7 Ways to Convince Your Spouse That Real Estate is the Way to Invest

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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.

real-estate-partnership

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!

raise-rents

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!

About Author

Natali Morris

Natali Morris is a technology and finance contributor for CNBC and MSNBC. She also writes about personal finance on her own personal site, www.natalimorris.com. She is the wife of Clayton Morris and mother of two (soon-to-be three) children. Her constant preoccupation is in not screwing them up.

15 Comments

  1. Ryan Canfield

    Nice article Natali!

    At first it was a challenge to get my at the time fiance to buy into the idea of “house hacking”. We were living in a condo that her mom owned that we were looking at buying. After looking at the numbers, we would have paid double the price if we bought it from her versus continued to rent. It was a challenge convincing her to live in the same building as our tenants but eventually she came around. 4 months ago we closed on our second owner occupied 3 flat and we couldn’t be happier.

    It takes many heart to heart conversations but you definitely need your spouse on your side to invest in real estate and keep a strong relationship. Once you are on the same page as each other, it’s another exciting chapter in your lives together!

  2. Jerry W.

    Natali,
    Thank you for the article. While my wife is not in favor of real estate, she is not as opposed as she used to be. Her parents raised her to only put money in banks. They never even invested in the stock market. Investing in real estate is super risky from her viewpoint. In order to help ease her fears we set up our house and personal land owned into ownership as tenants by the entireties. The rental units I bought were put solely in my name and my wife is not on the titles or on the loans. If something went horribly wrong the bank could not come after our home or assets owned as tenants by the entireties. Then I also had on deal that helped. I bought 2 houses on a nice lot, but the big house was very messed up and needed work. I was able to resell the property in less than a month and make a $14K profit. That got her attention. She is still not a fan of real estate, but she is not as opposed as before. Now if I could only do a few more deals like that.

  3. Jerome Kaidor

    Actually, my wife dragged me into RE. Kicking & screaming. She just wanted a tax writoff. Back then, in the mid-90’s, you could make 15% in a high-tech mutual fund. And your fund would never call you with upchucking toilets. So we bought that first fourplex and swung hammers and paintbrushes for a few years.

    By 2001, the fourplex was standing tall, and high tech was not looking so good. By that time, I was convinced, and started looking for more properties.

    Now we have 73 units with robust cash flow. I haven’t worked a W2 job since 2003.

  4. Francisco Gonzalez

    I believe you have to find some sort of compromise. For example my wife really believes in a “nest egg” for her security and our kids. We saved up enough that made her feel comfortable and I did not touch any of it. With extra income we put aside, we began investing in real estate. Her “nest egg” is protected and with smart investments she is beginning to see some promise.

      • Justin Prevatte

        @Natali

        Thanks for pointing out your “Forget the Nest Egg” post. Sharing it with my wife for sure!

        Great analogy and explanation. You mention other options besides buying rental properties which ads a lot of credibility. Often time people just preach a single option and it comes off as them justifying their own choices.

  5. Frank Sanchez

    You lost me on RDPD, that’s a fairytale. Inspiring, yes; truthful, no.

    I read books and shared the info with my wife. We also used audio books on road trips, that’s a great advice.
    Then, read more about taxes, mansamente, psychology, and develop a common goal: diversify investments.

    We are both aligned, because we understand risk and rewards.

    Good post, thanks.

    Frank

  6. George-Hyuung W.

    Hi all,

    Under subheader, “Explain the return on the deals that you are proposing to buy”, can someone kindly explain this part: “$35,000 purchase price, $900 per month rent. This is an 18% cap rate”. How does Natali arrive at her cap rate? #noob #learning #thanks

    George

    • Natali Morris

      George, this is the formula I use:

      Annual rent roll (monthly rent X 12) * 0.60 / purchase price + rehab cost

      I use 60% of annual rent roll because that takes 40% out for vacancy, taxes, and insurance. It is pretty conservative but good to be conservative when estimating profits.

      So in the above example,

      = ($900X12) *.60 / $35,000
      = $10,800 * .60 / $35,000
      = $6,480 / $35,000
      = 18.5%

      Make sense/cents?

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