topic Re: What's the next step in building wealth? in Personal Finance

What's the next step in building wealth?

800who — Sun, 12 Jul 2020 22:00:40 GMT

I've been trying to buy my first house since January, and I recently gave up for the time being and signed a one year lease for an apartment with my girlfriend(the market is terrible in my area and I'm motivated to get out of my current situation). I have $30k in liquid assets, the only debt I have is $1800 left on an auto lease, I was going to use the cash for down payment, closing costs, furnishing the place.. etc.. now what? I have a federal job where I contribute adequately to the TSP, is this the time to begin personally investing? I'm very interested in pursuing real estate and have been for a couple years(buy/build houses & rent them). The place I am moving into is a stand alone one bedroom apartment that the landlord built himself on his own land out behind his house that he also built himself, I hope over the next year to pick his brain and learn things about building because I know nothing... what should I do now?

Re: What's the next step in building wealth?

Anonymous — Mon, 13 Jul 2020 02:48:21 GMT

All good motivations.

You do now have a year to plan it out.?

Look into multi units (if not already), as sounds like you are in a very good spot to live in one,

rent the other half or other units.

Over 4 is considered commercial, so maybe stick to 4 or less to stick with conventional etc.

Not sure if you already have your liquid in HY or certs, but could spring for 12 month if you can find better rates than HY

I have been in similar thoughts for the last 10 years lol, but have never pulled trigger.

It almost happened with half dozen properties over those years.

I do have 4 kids living at home, so multi live in would not work currently.

Recently I have been again looking hard, but still not ready to commit.

We may just relocate and start a farm to keep it simple and also because the

industry for the business I started 11 years ago may be going caput.

youtube has obviously many vids that are nice to watch, but most are somewhat non detailed, just glamorized

Would like to hear other input on real estate, more like real life xp.

Re: What's the next step in building wealth?

SouthJamaica — Mon, 13 Jul 2020 15:35:41 GMT

@800who wrote:
I've been trying to buy my first house since January, and I recently gave up for the time being and signed a one year lease for an apartment with my girlfriend(the market is terrible in my area and I'm motivated to get out of my current situation). I have $30k in liquid assets, the only debt I have is $1800 left on an auto lease, I was going to use the cash for down payment, closing costs, furnishing the place.. etc.. now what? I have a federal job where I contribute adequately to the TSP, is this the time to begin personally investing? I'm very interested in pursuing real estate and have been for a couple years(buy/build houses & rent them). The place I am moving into is a stand alone one bedroom apartment that the landlord built himself on his own land out behind his house that he also built himself, I hope over the next year to pick his brain and learn things about building because I know nothing... what should I do now?

I don't know. The fact that you're asking a question like that to a bunch of anonymous strangers, who may or may not be qualified to advise you on something like that, suggests to me that your money should be in a savings account.

Re: What's the next step in building wealth?

Anonymous — Mon, 13 Jul 2020 17:55:51 GMT

Personally I would probably wait it out until this crisis has abated. While it may be a great time for rates and buyimg property in general, it's a rather different scenarios for renting. With all the renters that have gotten deferement it could cause some owners to default themselves, by not having that revenue. So if you don't have the reserves to ride out something like this it might be bast to wait.

Or at least buy something within your means where you wouldn't need to rent the other units out immediately.

Re: What's the next step in building wealth?

800who — Tue, 14 Jul 2020 01:01:13 GMT

@SouthJamaica not really looking for someone to tell me what to do... I like to brain storm and have collaborative thinking to have the possibility to expose my self to thoughts or ideas I haven't yet been exposed to, to further my own thoughts and ideas and to start a potentially interesting and informative discussion. Thanks!

Re: What's the next step in building wealth?

800who — Tue, 14 Jul 2020 01:04:21 GMT

@Anonymous I am trying to avoid that because I am heavily motivated, I am not one at all to make rash decisions, most if not all of my decisions despite what the context is have some sort of research put before being made because that's just who I am lol, but I don't want to have life pass by and have only accrued cash in a savings account for 40 years, I'm talking like retire at 55, travel, ride the boat, whatever I feel like doing with whatever money it takes lol for lack of better example. I want to generally be more productive.

Re: What's the next step in building wealth?

Anonymous — Tue, 14 Jul 2020 01:28:15 GMT

Well I heard that the markets are down pretty low, still low.

Investing wise now with 401k, IRA, stock accounts, will make many millionaires over the next few years.

That and "investment" properties are both investments.

Both and any other business investments all come with some degree of risk and all should require

due diligence and much hard work and non stop attention.

Getting your money to work for you, can and does work, but as others have mentioned....right

now can be the perfect time or not such a good time.

All "investment" property purchases do require some number crunching to see if they will work.

Adding in current financial variables are somewhat like throwing a wrench into a well oil machine.

I think that is why I have never pulled the trigger. BUT I do know that I seem to be happy at my decisions

that I have not yet. I have had much more freedom by becoming "wealthier" by not taking on more debt

and actually have become almost debt free and owning my home free and clear...very soon.

Yes, If I would have chosen to do it 10 years ago, I Possibly could have many properties by now, or maybe not.

Unsure, but I do not beat myself up over it....too much lol.

And the cherry on the top is my eldest son recently graduated high school,

with my youngest son just starting school last year lol.

So it is nice to have some, just a little bit of free time to spend with them and not only listen to them,

but teach them about managing money.

I think I spoke a bit too much on your thread, but to end this post, I will say there are some

property investment forum specific to this and FIRE ones.

I still stick true to my sayings of the past, you can be a millionaire and be poor, or you can have a part time

job making minimum wage but still be wealthier than that millionaire.

Just manage your money and spending habits really well.

Be happy and stay safe!

Re: What's the next step in building wealth?

SouthJamaica — Tue, 14 Jul 2020 03:09:10 GMT

@800who wrote:
@SouthJamaica not really looking for someone to tell me what to do... I like to brain storm and have collaborative thinking to have the possibility to expose my self to thoughts or ideas I haven't yet been exposed to, to further my own thoughts and ideas and to start a potentially interesting and informative discussion. Thanks!

OK I can respect that. So let me brainstorm with you.

IMHO real estate is very risky and very illiquid, so that it should never be done with your own money, unless you have a lot of extra money you can afford to (a) lose or (b) tie up. It should be done through a separate business entity, and it should be done on money borrowed by the entity through mortgages. I just don't think you have enough money to play that game yet.

Re: What's the next step in building wealth?

800who — Tue, 14 Jul 2020 20:40:56 GMT

@SouthJamaica May I ask what's the nature of your business?

Re: What's the next step in building wealth?

SouthJamaica — Tue, 14 Jul 2020 21:21:16 GMT

@800who wrote:
@SouthJamaica May I ask what's the nature of your business?

I'd rather not say.

Re: What's the next step in building wealth?

randomguy1 — Fri, 17 Jul 2020 20:22:39 GMT

Depends how much money you make. I would say acquire a second income. Passive income would be a great step.

Re: What's the next step in building wealth?

loyalsudz — Sat, 18 Jul 2020 14:31:21 GMT

I am open for collaborative discussion. It sounds like you are dealing with the questions that most people ask themselves when they obtain a cash reserve. It is nice to have cushion/safety net. Congrats! That's great having the 30K and a retirement plan in the works through your current employer. The next steps are very dependent on your priorities.

Is it to be debt-free?
Is it to be a real estate investor?
Is it to be a real estate flipper?
Is it to just have a side-hustle?
And finally, do you want to learn investments in taxable dividend income using a percentage of your current income or is it time for a hard stop until the storm mode aka coronavirus and other subside?
Is this about the feeling restlessness that you are not making steps to prepare for the future?

A lot of questions for you to answer. Some of them have bases in a spending and income plan because it is more about the math. If you can do the annualized math times 25 years that gives you many answers already. And when you are ready, you are ready no matter the age.

Working with existing income

To determine next steps, plan some scenarios or hypothetical changes based on some assumptions, constraints and risks.

What portion of your cash is an emergency fund of 3 to 6 months worth of expenses? That means everything for one year of what you spend and how much you have left over every month and what that equates too on a yearly bases. To cut out expenses, means you can retire earlier because you do not necessarily need x amount. The greatest wealth building comes from your existing paycheck or take home pay. That net determines options and wriggle room. If it is not enough, then you take on side hustles. When a side hustle produces revenues or profits above your current income and not just projected but in the bank then you have a business model that is working but it has to make more money because being self-employed means that medical insurance, and all the extras in your benefit package are all on your shoulders to maintain.

Does the side-hustle allow you to spend quality time on your human capital ie family, friends, and net-working endeavors as well as volunteering?
Start with a spending plan
Work on projections with the side-hustles
Include a timeline for studying to understand what is involved ie youtube.com and free online college courses from a community college or other consortium of schools that offer free courses.
Ask yourself how that aligns with current plans meaning is it too different from what you do at work? Would it be better to invest in courses aligned with your current career path that would provide income and recognition if you invest in yourself and how long will that take?

If you just want a house head over to the mortgage section since there is some really good information over there which can help determine if you are ready for that.

Re: What's the next step in building wealth?

800who — Mon, 20 Jul 2020 17:49:38 GMT

@loyalsudz thank you! What you said is very helpful in giving me the abililty to brainstorm further.

Re: What's the next step in building wealth?

TGG_1976 — Sat, 12 Sep 2020 16:11:01 GMT

I would say, just continue saving and grow that liquid asset. As you want to buy a house next year, investing it into stock is too short of a time frame/ gamble to get tangible growth results. Any somewhat liquid asset that you need in the next 3-4 years should really be in a high-yield savings account. The stock market is too volatile at the moment and you could loose money. Hang tight, keep saving and pay down any dept and you re-consider your next move in a few months.

Re: What's the next step in building wealth?

Anonymous — Sun, 13 Sep 2020 18:00:38 GMT

@800who wrote:
I've been trying to buy my first house since January, and I recently gave up for the time being and signed a one year lease for an apartment with my girlfriend(the market is terrible in my area and I'm motivated to get out of my current situation). I have $30k in liquid assets, the only debt I have is $1800 left on an auto lease, I was going to use the cash for down payment, closing costs, furnishing the place.. etc.. now what? I have a federal job where I contribute adequately to the TSP, is this the time to begin personally investing? I'm very interested in pursuing real estate and have been for a couple years(buy/build houses & rent them). The place I am moving into is a stand alone one bedroom apartment that the landlord built himself on his own land out behind his house that he also built himself, I hope over the next year to pick his brain and learn things about building because I know nothing... what should I do now?

Okay let me give you a piece of advice here. If your going to get into real estate investing and do the remodeling yourself prepare to spend significant amount time doing so. This is not passive at all it's very active and time consuming. Are your prepared to spend 20+ hours a week fixing up a house to rent it out? Do you even have that much time available? I remodeled my own home and that was a light remodeling where it was mostly cosmetic i.e. painting the whole house, ripping up the old carpeting and putting new flooring down, replace ceiling tile, etc. That takes a while to do for one person. So if your job requires you to put in 60 hours a week or more like mine does be prepared for this to take months and that's a cosmetic remodel and not gutting the house down to the frame, installing new electrical and plumbing.

Just on cosmetic light remodel expect to spend around 10k on it. Not saying not to pursue real estate because there is money to be made there just letting you know what you are in for. Also understand most landlords are looking to get just $100.00 per door for there rentals after mortgage, taxes and maintance is accounted for. I know a lot of people like residential real estate investing but if you want something that's less time consuming commercial real estate with triple net leases is where it's at. So in that part I agree with SouthJamaica on.

However, if you plan on buying multi family unit and living in one of the units than residential real estate investing can make a lot more sense. This is what I did myself with me living in a 3 bedroom apartment above the garages in the back of my property and planning to rent out the house at the front of my property. However, with my father passing this year my mother is going to be moving into the house instead and I'm never going to charge her rent. I'm telling you this because if renting out the units in multi family property doesn't work it's still useful to have if you need to take care of relatives one day.

Anyway that's just my $.02 of the topic for whatever it's worth.