How to convince the wife.......

Question

Jon Klaus · Answer

Chris, your wife's plan could be a winner. Here's a potentioal scenario, without knowing your price range:

You buy a real fixer in a great neighborhood. Say you pay $175k in a $300k  neighborhood.  You are an experienced rehabber/carpenter, so you put in $25k in sweat equity, and $25k in materials. You are in for $200k hard cost. You bought under market and you got an $80k rehab done for $25k. It's now worth $300k. You've gotten an OO 5/1 ARM that you are paying 3% for.  You've put down $40k and owe $160k.

You live in the home for 2 years.  You sell for $330k, as you've seen 4-5% annual appreciation. Your proceeds are about $150k after transaction costs. The gain is tax free. The sweat equity you gained with your work isn't taxed.

You repeat the process, putting half your proceeds of $150k into your next home. You take the other $75k and put it down on an income property.

Is everyone happy?

Ed L. · Answer

First thing you need to do is confirm that rentals are profitable in your market.   The Fed is rapidly re-inflating the housing bubble especially in higher demand coastal regions...  Home prices and rental rates reflect upon one another but are not in lock step as people who bought homes pre bubble are able to rent for less than people that purchase at the peak of the bubble...

If you are currently renting I would probably go with the wife and purchase a SFR.  Buy it right, fix up, and flip after 2 years tax free profits...

The numbers would have to be very compelling on a duplex/multifamily before I would move the wife in one..

Joel Owens · Answer

The key with all of this is comfort level.

Some property owners just are not meant to live next to tenants in other units.

Nicole mentions having other people live at your property or in a room.

I have heard of people doing this but for me I am just a private space person. I do not want to be next to tenants in units or have them living in my space.

So analyze who you are and what you can tolerate as an investor and see what type of real estate niche is right for you.

Adam P · Answer

hi Chris, I would buy the multifamily then keep your eye open for the single family.  Joel always great one liners.

Nicole A. · Answer

You could buy the single family house and rent out a bedroom or the basement...to someone who's not home a whole lot.

We've been renting out rooms in our home since 2009 at $700 or $1400 per month, depending on if one or two rooms are rented.

Erin Plitsch · Answer

My husband and I went back and forth on the duplex vs SFH when we were first buying, and went through all the pros and cons, too.  2 SFHs later we're planning to transition into a multi-family, now that we've gotten a taste for investing and cash flow, and are feeling a little more comfortable with being landlords.  I can absolutely see both sides...a potential compromise might be if you could find a SFH with a detached carriage house or garage apartment?  You could always start with a month-to-month, and if she feels uncomfortable, you don't have to continue down the rental path, but you'll have some great guest quarters and the option for the future to make some extra $ if need be.

Chris Gillins · Answer

Thanks all,

Happy wife, happy life is the catch all. I don't mind living next to tenants, but then again, I am gone all day and she is home with the kids. We both want to get into real estate, but having moved 9 times in the 7 years we've been married, I definitely see her side in that she wants her own space. I think the right situation is out there that we could both agree on, it's just might take a little while to find.  We're in an apartment right now, but just moved from a SFR rental, and we both miss that, but I think the payoff of getting a rental under our belt first would be better in the long run. Thanks again, love BP, great resource!

Joel Owens · Answer

You might can stand living next to tenants and the cash flow is worth it. Your wife might however see it as nothing but stress and worry.

You cannot underestimate the stress this could cause on your relationship and no amount of money is worth that. I also have had discussions with smaller investors locally where they ask me they found an area they really like but the cash flow isn't as much. They have other areas where the cash flow is better for a quad and live in one but the area isn't as great. I tell them they do not want extra cash flow in the face of putting their family in an environment where they do not fail safe to thrive and be comfortable. All that will do is breed discontent and damage the relationship.

Are you gone most of the day and the wife stays home or do you both work??

My home to me is my sanctuary and I could never live next to tenants but everyone is different.

Happy wife, happy life! We have all heard it before.................. : )

What's another one " If mama isn't happy then NOBODY Is happy ".

Eric Y. · Answer

@Richard C. lol at buying the SFR because your wife wins.

@Chris Gillins

Had a similar situation myself. We put down all the numbers and of course my way was a better business move but severely lacked any comfort for our personal lives. As a younger guy, this didn't bother me--I could probably make do with a few acres and an RV if I knew I was setting myself up for major success 5-10 years down the line. When I first started the wife didn't quite see eye to eye, so we came to a sort of compromise. She got a SFH, I got to shop it to find an area I thought would appreciate and a home that had room to build equity in and we also agreed that she would come up with some of her own money to make the deal happen as I didn't want to strangle out my business growth by paying every cost on the SFH. Long story short, we live in an area that is significantly better and nicer than I would have chosen and in ~20-22 months (going by comps and neighbor's home that just sold) we've got about $160k of equity after the work I've completed.

Would I do it again knowing what I know now? Not exactly. I would have pushed harder to go less on our personal residence as this whole area did what I expected price wise and had I been able to purchase 2x or 3x more homes in 2011/2012 we'd be sitting even prettier. All in all, it is probably a wash. The multifams didn't appreciate anywhere near as much, but they would have been cashflowing for 2+ years now. On the bright side, I don't have to live next door to my tenants which is a good thing.

Elizabeth Colegrove · Answer

@Chris Gillins

I was in your boat. For the longest time my husband had no desire to buy any investments. I could talk him into a personal property, and that was only a maybe. The way we both got on the same page was our "long term" vision. His goal/dream after the navy is to retire (with military pension at 44 and live on the boat that he had built). I showed him how buying investments now, would give him the cash flow later to do this "dream" with me doing all the work now.

Good Luck!! You will get there. Honestly the key for us was communication.

How to convince the wife.......

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