What would you do if you are in our shoes?

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What would you do if you are in our shoes?

Yen Padilla
Ossining, NY · Member since 2018 · 18 posts · 4 votes
Hi!I just joined bp hoping that I would get more info and help even before I start with REI.My husband and I work full time as a registered nurse in NY but we are both tired of living paycheck per paycheck.We got our SFH thru FHA Loan 9 yes ago and now we're paying our monthly mortgage $3,980/month.We got our house for $440k and now our balance is around $380k.As per Zillow the value of our property now is $420k.We would like to try on Multi-family rentals to improve our income and to have a safety net in the future.. If you're in our place what would you do to get started in RE?Shall we sell our house?Shall we keep it and refinance so we can save up faster for our dp and reserve?Or Shall we loan from private lender and start the multifamily rentals without selling our SFH? I got so hooked and passionate to start multifamily rentals but I would like to be smart and be very careful not to mess up our lives esp with our 3 gradeschool kids relying in our decision.
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Rick Pozos
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
8y

Two people with good jobs should not be living paycheck to paycheck. I have a feeling you should be reading some personal finance blogs. Most Americans spend way too much on stuff. For my wife and I our big sin is going out to eat. Every once in a while we start to get lazy and eat out almost every meal. We have to rein it in when we realize that we spent over $1500 on eating out that month. Most families can cut all kinds of spending if you really want to do it. My wife and I have realized that we can live on so much less if we just watch what we do more carefully.

The real estate stuff, yes, that is great and you do build net worth over time and you increase your cashflow. When your cashflow goes up, you have to keep your expenses at the same level or lower. Otherwise you will be in the same mess. YOu will be making 300k a year with 300k in bills every year instead of 125k income with 125k in bills. If you could decrease your expenses down to 100k per year and keep the 125k in income you will increase your cashflow by 2000 per month. I am just making up numbers, but I hope you get the point.

Keep the house. Educate yourself more in real estate and join a real estate investor club in the area to learn even more. Start reading Mr Money Mustach and/or Afford Anything. Both are great financial blogs. Try doing some of the things that they say and you will realize how much you spend on junk that you shouldnt. My next post is coming out in a couple days about this very subject also.

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  • Mohit Asthana
    Investor · New York City · Member since 2016 · 45 posts · 22 votes
    8y

    What would your house rent for in the current market conditions? If the numbers make sense, I'd say rent it out and refinance your property to buy a multifamily property.  This way, you reduce your cost of living, possibly making money on your house. 

    If you sell, you are exempt for up to $500k in capital gains tax since you're married and lived in the house for 2+ years. I wouldn't trust Zillow's zestimate frankly, but I would look at the "recently sold" category. 

    I wouldn't touch private money if you could refinance your house right now, as private money is usually a lot more expensive than a traditional mortgage. Some of the hard money people I've talked to usually loan at 10-12%, making it quite hard to make money. 

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  • Amy Beth
    Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes
    8y
    Since you are living paycheck to paycheck I would sell your house and use your equity to fund a downpayment. If you end up with a bad tenant or a costly repair you will have problems covering both the expenses of the MF and the SFH too.If that is not enough equity (consult a realtor to find out the actual value of your home instead of Zillow) then being RNs it should not be hard to pick up extra shifts or get a second RN job on the side to increase your downpayment fund. Put off selling until you have more money saved either income or cutting back on your current expenses. Make sure you are living on a budget too so that you are in control of your money.
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  • Yen Padilla
    OP
    Ossining, NY · Member since 2018 · 18 posts · 4 votes
    8y
    Thanks for new insights and options Mohit and Amy...we got used to spending so much on vacation and eating out and all splurges...overspending our budget..until I got injured at work last year and herniated my disc..I was out for a while...unsure if I can get my life back.It was a big wake up call for me. Now I would like to put every single cent that I'm gonna make in REI..I know it's not too late.
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  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    Two people with good jobs should not be living paycheck to paycheck. I have a feeling you should be reading some personal finance blogs. Most Americans spend way too much on stuff. For my wife and I our big sin is going out to eat. Every once in a while we start to get lazy and eat out almost every meal. We have to rein it in when we realize that we spent over $1500 on eating out that month. Most families can cut all kinds of spending if you really want to do it. My wife and I have realized that we can live on so much less if we just watch what we do more carefully.

    The real estate stuff, yes, that is great and you do build net worth over time and you increase your cashflow. When your cashflow goes up, you have to keep your expenses at the same level or lower. Otherwise you will be in the same mess. YOu will be making 300k a year with 300k in bills every year instead of 125k income with 125k in bills. If you could decrease your expenses down to 100k per year and keep the 125k in income you will increase your cashflow by 2000 per month. I am just making up numbers, but I hope you get the point.

    Keep the house. Educate yourself more in real estate and join a real estate investor club in the area to learn even more. Start reading Mr Money Mustach and/or Afford Anything. Both are great financial blogs. Try doing some of the things that they say and you will realize how much you spend on junk that you shouldnt. My next post is coming out in a couple days about this very subject also.

    1Reply
  • Simcha Davidman
    Rental Property Investor · Baltimore, MD · Member since 2014 · 408 posts · 209 votes
    8y

    It's already been said, rather well, but I will echo @Amy Beth and @Rick Pozos - you need to do, or have someone do, a serious personal finance audit.  Everyone has their personal situations, but if you're both RNs, there should be more than enough money coming.

    Real estate investing is great, if you know what you're doing.  But be careful, and find people who know what they're doing.

    Back in 2007-08, every one and their grandma was getting into real estate, and really savvy investors knew at that time that it was all hype and going to end badly.  I was thinking this recently over the last few weeks, how everyone I know wants to get into real estate now.  And then it finally dawned on me - wait a second, so do I...

    Anyways, I'm still trying, but buy smart.  If you cannot buy smart, don't buy.  Remember that.

    Best of luck!

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    Assuming you could rent for less than your present mortgage payment I would strongly suggest you sell and move to a rental apartment.

    At this point in your lives you are not qualified to own or invest. You need to get your personal finances under control and learn how to live frugally. Until you are able to do that the chances are you will fail miserably investing in real estate.

    Investing is not a method of breaking the cycle of living pay check to pay check. It is a method for disciplined indivulaes to invest the money they save.

    Pay check to pay check life style is a choice. 

    1Reply
  • Yen Padilla
    OP
    Ossining, NY · Member since 2018 · 18 posts · 4 votes
    8y
    Thanks again for ur insights and some reality checks.It's time to weigh in things.No matter what we do whether nursing job or REInvesting if we spend more than what we earn we'll end up in the same mess... Good thing we haven't started REI yet..not yet.Thanks to BP..and to u guys...we could have ended up in a bigger mess. For now..I'll continue to educate myself on REI until we are all set for this.
    0Reply
  • Amy Beth
    Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes
    8y
    I think your drive to invest in real estate and your ability to accept feedback about getting your finances in order shows that you have great potential. Dave Ramsey is good at getting people out of debt and building for their future so I would recommend checking out his website, buying his book the Total Money Makeover, watching his debt free screams on YouTube, and/or listening to his daily podcasts. If you can follow his advice and live on a budget, you could find extra money every month to save and get yourself in a better financial position to invest in real estate.
    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    8y

    @Yen Padilla why is your mortgage payment $3,980??? That's about double what it should be for a $380k loan. Are you seriously paying $2,000 a month for insurance and taxes?

    I agree with others about getting your finances straightened out first. A solid foundation is necessary to success. If you jump into REI without financial discipline, there is a high likelihood of failure. People with bad financial discipline win millions in the lottery and still end up broke.

    The DIY Landlord Book4.7247 Reviews
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  • Yen Padilla
    OP
    Ossining, NY · Member since 2018 · 18 posts · 4 votes
    8y
    @Amy Beth My injury last year was my big wake up call for a complete makeover for our finances.It has changed our spending habits so much and up to this point even if I'm back to work full time I intentionally decided not to do any overtime yet..I would like to train myself and my family to get used to living within our means.No big trips (we had 2 out of the country holidays last year),no dining out and less online shopping.Everything happened for a reason and I believe that the injury had happened as an eye opener for us.
    0Reply
  • Yen Padilla
    OP
    Ossining, NY · Member since 2018 · 18 posts · 4 votes
    8y
    @Nathan G Principal $744 Interest $1,755 Escrow $1470 Our regular monthly payment $3970. Please advise coz we've been in this house for almost 9 years now and our monthly is increasing every year.Shall we refinance?Shall we sell the house?
    0Reply
  • Yen Padilla
    OP
    Ossining, NY · Member since 2018 · 18 posts · 4 votes
    8y
    We have no problem living in an apartment if that would help us reboot our finances.
    0Reply
  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    People have said what can be done, but you know that it is all up to you and your family. The adults have to discuss the things that CAN be done and what are you both willing to do. It is a joint decision and I think people here on BP can tell you what they would do or what they think you should do, but they do not know all the details of your life. 

    I think you have plenty of options. Both of you make some tough decisions, get the whole family on the same page and go forward. It is never easy making big changes but it sounds like you have already made the big one which is Mindset. You know that you cant spend up to and over your income anymore. You gotta read my website. All the website info is on my profile page. I just blogged about this. Check it out.

    Good Luck!!!

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Yen Padilla what’s your interest rate? If you have good credit you can get around 4.5 percent today. Then your P/I would be 1925 on a 30 year fixed instead of 2500 you’re paying. I’m guessing your interest rate is higher
    0Reply
  • Jorge De Jesus
    Katy, TX · Member since 2017 · 372 posts · 140 votes
    8y
    Buy a duplex and hack it, or rent out/Airbnb any extra bedrooms in your current home, or go down to an apartment. Save for a year. Meanwhile educate yourself.Or refi out to buy a 4plex and go from there
    1Reply
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