Looking for some advice

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Looking for some advice

Morgan McConnell
Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes

Hey guys. I'm looking for some advice. I have been reading about real estate investing for the past ~6 months and I really want to jump in within the next year. My wife and I currently have about 60k debt (mostly car notes and some credit cards, not including our primary home) and not much saved (we've been aggressively paying it off). I'm expecting a 20-25k bonus later this year and I would like to use that to get into flipping to pay off our debt and then build up some capital so that I can get into doing BRRR's. My wife is totally against investing the money and thinks we should pay off all of our debt (minus the house) before investing. I think that through flipping, I'll be able to get us out of debt fast and achieve financial independence a lot sooner. Do you guys have any advice on how to put her mind at ease? Or I should I go with her advice and get out of debt first?

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Marc Winter
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
7y

Here are a few 'rules' for real estate investing:

1.  Do not JUMP in--wade in slowly.

2.  Be prepared for the unexpected.

3.  Happy wife, happy life.

4.  It's all about who is looking:  What you see:  opportunity to do your thing, get out of debt and be a hero!  What she sees: a big gamble that you claim with one more throw of the dice  you'll win big.  She needs security.  

5.  If still in doubt, refer back to rule #3.

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Here are a few 'rules' for real estate investing:

    1.  Do not JUMP in--wade in slowly.

    2.  Be prepared for the unexpected.

    3.  Happy wife, happy life.

    4.  It's all about who is looking:  What you see:  opportunity to do your thing, get out of debt and be a hero!  What she sees: a big gamble that you claim with one more throw of the dice  you'll win big.  She needs security.  

    5.  If still in doubt, refer back to rule #3.

    20Reply
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Morgan McConnell:

    Hey guys. I'm looking for some advice. I have been reading about real estate investing for the past ~6 months and I really want to jump in within the next year. My wife and I currently have about 60k debt (mostly car notes and some credit cards, not including our primary home) and not much saved (we've been aggressively paying it off). I'm expecting a 20-25k bonus later this year and I would like to use that to get into flipping to pay off our debt and then build up some capital so that I can get into doing BRRR's. My wife is totally against investing the money and thinks we should pay off all of our debt (minus the house) before investing. I think that through flipping, I'll be able to get us out of debt fast and achieve financial independence a lot sooner. Do you guys have any advice on how to put her mind at ease? Or I should I go with her advice and get out of debt first?

     Flipping is the riskiest, most taxed angle for real estate investing. The average flip takes 6 months, and grosses $67,000 per National Association of Realtors. Once you pay for the materials, contractors, carrying costs, taxes, etc the net is $15,000. So, if you like buying a job that pays $30,000 a year, flipping is for you. Most hard money lenders want you to put down 30% of the cost of the property (on a $200,000 property that is $60,000) and pay for the renovation ($30,000 to $40,000 and up) and on top of that you have to make large monthly payments to the hard money lender for the money you borrowed. 

    If you insist on flipping, find a silent money partner who puts in all of the money while you manage the project.

    Remember, as already stated "Happy Wife, Happy Life.

    9Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Marc Winter

    Thank you, very sound advice. I’m definitely trying to educate myself as much as possible before making any moves. I just don’t want to get stuck in the “analysis paralysis” that I keep hearing about. #3 and #4 are great points. I’ll keep this in mind and try to ease her into it.

    0Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Mike M.

    Wow, thanks for putting up the numbers! I just picked up J Scott's book on flipping houses. I honestly don't know a lot about flipping but I plan on learning as much as I can before getting started. I'm really interested in the BRRR thing but I also want to get us out of debt faster so that I can focus on long-term deals. Cash flowing $200 a month won't help me get out of debt much faster than driving Uber on the side (which I'm already doing). I would rather invest my time/ money into something I really care about (real estate). I appreciate the information!

    0Reply
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Morgan McConnell:

    @Mike M.

    Wow, thanks for putting up the numbers! I just picked up J Scott's book on flipping houses. I honestly don't know a lot about flipping but I plan on learning as much as I can before getting started. I'm really interested in the BRRR thing but I also want to get us out of debt faster so that I can focus on long-term deals. Cash flowing $200 a month won't help me get out of debt much faster than driving Uber on the side (which I'm already doing). I would rather invest my time/ money into something I really care about (real estate). I appreciate the information!

     My one and only wife and I have been married for 40 years now. I've learned some things along the way. While we were raising our family, (she was a stay at home mom) she needed the security of a good income. When the kids got older (10 and 12) and could plumb and wire and help out on the flip, she was all for it. It was a "family" investment. Sometimes it just "timing".

    It says you are in San Diego. I would guess you would improve your finances considerably by moving to a less expensive and less taxed location. We all make choices in life.

    1Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Mike M.

    That's a great point, my kids are 4 and 6 so they're not helping with a flip anytime soon. But my wife stays home with the kids too. So I suppose her need for financial security is something I should validate. I'm actually in the military (been in almost 11 years) so I have pretty good job security and decent pay. And we move a lot. We're actually moving to Quantico, VA next month. I want to get started on my REI venture once we get settled out there.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    7y
    Originally posted by @Account Closed:
    Originally posted by @Morgan McConnell:

    Hey guys. I'm looking for some advice. I have been reading about real estate investing for the past ~6 months and I really want to jump in within the next year. My wife and I currently have about 60k debt (mostly car notes and some credit cards, not including our primary home) and not much saved (we've been aggressively paying it off). I'm expecting a 20-25k bonus later this year and I would like to use that to get into flipping to pay off our debt and then build up some capital so that I can get into doing BRRR's. My wife is totally against investing the money and thinks we should pay off all of our debt (minus the house) before investing. I think that through flipping, I'll be able to get us out of debt fast and achieve financial independence a lot sooner. Do you guys have any advice on how to put her mind at ease? Or I should I go with her advice and get out of debt first?

     Flipping is the riskiest, most taxed angle for real estate investing. The average flip takes 6 months, and grosses $67,000 per National Association of Realtors. Once you pay for the materials, contractors, carrying costs, taxes, etc the net is $15,000. So, if you like buying a job that pays $30,000 a year, flipping is for you. Most hard money lenders want you to put down 30% of the cost of the property (on a $200,000 property that is $60,000) and pay for the renovation ($30,000 to $40,000 and up) and on top of that you have to make large monthly payments to the hard money lender for the money you borrowed. 

    If you insist on flipping, find a silent money partner who puts in all of the money while you manage the project.

    Remember, as already stated "Happy Wife, Happy Life.


    Remember this is the average gross and includes those with a lot of experience. Do you think the first time flipper typically does better or worst than this average? It may sound like I am against your idea but I am not if you can convince the wife of its merits. Why? Because it gets you started and learning. I am attempting to add some reality to your expectations. It will be work, have risk, and likely not return a great return for your efforts. Many first time flippers lose money on their first flip. However, Ideally you learn a lot and can leverage that knowledge for subsequent flips. It starts by convincing the wife and my "reality" is not likely to help. Good luck
    1Reply
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Morgan McConnell:

    @Mike M.

    That's a great point, my kids are 4 and 6 so they're not helping with a flip anytime soon. But my wife stays home with the kids too. So I suppose her need for financial security is something I should validate. I'm actually in the military (been in almost 11 years) so I have pretty good job security and decent pay. And we move a lot. We're actually moving to Quantico, VA next month. I want to get started on my REI venture once we get settled out there.

     Since you frequently move, where you start your investing matters a lot. If you are moving soon, you'd target a community outside of DC like Fredericksburg, and go to city-data.com and Redfin.com and start getting a feel for the demographics. Anything heading towards DC is going to be too expensive. Join a Real Estate Investment group in the area. Spend time learning from those already doing before you jump in. And keep in mind it will take your wife a good 6 months to start to feel she is settled. Thanks for your service.

    0Reply
  • Darius Kellar
    Real Estate Coach · Member since 2018 · 245 posts · 216 votes
    7y

    Focus on renting first. After you get a few rentals then go into flipping . Don't just jump in.

    0Reply
  • Stuart Grazier
    Investor · Parker, CO · Member since 2016 · 550 posts · 389 votes
    7y

    @Morgan McConnell Get your personal finances in order before you try to jump into flipping houses. If you haven't read @Scott Trench's book Set For Life, I highly recommend it! It will set you on the right path. Live below your means, save as much as humanly possible, get out of bad debt, then start investing in rental properties. Oh, and thanks for your service! 

    3Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    I'm glad you read the book. So many people see the tv shows and wake up one day claiming to be a flipper. It's involved, detailed, stressful and very high risk. In most cases it takes awhile to build up to that. It's not something you just decide to do to pay off the bills real quick. Nothing close to that. Too many people view it as something simple you can get in and out of like 5lynx or Mary K. it's involved and takes a certain degree of skill and a lot of passion helps. It's a great business I love but I'd say ease into it. Study a lot; ask a lot of questions and maybe find someone who knows what they are doing so you can look over thier shoulder. Good luck.

    0Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    How do u flip a house with a 20k bonus?

    0Reply
  • Joel Fine
    Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes
    7y

    Have you considered house hacking? Find a duplex, triplex, or quad that needs some fixing up. You can get some very inexpensive 30-year financing if you stay at or below 4 units. You occupy one unit while you rent out the rest. If you can do some of the work yourself, you can minimize your expenses while the tenants in the other unit(s) pay your mortgage.

    2Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Dan Heuschele

    Thanks for taking the time to give me some perspective. It's one thing to read an analytical book about flipping houses and another thing to hear the cold hard truth from people doing it. I think you and everyone else here have convinced me to ease into this and educate myself further. I think that along with getting my finances right will make the wife a little more comfortable with this whole REI thing. We got pretty lucky with buying and selling with the VA loan. Made $30k on both of the houses we bought and put nothing down on them. Kept one as a rental for a few years and the other as our primary, sold them both last summer. With that kind of "success" early on, it's kind of hard to keep my excitement contained. I know a lot of people here think that $60k is peanuts but for a military guy on a modest paycheck, that was pretty good for us. But I know I need to learn more before getting into this game.

    1Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Mike M.

    Thanks again Mike, we're in escrow on a new build about 20 minutes west of Fredericksburg as our primary. I'm really interested in that area because of the amount of growth happening over right now. It'd be nice to get something as our primary and hang onto it long term. A lot of guys in the military just buy houses with the VA loan, keep them for 3-4 years and sell them. Just a had a buddy that did it and make $175k in San Diego. Not bad a bad payday but I'd like to keep mine as a long term rental.

    0Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Darius Kellar

    You’re absolutely right. After reading everyone’s input, I think that’s where I’ll start. First focus on getting my finances right and then work on buying a couple of rentals. I think I may have been putting the horse before the carriage with my idea about jumping into flipping houses first. I appreciate all you guys talking some sense into me!

    2Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @Stuart Grazier

    I appreciate the book recommendation! I love reading and I will definitely check it out. And I agree, I need to get my finances right before getting into this. I’m glad I posted this question, I was honestly nervous to post here because I feel pretty inexperienced compared to some of you guys in this realm.

    0Reply
  • Ryann Kluthe
    Real Estate Agent · Omaha, NE · Member since 2017 · 26 posts · 19 votes
    7y

    @Marc Winter i totally agree!! Very well said

    0Reply
  • William A.
    Investor · Louisville, KY · Member since 2014 · 74 posts · 46 votes
    7y

    @Morgan McConnell My advice is to focus on getting your finances in order. Have you heard of Dave Ramsey and the debt snowball?

    1Reply
  • Morgan McConnell
    OP
    Flipper/Rehabber · Locust Grove, VA · Member since 2019 · 13 posts · 6 votes
    7y

    @William A.

    I actually started with Dave Ramsey's Total Money Makeover and then I read Rich Dad, Poor Dad. Both of those books are what got me interested in REI. I'm working on my debt snowball right now. I know I have a lot of learning ahead of me but I enjoy reading. I just finished "How to Invest in Real Estate" by Josh Dorkin and Brandon Turner and "The Loopholes of Real Estate" by Garret Sutton. I just got the "Book on Flipping Houses" by J Scott and "Set for Life" by Scott Trench. If you have any other recommendations, I'd love to hear them!

    1Reply
  • Josue Vargas
    Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
    7y

    Not sure of your best bet is flipping houses now. I do long term rentals. But considering my rentals ROI is about 10-11%, and usually credit cards, debts, etc are above 12% on the short term (worst on the long term if you owe a considerable $$$$$), I would focus on paying off credit cards rather than having a mortgage or a loan for flipping houses without experience. Way risky to pay off your initial business debts, plus you have already personal debts. Better just to start fresh out of debts then start saving for the Flip or Rental investment.

    Just my thought.  

    0Reply
  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Morgan McConnell

    One of the biggest lessons I learned was to make sure that whatever you do your wife and family are in alignment

    sometimes money or lack there of to make people very nervous and make emotional rash decisions

    I would try my best to define what the goal is of why you’re doing this and what it’s going to do for your life ,maybe 10 or 20 years from now then you back it out with the strategy and the strategy could be to flip so many properties get out of debt. The next part of the strategy could be to start accumulating wealth by buying rental properties and move forward from there

    this way you have a strategic plan to get to a goal and you’re not just going crazy are buying properties and flipping and she is against it or doesn’t believe in you the last thing you want is a challenge between you and your wife

    0Reply
  • John Hovanec
    Flipper/Rehabber · Piedmont, SC · Member since 2018 · 119 posts · 50 votes
    7y

    @Morgan McConnell. To start out. Thank you for ur service. Like everyone has said it’s good to pay off ur debt first. Not saying it can’t be done but just makes life a lot easier if u start with less debt. In the beginning of any business u will make mistakes. Mistakes cost money which would be easier to deal with without stressing of how u will pay ur personal bills. Paying bills isn’t as fun as getting started in re but it will help u continue on in re. Once you move dive into the real estate groups. Hang out the people in real estate. Learn from them. Good luck.

    0Reply
  • Kyler Cook
    Rental Property Investor · Kalamazoo, MI · Member since 2018 · 117 posts · 235 votes
    7y

    @Morgan McConnell

    It is factually scientifically true that men are less risk adverse and women are more risk adverse. Likely a result of testosterone and the desire to test ourself. Your wife if a benefit to you to help mitigate some of your ambition. If you believe flipping and Brrrring this close to a recession is your way out of debt while wading in 60+ of it Is very much consider hearing your wife’s wisdom. No reason that you can’t wait two years to get in in a better circumstance that won’t leave you worse off than when you started. My vote is with your wife.

    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    7y

    @Morgan McConnell, no one has mentioned this yet, but you said you have $60k in debt from cars and credit cards. Can you sell those cars and buy cheaper used cars? Can you get by with one car? On the BiggerPockets Money Podcast, multiple guests have cited "Buying a New Car" as their Biggest Money Mistake.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    0Reply
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