Hi everyone,

I just found this website today. I'm a 26-year husband and a father to two amazing kids (both under 2yrs). We live about 30 minutes north of Cincinnati. My wife and I both work full-time jobs (M-F, 9-5). Together, we make a bit over $100k pre-tax (not including any bonuses). However, a huge chunk of our take-home pay goes to our mortgage, our student loans (we have $100k remaining on those), and toward childcare. Our only debt outside of the mortgage and student loans is a $7k loan for a sweet minivan.

My first big goal is to make enough money on the side that my wife can stay home with our kids. At the very least, I'd need to bring home another $1,500/month (her take-home minus childcare). I've been trying to solve this problem all of 2017; I spent months researching drop-shipping products from China through a website I built with Facebook ads. I ran ads for almost 2 months making $6k in sales. However, I broke even after Facebook took $4k of that. I stopped doing this business as I was preparing for the birth of my son. I said all that to point out that I'm willing to put in the hard work and research, I am just in need of a good plan. After speaking with an investor who is doing very, very well (and is not much older than me), he suggested that I start investing in rental properties.

We only have $4k to 5k in savings (not counting $15k in 401k). We only have about $10k to $12k in equity in our home. Is investing in real estate for rentals even a reality for us right now? With 2 children now, saving anything substantial is not very doable for us at the moment. My investor connection mentioned Lending Club as an option for a personal loan. Is this all too risky? I really would like to help my wife be able to stay home with our kids.

Thanks in advance.

What's your student loan rate? If it's more than 5%, I suggest you pay off your student loan first because it means that you need to find a investment makes 5% + risk free rate.  

James, 

The option of doing real estate to speed up your income is a great one that I used as well.  With two littles about the same age I know where you are coming from. 

What i would recommend may vary depending on further information. If you are comfortable with the risk and can make the expences work out with the real estate plan then have at it as it can pay off well.

In a scenario where you are a little more risk averse maybe you study from your friend and find a way to make some extra money doing this- finding deals, handyman, advertising or whatever you find to help get into the business while paying down debt and building up savings.

My avenue if risk averse and you can break down some of these other bills would be as follows:

What is monthly payment for sweet minivan and student loans?

If you have multiple student loans and some have higher interest rates clearly you want to pick these off.

Pay off your smaller loans of choice to reduce amount you need to make monthly and take that extra you are used to spending and apply it to paying off other loans. This can reduce the amount needed monthly and make a loan to get into real estate easier to qualify for and easier to swallow.

There are also other avenues i know too little about that you can research such as reits and crowd funding.

Best of luck to you and your family.

James,

Since it sounds like you are pretty comfortable with marketing and willing to put in the work, I would suggest wholesaling as a way to enter the real estate field.  It won't be easy; it will definitely be a second job, but it can provide good income with no money needed for an initial investment.

I would use your income from that to pay down some of your student loans as those (at least from my experience) can have a fairly high interest rate.

By wholesaling deals, you will probably learn a lot about your local real estate market, get very good at analyzing deals, and perhaps can find some that you can afford outright to either flip or to rent out yourself.

The first step though is to educate yourself.  This website is a great place to ask questions, there are a lot of books on real estate, and BiggerPockets has a great podcast that you should listen to.

Pay down student loan debt first and pay off that car loan. That’s the worst kind of debt. A car is a depreciating asset

Thank you all for the feedback! I will research wholesaling, Brian. For those asking: My student loans have a 5.6% interest rate and my wife's are similar. Korey, the minimum payments for the student loans and van combine to about $900/month, but we paid extra on the student loans most of this year.

@James Wagner

I would recommend taking a good look at your monthly budget and re evaluate that. 

My wife and i live in a moderately nice home and drive good reliable vehicles.  We live on less than 40k per year and she stays home with the 2 kids (1 on the way). 

On top of that we have purchased 7 rentals over the past few years. 

I think the answer you are looking for can be found in cutting back expenses. 

Check out....  1. Mr Money Moustache 

2. Set for life  By Scott Trench 

3. Dave Ramsey (although he is a bit too far on the debt side of things)

Good luck out there! 

@Joshua D.

Thanks for the comment, Josh. I will check out #1 and #2! We have spent a lot of time looking at our budget and going through Dave Ramsey's material (we use EveryDollar). We give $500/month, mortgage $1200, minimum student loans $711, van loan $171, daycare currently around $600/month (will go up now that we have 2nd child), phones, energy, internet, water, trash combine for $360, auto insurance $143/mo...etc.

We got rid of directv 18 months ago, do 80% of our grocery shopping at aldi, we don't use credit cards (except when i was running my online store), we rarely eat out. We try to put $400 aside each month for potential auto, gifts, house, travel expenses. After all this plus hospital bills from the new baby, I've really had trouble figuring out anywhere else we could cut..

One thing that people often overlook is the amount of time they are spending on finding deals, trying to start that online advertising thing, etc (since sometimes it doesn't pay off).  You might be better off if instead of spending 10-20hrs/week on investing, in spending it working extra hours at work or a 2nd part-time job.  I know it isn't ideal, but to help yourself dig out of that hole faster it might be a good plan for you.  Then once you have some money saved then change to an investing strategy.  Good luck!

Check out this link if you're considering wholesaling in Ohio: https://www.biggerpockets.com/forums/93/topics/184743-getting-busted-in-ohio-for-wholesaling-and-praticing-re-without-a-license

@Russ Draper Thanks, Russ! A spent much of 2016 working extra hours at Lowe's after work (my current salary position doesn't have an option for overtime pay). I did this for a while to make extra money, and it was helpful, but I decided to start the online thing from home because I could spend time with my family until my daughter went to bed at 8pm. Then I'd build my online business from 8pm to 2am. I think your advice is where I'm at right now, though. I did really well on the ACT in high school, especially the Math section where I scored a 35. So, I'm looking at offering tutoring part time to help build up some savings.

@Account Closed , thanks! I will check it out now.

@James Wagner I agree with @Joshua D.  

Rentals are a great way to turn money into more money.  So they're a great step 2.  You're at step 1, getting that initial money.  You're doing great so far!  Keep it up, don't lose focus, but yes, you do need to increase income or decrease expenses.

Spend 10 hours on Mr. Money Moustache (MMM) or watch his 30 minute talk on youtube.  Whenever I am trying to cut back my budget and just not seeing where I can, I like to recall that about 50 million Americans live in poverty, which for a family of 4 is about 20k a year.  If they can do it, surely I can live on double that comfortably, right?  I try to meditate on that ($40k) number when I'm looking for ways to reduce my budget to some number that seems impossible but is actually much larger than 40k.

MMM lives very well on less than 30k per year, and the "extreme retirement" guy lives what he considers well on (I think) 7 to 10k a year.

No judgment from us either way.  By participating in your 401k and still wanting to save more, you're already in the top 1% of financial intelligence among Americans.  Good luck!

Oh man, I'm 26 and owning a minivan is a scary thought! 

I'd stay away from the idea of wholesaling since most of them don't make money and it is another full-time job that doesn't guarantee anything. And you've got so much on your plate already. It can get you some down payment capital, but it isn't investing. 

Seeing as you're in a state where you can buy a SFR for $50k and still cash flow 300 or more per month, I'd look at those sorts of deals if you're willing to go the slow and steady route to replace that $1500/month.

I bought two duplexes this year in Ohio for about $110k all in for both. I did creative financing for one and paid cash for another, but had I done traditional or low down payment loans, they would still cash flow over $500 each. You'll still need to find a way to save another 5-10k and get bank financing for those deals, but you'll figure it out if you put the effort in.  

And as others have said, it's not a bad option to pay down the current debt, either!

@John Gillick , thank you for the encouragement! I had never heard of MMM until this thread, so I will spend some time there.

@Ryan Evans , I can't believe I have a minivan either! Ha...I'm definitely willing to go the slow and steady route, if that's what it will take. 

Hi James,

My wife and I are huge Dave Ramsey fans! He is a little to the extreme for normal (poor) thinking. I used his Total Money Makeover book and Financial Peace University to Hulk Smash all the bad debt (vehicle, student loans, credit cards etc.) then put my family on a solid foundation with an emergency fund of 6 months expenses and eventually pay off my home in 11 years. We made around $100k per year to do this while paying cash for vacations and used vehicles including a minivan too! 

Now close to $65k income my wife is able to stay at home with a few freelance jobs per year. We put back 15% of that income into retirement, put a few grand a back per year for our 2 kids college funds and now we are looking at building wealth with REI.

In my opinion. Get your family on solid ground financially and emotionally by being on the same page with your finances then rock out your investing.

Why is your mortgage payment 1200? Did you do FHA or something? That seems very high unless you’re in a 300k plus Home.

At some point you have to cut less and earn more. If you’re at 100k together pre tax, see if you can get to 120 or eventually 150.

@Jason Rikard thanks for the reply! sounds like you did a great job following Dave's plan! Thanks for the advice...focusing on our foundation first is where I think I'll start.

@Caleb Heimsoth thanks for your comment! yes, we did FHA. looking back, maybe that wasn't the best choice. I'm not sure. the sale price was $174k.

@James Wagner how much equity do you have?  If you’re near 20 percent id refinance to get rid of Pmi. 

@Caleb Heimsoth good advice. too bad that we are not near there yet. only a little over $10k equity. Bought the house about 18 months ago.

how much is your Pmi?  You are probably best served doing things in this order:  eliminate car payment.  Pay down student debt (not entirely off) and eliminate Pmi.  

Could you refinance student loans ?

@Caleb Heimsoth since our student loan interest rates average 5.5%, at a quick glance i couldn't find any better than that. maybe i just don't know where to look though.

thanks for the advice on the order. that helps me with an attack plan.

Does sofi allow you to get a better rate?  You need excellent credit though for that to work I believe 

so if you pay off up to 20 percent equity you save yourself over 100 dollars a month.  All of this is great but if you really want to move the needle you probably want to look at earning more 

@Caleb Heimsoth when I checked over a year ago, sofi would not have lowered our rates. 18 months ago when we bought our house, my credit score was in the "good" range. not sure now.

@Caleb Heimsoth agreed...that's where i'm at