Previously I described how I tried to become a real estate investor by purchasing a duplex as our first home. Those who have read that post will know that it did not work, in part because Ariana was afraid of investing in real estate. Fear is common among people, especially when getting into something new. When it comes to couples, it can be even more challenging as both people have to get past the fear in order to move forward. We eventually got past the fear, but it was not an easy process. Below are some of the steps and challenges that we faced before we finally took the plunge and bought our first duplex.
They day we closed on our house I was ecstatic! We had achieved the “American Dream” by age 22, which was to own our own home. It seemed like college and the hard work of the first year in our jobs was all worth it. But I felt like a failure inside. I had spent months learning about real estate investing and had an awesome opportunity to not only own our own home, but to collect rent from the other half and to how a low/no mortgage payment. Instead of going that route, we now owned a house, but we had a full mortgage payment and no rental income. As I learned from Robert Kiyosaki in Rich Dad Poor Dad, our new house was not an asset, but instead a liability. A big liability.
In a previous blog I explained how I had set a goal to retire within 15 years without much of a plan. Investing in stocks did not work out, but I realized that investing in real estate could be a viable way to actually achieve that goal. After we didn’t buy the duplex, I wasn’t sure how I would be able to get started in real estate investing. We had spent our savings on the down payment and closing costs for our house. So we were back at square 1. No plan, no savings and a big monthly payment.
Several nights we had discussions about the future. Ariana was having trouble finding work that she could apply her Zoology degree in. She was working at a human society, which was around animals, but it was hard work and barely paid above minimum wage. At one point, we calculated that she had to work 2.5 weeks just to pay her monthly student loan bill! I was in a little better place with my job, but with the new mortgage and car payment we did not have a lot left over each month to save. How were we ever going to be able to retire within 15 years?
What Finally Sold Her
One night while laying in bed and talking, I nonchalantly asked Ariana what she wanted out of life. This started an amazing discussion of both of our sharing our dreams and the vision for what we wanted our life to be. The next day, we decided to each write out what we wanted our life to be like/contain in 10 years, 5 years, 3 years, 1 year and 6 months. We shared our goals and created a combined list that encompassed our most important goals.
The next step that we took was absolutely critical. We started brainstorming how in the world we would be able to accomplish all of our goals. One of our goals was to allow Ariana to stay home when we started to have kids within a few years. With our current path, we were not sure how we could do it. Having a child is expensive by itself, but going from 2 incomes down to 1 on top of it made it even more difficult. At this point, I brought up the idea of real estate again. Even though we both had some fear about it, we walked through an example of a duplex.
Purchase Price: $30,000
Down Payment: $6,000
Monthly Rents: $1,000
Monthly Expenses: $500 (Estimate)
Monthly Mortgage: $180
Monthly Cashflow (Profit): $320
After walking through the example with her, I started to see some of the fear dissipate. With some quick calculations, we realized that if we purchased 4 duplexes, we could replace her job. Let me say that again… with only 4 duplexes, we could allow Ariana to replace her income and leave her job!
Rising From “Failure”
After our goal planning sessions, I had a new level of excitement and I could tell that Ariana was coming around to this whole idea of real estate investing. For the first time we had written down our goals and started identifying specific actions that we could take to achieve them. There were still a lot of questions to answer and hard work ahead, but we had a unified vision and a shared understanding of one of the ways to potentially get there.
P.S. – I am very happy to report that through goal planning, hard work and sacrifices, Ariana was in fact able to leave her job 2 years ago when we had our daughter Elena.
So what is holding you back? Leave a comment.