In my recent episode of the BiggerPockets Podcast, I was asked how someone could talk their spouse into real estate investing. I’ve thought about this question a lot since the episode, and I have to say, I am not satisfied with the way I responded. So please allow me a do-over on this important question!
Hey Natali, how do you talk to your spouse about real estate investing?
Oh, thanks for asking! I have some thoughts!
Even though I was raised by real estate investors, I still felt weary about taking money out of our savings and retirement accounts to buy property. I would wager there is usually a conservative investor in each partnership that feels this way.
Meanwhile, my husband is the cowboy — always ready to hop on the horse and start swinging his lasso to round up investments. So, how does the cowboy convince the pioneer to start investing? Here are a few things your conservative spouse may need to know.
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7 Ways to Convince Your Spouse That Real Estate is the Way to Invest
Know your stock and bank-based investments are not as safe as you may think.
Market crashes are cyclical. History tells us that a market crash happens every 10 years. Some economists believe that our current level of volatility means that we may see one every five years now. Most investors are hoping that they don’t need their investments during one of those downturns, but we can just never know. The stock market has made many a millionaire and many more a fool. It is not the only game in town when it comes to investing. It is just one of many tools.
Realize your investment accounts are probably pretty expensive.
Most people don’t know how much they are paying in fees inside of their investment accounts. Once you see the cumulative effect of this, you will start to break your faith in the stock market as the only way to build wealth. I use a site called FeeX to track the fees in our investment accounts. The first time I did this, I nearly choked at the analysis! Try it with your spouse!
Understand real estate is not an appreciation game.
Coming from the San Francisco Bay Area, this mindset took some breaking for me. Buying for appreciation is not how you make money in real estate. Oh, sometimes you can, but prudent investors buy for cash flow, not appreciation. Tell your conservative spouse that you are investing to add to your current level of cash flow. You are not buying to hope that investment goes up in value in order to sell someday. Explain the difference between performing and non-performing assets. Don’t present a deal that you intend to sell, unless you are an experienced flipper. Present a deal you intend to keep for cash flow!
Explain the return on the deals that you are proposing to buy.
You have to be ready with numbers and explain the difference between your proposed investment and your current investment. My husband and I had real estate deals before we were married, but when we made our first purchase as a family, he was able to bring this deal to me — single family home, $35,000 purchase price, $900 per month rent. This is an 18% cap rate! None of our investment accounts, no matter how well diversified, could get anywhere near this! It is hard to argue with value.
Use your budget as ammunition.
What could your spouse do with that $900 per month in the above deal? That is $900 per month that you don’t have now with your money in a bank account. Take your monthly budget and point out how cash flow will give you freedom. Is this your total mortgage? Is this your child’s tuition? Is this your credit card payment? Allow them to see dollar signs and imagine them in use!
Use the literature.
When my husband and I decided to jump into real estate as a family, we read Rich Dad Poor Dad out loud together. We did this on road trips. I read aloud while my husband drove. Most of you have read this book, and you know how this book sets your hair on fire. In addition to this book, listen to podcasts, read some blogs. Link your spouse to these resources, too. This is free education!
Know your spouse.
If you’re like me, you can play out your spouse’s arguments in your head before they fly out of their mouth. You already know the arguments your spouse uses against you. Be ready to dodge their punches. Be ready with the answers to the questions that you already know they will ask.
What are the things that make your partner hesitant?
I’d love to hear how other couples come together to agree upon and execute shared wealth-building goals!