Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
Just received news that I am not permitted by the city to purchase another property due to the affordable housing covenant im contracted under. Not the news I was hoping for and this will severely impact the financing I will be able to get to invest in real estate.. Demoralizing to say the least, but I knew this was a possibility and must move forward.
plan B, C, D, etc
B: Sell current house and get 70k to put towards the 300k student loan debt that has had me stuck in month to month living for the past 10 years. Find a new place to live with no cash available
C: Stay put, see what financing my wife can get and we invest in her name (She makes 30k/yr)
D: Form LLC with my investment group, using my wifes name because I'm also not permitted to be in a corporation, see what we can invest in.
E. Find a partner willing to team up with someone with skills and determination but no cash/financing
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y
Plan B.
Let's be realistic. You have $300,000 in debt that has held you down for ten years. I'm assuming your wife has been around for most of those ten years and she's still only making $30,000 a year?
You should not be investing, period. You're only fooling yourself into thinking you can build wealth when you can't even get out from under the debt you incurred ten years ago. You shouldn't buy a primary home. You should be living cheap, riding a bike, eating beans and rice, working overtime or a second job, selling your plasma, and doing everything you can to pay off that debt that's holding you down. The borrower is slave to the lender.
Read Financial Peace University and attack this like your life depends on it.
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Al Pat thanks for the insight. Isn't something like a HVAC part of capital expenditures that I would be setting aside part of the rental income for? I will definitely have to be very careful but was thinking so long as I factor ALL of the expenses and see cash flow after it'd create income I could then use in addition to my W2 to get out of debt faster
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Will Gaston I'm open to any and all feedback. I think there's a difference between defending your values and being defensive. I am not blind to the fact that I am in tremendous debt, put myself in the debt, and have to work extremely hard to get out of it. I just felt that the initial responses were very lazy and inconsiderate. I mean, just look at this discussion now that I spoke up about how things were said. Now we are having a healthy dialogue, people are asking great questions and giving sound advice. Would you agree? Thanks for taking the time to share
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Matt Bishop thank you for sharing. Family first in my book. Doesn't mean I don't sacrifice time with them to work and get us out of debt, but they are priority #1 and finance a close #2. May be different priorities than others on here and I'm ok with that. Imo maintaining a lasting relationship with my wife is more valuable than losing it and creating and maintaining an attachment with my daughter will pay dividends later on in life. Can't wait to teach her all the finance lessons im learning that I neglected to learn or be taught at a younger age!
@Dave E. Thank you for acknowledging that, I few realized what everyone meant by "the facts", just seemed a bit lazy in how it was communicated. Happy it all has lead to so many people in the discussion. Now this is a conversation 👌👍
We've all been there, Blake. Some of the ideas proposed already have been put into practice by many of us. I live in a duplex. I paid $45K cash for it and fixed it up. I have students in the top apartment for $930/month. So I recently bought another, significantly nicer duplex a street and an alley away, still nothing to write home about, but I paid $110K cash for it. One of the inherited tenants in that duplex who has paid me his rent in the past at my doorstep, recently had an argument with me over his late rent. He told me there was absolutely nothing about my life that he respected, that I "lived in squalor" in my duplex, and the only thing he saw as a plus in my life is that I owned his duplex, too.
He knows nothing about the rest of my portfolio by design, and this is a guy who couldn't scrape up half the rent for a 2-bedroom apartment in a strictly low C-class hood. A week later, another tenant at that duplex ODed on fentanyl in fake Oxy pills and the paramedics had to use Narcan to bring her back. He was at the "party" where it happened. I went over there and I found him in bed with her, itty-bitty skinny black dude with a 400lb spreading pasty-white woman, naked bum-bum out, high as a kite, clinging to where her neck used to be and blubbering about how sorry and ashamed he was. Wah, wah, wah..."And the landlord's here and, and, oh, he's judging me...HE'S JUDGING MEEEE!!!"
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Jim K. Haha sounds like a day at my work in the ER! Yes very grateful for the good that comes with the privileges I've been given. Work to do on the not so good that comes along side it.
@Al Pat thanks for the insight. Isn't something like a HVAC part of capital expenditures that I would be setting aside part of the rental income for? I will definitely have to be very careful but was thinking so long as I factor ALL of the expenses and see cash flow after it'd create income I could then use in addition to my W2 to get out of debt faster
I think what they were trying to say is that you need to have reserves at the ready for emergencies. For example, I started renting out my house in MD in Oct 2020. The sewer line burst in Mar 2021, and I had to pay $8,000 to repair it right away. There's no way around it. I didn't have the capex accumulated for that particular property in that short amount of time, but I do have an emergency reserve that I used. Sure, I'll claim it during tax time, but the bill still needed to be paid in the meantime. Since I have reserves and two other rentals, I didn't take a major hit and I'm still in the black for the year. It would be a disaster if that was my only rental and I was already strapped for cash.
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Joe Splitrock going to private universities for over 100k as a 19yr old naive person trusting others who were under the belief that "you need to go to school to get a good paying job"... That along with my wife deferring payments for years and taking out unnecessary loans ballooned the already high amount of debt to a bigger debt. I make 140k gross per year, have one car payment and other expenses are fixed costs (bills, college savings, mortgage, student loans), and variable costs i am needing to get better at managing (such as eating out, buying unnecessary items). I am just recently starting to understand and look at our finances differently so just beginning the journey so to speak. Wish i would've known about these strategies sooner but you don't know what you don't know. Taking action now and not looking back. Thx for asking Joe.
BSN nurse who later got an MBA. Wife is marriage family therapist... very expensive profession that doesn't pay well, that along with several years of deferring her loans without making payments, and pulling out personal loans to pay me rent when we first rented together (i was not aware of this...) So yeah we're in a bad situation that we put ourselves in, but that doesn't mean I'm stuck punching in and out for the rest of life. I will not quit, you don't know me, and I'm not like others you can bully out of here by shaming and judging.
So if you are nurse with an MBA, then the only reason for that degree would be if you went into nursing management. I rent to travel nurses who make $120K a year with NO MBA and in one of the lowest paid states in the country! If you are not leveraging your degrees for optimum salary, figure out how to do so immediately. A marriage therapist making $30K a year is not succeeding in the profession or might be working part time. A good therapist makes more than that. Even a public social worker makes more than that. Costco cashiers make more than that. It is not that you are "stuck punching in and out", but you need to pay your dues / earn your value. That may mean working jobs you don't like for a few years. You want to skip the hard part and you are acting like you shouldn't have to pay that price for the bad decisions you made. Telling you the truth isn't bullying. You are an adult and shouldn't even be using that word.
@Joe Splitrock going to private universities for over 100k as a 19yr old naive person trusting others who were under the belief that "you need to go to school to get a good paying job"... That along with my wife deferring payments for years and taking out unnecessary loans ballooned the already high amount of debt to a bigger debt. I make 140k gross per year, have one car payment and other expenses are fixed costs (bills, college savings, mortgage, student loans), and variable costs i am needing to get better at managing (such as eating out, buying unnecessary items). I am just recently starting to understand and look at our finances differently so just beginning the journey so to speak. Wish i would've known about these strategies sooner but you don't know what you don't know. Taking action now and not looking back. Thx for asking Joe.
You have a decent salary, but look for ways to job hop to better paying positions. Your wife needs a better job. You should not be eating out or buying unnecessary items. I can assure you even if you make more money, uncontrolled spending will just consume every penny. There are people making $500K a year that file bankruptcy. I recommend reading Dave Ramsey Total Money Make Over book. Learn to set a budget and curtail your spending. Start paying off that debt. You can do it. People have gotten out of worse situations.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
@Steve Vaughan from my time on BP is the absolute best at solving and working through this issue.
for me I did not go to school other than a little bit of JC but early on as a hot shot realtor flipper I bought a mercedes
and expensive house and an airplane.. so probably not the best use of my cash and borrowing power.. House was great made a ton on Bay AREA appreciation.. Car well could have bought a more frugal car no doubt.. Airplane was just because i always wanted to be an airline pilot.. I did not put myself in server debt though at the end of the day I had restraints paid cash for everything else.
But you do have to have a balance even though the flying over the years has probably cost me close to 500k to me its worth it. Cant take those experiences away or with you to the grave.
What the others are saying is true....you asked for advice now take it like a man. I would bet you that all of us have had it as tough at some point in our lives. I don't see any trust fund babies around this forum....
1) You don't always get to do what you want in life, you sometimes have to do what makes money. Period. But as someone said there are some well paying jobs that will get you into the RE field so you can learn while you pay down debt. Realtor and construction being two of them. Don't laugh, a good junior carpenter or electrician/plumbers assistant can make upwards of $60k a year...without overtime. A utility lineman - $300k
2) @Randy Rodenhouse got it right - get out of California! Your COL will drop by half, you can get into housing much easier, less Govt restrictions, Etc....you're like a homeless person that wants to stay in the Beverly Hills Hilton, y'know what I mean?
3) @Nathan Gesner and @Jim K. are, as usual, spot on.....You want to go where they are, right? Listen to them. It's not always this easy to get great free advice like this.
To recap - move and get new jobs.....and in a very few years you will feel very different about all of this. We've all been there, you hear some of our stories, and you be thankful to be where you are right now.
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
5y
@Blake Henderson agree you will set aside about 5-10% for CAPEX. However, I had multiple situations where HVAC went out on a month 2-3 after acquiring property. I also had water heater leak within months. Needed to replace PRV because water pressure was too high. Water main lune leak and needed replacement. Not all with one property but among my portfolio. This becomes easy for someone like me with multiple properties and strong cash flow but of you just acquire a property and in six months need to buy HVAC, it will ruin your plans. Also, I get a deal on my repairs, I buy my own system and have guys install for about $700. You may end up paying more than double of what I can. Bottom line, write down your plan for current situation, have a date for each action like 30k debt paid off by March etc. because without a plan you will not get anywhere or may end up different than what you thought. All plans don't work according to plan. Anyway, follow what Jim and Nathan said, they both are very seasoned. We all have paid off debts bigger than yours but our debts were very calculated and very well vetted. Mine was not the student loans, I hate that one. My MBA was paid for by my employer.
Rental Property Investor · Henrico, VA · Member since 2019 · 265 posts · 155 votes
5y
One thing I didnt see mentioned here is just setting up a monthly budget (in an excel spreadsheet), listing everything coming in and going out. It should be very detailed. In the beginning, it can track all of your expenses for each month, then turn into a planning tool. It will help you answer how much are you in the black or in the red last month, the one prior, and then next month. What do I need to cut out moving forward and what specific dollar amount can be allocated each month, above the minimum student loan payment towards paying it off faster; then set up an automatically recurring online payment for that amount. And continue to track your monthly expenses (including that extra student loan payment), you may find other other opportunities to increase it again and to adjust that extra monthly payment (and dont cancel it) if income increases or other expenses are cut.
Also, you mentioned your in an affordable housing arrangement now? What does that look like, in terms of your monthly payments to what would be available if you went with plan B and sold to move somewhere else? What's the interest rate?
I agree, if your wife can look for an alternative job or field, have to imagine can leverage that degree better. My friend (Principal at an engieering firm) worked with his wife to do the same (Nurse practitioner), as he would have with others (including changing jobs and negotiating new terms of her new job offer) and it assisted her in career growth and a significant compensation boost.
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Joe Splitrock don't disagree i have to pay the price. Wife works part time and hasn't been willing to work more right now while being pregnant and helping raise a3yr old but soon as they are older she will. Agree my MBA isn't being utilized, I got it to get into Healthcare administration while I have been climbing the ladder in leadership and management. Less frivolous spending and paying down debt is good advice. Aside from that, are you saying that adults can't be bullied? Or that you just think that word doesn't apply to adults? Does that word then become abuse once someone becomes an adult?
First off, I admire your candidness - it's not easy to admit to your financial picture on a public forum, with your name and picture next to it. There's a lot of shame in the US (and other countries, I'm sure) about levels of debt and feelings of failure.
So I don't have to think about some things too hard, I try to come up with quick little sayings that embody things I'm trying to accomplish. One of them I've applied to my career ("Always make the other guy look like the unreasonable a-hole"). Here's one I've tried to apply to my life:
"When in a hole, the first rule is: stop digging!"
You're in an obvious hole with a pretty significant amount of debt. However, like "The Richest Man in Babylon", you really need to remember to pay yourself first. That includes when you have some debt, because you need some victories. I would probably not sell the house to get $70k to put towards student debt because your levels are so high, you will need to buy another house (or rent something), and because your payment is unlikely to change. Based on limited information here, it appears to me you are in need of two things right off the bat: reserves and cash flow.
Reserves: start immediately building up at least a 3-6 month cushion of cash. Yes, this can sit in a measly .1% checking or savings account or money market account. It doesn't matter that it doesn't make money - it gives you a little cushion from borrowing any more money when something goes wrong and will give you some confidence to be able to take some chances later.
Cash flow: eliminate everything that can be eliminated that cuts into cash flow. That's all the monthly subscription stuff - Neflix, Hulu, Amazon, etc . That's the phone bill that includes $100/month to pay off the $2k phone. That's the food subscription plan. ETC. Most people would be really surprised how many $5/month subscriptions are killing their cash flow. It's easy to justify when it's "just $5" and it happens monthly, automatically.
Once you've pared your immediate expenses down as far as they will reasonably go - that doesn't mean you have to live under the bridge or send letters to people instead of having a phone, only that you should have a free phone with a $15 plan - and got several months of living expenses in cash, you need to start looking at your bigger picture. Maybe you should sell your house, if it's unnecessarily frivolous (5 bathrooms for 2 people; that kind of stuff), can be suitably replaced (meaning you still live in a decent, safe, convenient area that meets the basic shelter needs of your family at a good cost-to-value price), and will free up cash to do something significant with. Maybe you should sell your cars if you're both driving $500/month payment vehicles that could be replaced with 2 $250/month payment vehicles, or, better yet, 2 $0/month payment vehicles.
From there, you might just come to the conclusion that you need more cash coming in because you've pared expenses as far as they can go based on your geography. In that case, you might need a second job. Or you might decide you'll have a better quality of life if you move somewhere less expensive, where the ratio of salary/expenses is better than where you live now.
You need to get a firm foundation before you venture forward any further towards investing, because you're on such shaky ground already. And I'm going to link my friend @Shiloh Lundahl here, as he has a lot of years of experience as a counselor/therapist in California and might be able to offer some good suggestions for increasing your wife's income level. $30k/annual is either a very low hours part time job or a super lousy salary for someone in a professional field.
Good luck! And don't fret on the tough love. It's better than hearing soothing lies :)
@Al Pat thanks for the insight. Isn't something like a HVAC part of capital expenditures that I would be setting aside part of the rental income for? I will definitely have to be very careful but was thinking so long as I factor ALL of the expenses and see cash flow after it'd create income I could then use in addition to my W2 to get out of debt faster
Do you think that ACs only conveniently break when you have enough set aside in your capex account???? If something goes wrong in a rental, you must fix it THEN, regardless of how much money the rental has made you. You can choose to push the carpet one more renter, and if the roof looks sad but isn't leaking yet, you can gamble another year. But when the AC goes out or you need a new water heater or the fridge or stove breaks, you need to have a new one within a few days. Even a tree dying can be anywhere from $500 to $3000 expense that you need that season. If you don't have $10k extra cash (in addition to your personal emergency fund) floating around, you shouldn't be investing.
No, you can't "figure in all the expenses" because expenses aren't predictable. They only happen at an average of a certain interval. When they actually fall is often entirely unpredictable. If you have 200 units, then I guess you'd probably almost never have sudden excesses (as well as good years), if those units are scattered around the city and aren't all in the same flood plain or whatever. But no, rentals aren't just shoe-in easy money. Passive income is a tax status, not a guarantee of easy money. Pretty much the only passive income that's easy money are oil royalties...and you have to be born into those these days!
@Joe Splitrock don't disagree i have to pay the price. Wife works part time and hasn't been willing to work more right now while being pregnant and helping raise a3yr old but soon as they are older she will. Agree my MBA isn't being utilized, I got it to get into Healthcare administration while I have been climbing the ladder in leadership and management. Less frivolous spending and paying down debt is good advice. Aside from that, are you saying that adults can't be bullied? Or that you just think that word doesn't apply to adults? Does that word then become abuse once someone becomes an adult?
Hi again, Blake. I think Joe is trying to explain the armadillo-thick skin you have to develop in real estate. Who the hell are we to push you around? Because some of us have a nice nest egg saved up? That doesn't make us special.
I will repeat the kudos for reaching out. A lot of us have been walking this path for a good long time. It kind of makes us oddballs in a lot of ways. You've seen we're all money nerds, for instance. This society really seems to hate that. Talking about and sharing your finances is really not the done thing in polite society. It takes a huge leap of faith to get past that. Congrats to you.
The more you write, the clearer a few things get. I think Dave Ramsey and The Total Money Makeover would really help. So would this other book called The Millionaire Next Door.
OK, with that in mind to help get you on the road to the kind of iron financial discipline and focus on finances you need to do better at getting the brutal debt boot off your neck, looking at your salary and your wife's eventual willingness to earn more in her own work, you're not in THAT bad shape, really. The thing that will make it really hard right now is fighting the psychology, the social mind control you have to beat off to live a certain way and act a certain way. That mind control keeps you broke and will very often take the form of forcing you into living in too much house and driving too much car. I'll ask you do an exercise with me that will help you really feel it.
You've got two young kids now.That limits some of your more extreme options, but can you sell the house right now, move into a one bedroom near the hospital you work at, sell the car you're driving and get yourself into a $5K Toyota or Honda economy hatchback, and really bear down on erasing your personal debt for the next three years? If you're recoiling in horror just at the thought of it...that's the mind control, right there. Of course you don't have to go that extreme, but you ARE going to have to make the kind of hard choices the perennially broke, and that's most of us, never make.
All to say, it's not going to be a cakewalk and you're not going to change one little thing and everything will be OK. Your friends and relatives will not understand the things you choose to do to break out of the money mind control that's kept you in the red your whole adult life. This is how it works for everyone. That's the big mindset fight you have coming up.
Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
5y
Just wanted to add that the thoughtful responses from the “usual suspects” Joe, Jay, Jim etc are what keeps me coming back to BP every day. There is much kindness and love here. I’m a respiratory therapist and I work with hospice patients so I’m often with patients when they die. It gives me a different perspective on life. Family and helping others is where it’s at.....
@Joe Splitrock don't disagree i have to pay the price. Wife works part time and hasn't been willing to work more right now while being pregnant and helping raise a3yr old but soon as they are older she will. Agree my MBA isn't being utilized, I got it to get into Healthcare administration while I have been climbing the ladder in leadership and management. Less frivolous spending and paying down debt is good advice. Aside from that, are you saying that adults can't be bullied? Or that you just think that word doesn't apply to adults? Does that word then become abuse once someone becomes an adult?
I think bullying is a real problem that affects children. Twenty years ago, I never heard a single adult use the word in the context of another adult. Now it is common for (mostly younger) adults to drop the word like it means nothing, Unfortunately the word bullying has morphed into "anyone telling me anything I don't like". It has even become an argument rebuttal. There is a difference between getting advice you don't like or having people disagree with you and actual bullying. The internet is filled with keyboard cowboys who are cowards in real life. You grew up in the internet age, so you know that, right? What I don't like about adults using the word is you become the victim and that becomes the excuse. Children are different because their minds and self confidence are still forming.
You need a tough mindset to get out from debt and achieve financial freedom. It takes massive self control to reduce spending and massive persistence to grow your income. Along the way you will face adversity and challenges.
I remember a story that a college friend told me years ago. A kid in school was bullying him and one day my friend punched him in the nose. From that day forward NOBODY ever messed with my friend. I am not advocating violence, but rather pointing out that you get in life what you tolerate. Get out of debt and show everyone what you are made of. If you came on here saying "I just paid off $300K of student debt through sacrifice and hard work", the responses would be totally different. Half the people would say, "that is amazing how did you do it?" Be a role model not a victim.
This is a supportive community, but also one that delivers some "tough love" at times. It doesn't matter how you got into the situation, provided you don't repeat that mistakes. All that matters now is how to get out. Just focus on that and ignore the noise.
Investor · Santa Barbara, CA · Member since 2021 · 76 posts · 67 votes
5y
@Joe Splitrock interesting perspective thanks for sharing. I've not been involved in much social media or internet communication to be honest so i think part of this was me not being used to how this culture communicates. Appreciate everyone's thoughts, I realize you all have better things to do than to share your thoughts, opinions, and advice to my post
