How we got started (Part 2): Becoming the Janitor

Sheila and I dreamed of a life that would not be constricted by the barriers that hold most people back. Lack of time and money are the two main factors which stop most people from achieving their life goals. We knew we had to make some dramatic changes if we wanted to experience the life we envisioned.

During a real estate seminar, we played a game many are familiar with: Cashflow 101.  You start the game by picking a career card which lays out your income and debt.  Careers range from the prestigious doctor making three figures to the poor janitor with low pay and little debt.  Many people are drawn to the high-paying career thinking more money will make them successful.  Unfortunately, the doctor career came with a high amount of debt which needed to be eliminated before financial freedom could be found.  After understanding the benefit of the janitor card, we decided to model our lives to "become the janitor."

We took a close look at our finances and found the two most expensive debts were our house and vehicles. The cost of our two brand new cars with full-coverage insurance was equivalent to the cost of our mortgage.

We found motivation to sell our new cars and purchase older replacements after we realized we could afford a second house if we didn’t have the car payments. A second house could be rented which would make us money, provide toward our long-term goals of world travel, and benefit someone in the community by providing quality and affordable living.

The problems started arising when we began researching the details of our plan. We initially saw that we would lose money selling the cars and we would have to cover the loss at the time of sale to satisfy the loan. This roadblock had stopped us in the past, but this time we refused to give up. Instead, we thought, “How can we make this work?”

We used a credit card and borrowed some money from family to cover the cost of selling our vehicles. We replaced them with older ones that had a proven history of reliability.

These cars were 10 years older, but looked and functioned great because we kept them clean and well maintained. We have put thousands of miles on each and have had no breakdowns. In fact, neither has required anything more than minor repairs and scheduled maintenance.

This one move was the turning point in our pursuit to live the life of our dreams. Over the 3+ years remaining on each loan, this simple strategy saved us $19,500 including the loss we took while selling.

Carrying the momentum from our car-selling success, we decided to tackle the issue of the house.  We bought our house during the decline of the market.  At this point, we were $30k underwater and could not sell the house.    

Our next option was to rent it out.  Even though we had no idea what we were doing, we took a risk and decided to move out of our house. We put it up for rent and immediately moved into an apartment. Through blind faith, we planned on finding a renter to cover the cost of the mortgage so we could eventually purchase another house with a lower payment.  

This plan didn't do so smoothly.  After two months of taking phone calls, showing the property, we still had not found a renter.  We understood that our inexperience was most likely getting in the way, so we decided to hand the responsibility over to the professionals.  There we were with two months vacancy and paying rent for our apartment on top of it.  Within a couple weeks, property management found a qualified applicant and placed them in the property.  Our future was finally starting to look bright.

Within a few months of deciding to make a change in our life, we eliminated over $900 a month in bills and added $1000 a month in rental income.

We had eliminated our two most expensive debts, but we were still not where we wanted to be.  Living in a two-bedroom apartment with two children (at the time) was not our vision of a dream life.  We needed to bring in more income and eliminate more debt.  We had continued our education in real estate investing.  It was now time to put it into action.

In the next blog post, we will share our experience investing in real estate through rental properties, including our initial struggles and what we learned to find success.  We hope to bring this blog current so we can document the steps we are taking today!

See you there!