47, feeling a bit stuck

[stayhungry]

Me: Part-time IT Consultant, grossed $125k last year. Have worked in IT for 20 years.
DW: Project Manager, earned $95k last year. Could earn $100k on full-time schedule.

We live in Ann Arbor, MI.

Net Worth: $1.6M, consisting of
- $450k 401k
- $170k Roth IRAs
- $220k Rollover IRA
- $160k SEP IRA
- $550k equity in 7 rental properties and home. All have mortgages. Tot Asset Value is $1.6M.
- $50k cash

Expenses: around $6.5k/month
Rental income: $3k/month, almost all of which flows back into loan principal. Cash flow might be $500/mo.

My primary client is now trying to insource their IT work. I've been working 30 hours/wk for them for the past 7 yrs. Now down to around half that this month. I could find full-time replacement work in IT but have been 'spoiled' by my part-time telecommuting job. We have a 7 year old son with mild autism. It's been very helpful to have max flexibility with current client to help look after son (esp during summer break) and rental properties.

I'm considering other employment options that might offer lots of flexibility. DW suggested working as realtor, which could be interesting and would dovetail with our rental property investing. However I'm a bit introverted and wonder if it would drive me crazy to sell houses all day long. Also unclear on how long it would take to make any income as a realtor. Also considering a franchise, or starting a business of some sort.

I probably have a few months to figure things out given our income, savings, and expenses. Although we have a decent net worth we're somewhat cash-poor right now. Any intelligent advice from you folks would be helpful, especially if you've found a successful path through a similar situation or career decision.

 

[brewer12345]

Um, seems to me if you could reduce your expenses somewhat and rejigger your real estate portfolio to have a bit more cash flow, you could just bail on the job search an spend your time dealing with properties, working with your son, and figuring out what you want to be when you grow up.

 

[Totoro]

+1 on brewer12345

Also, look into what your real estate portfolio is actually delivering in performance for each individual unit? It might be rather low (6.5% gross after interest?).

If DW continues working, you don't need to

 

[aja8888]

Hi and welcome to the site: Regarding your comment on becoming a RE agent...

Becoming a real estate agent is not very lucrative, unless you are in the "top dawg" category that has people coming to them to list a property. Generally, these people are long time agents.

Starting out selling RE is difficult, time consuming (goodbye weekends and nights), and creates a lot of tax deductions (worthless unless you have corresponding income to write them off against).


Our DIL started a RE "career" after the market got hot and has sold maybe three properties in two years, and she works for a big agency. Oh, the properties she sold were in the family. She is pretty aggressive and bright, but everyone jumps into real estate when the market is hot.

Selling is all about getting the listings so that you get a fee no matter which agent sells it. In these days of MLS services, people generally start out looking for a home online that is already listed and has a selling agent.

When I lived in California, we used to say "when the RE market is cold, you can find the RE agents on the tennis courts."

 

[heeyy_joe]

Develop a computer program to help autistic children.

 

[jerome len]

Unless you want to be on call 24/7 you don't want a career in real estate. Since you have a steady income with DW, I'd look into adding part time IT work. Franchises cost money, owning a franchise is a lot of work......very little free time. I'd look at fixed expenses, try to improve cash flow, have either you or DW have a job with benefits, health care expecially, and move on from there. I don't think you'll find many opportunities over 100k working 30 hours per week. But.......I could be wrong......Ann Arbor is a nice place to live, lots of educated people with growing RE values So, you have a lot going for you......good luck in the future.

 

[stayhungry]

Many thanks, these are all great replies. I should have thought of asking a bunch of genius millionaires for advice sooner.

Brewer12345: I like the way you think. We've cut back some spending in recent months (reduced grocery and restaurant expenses by half--thanks budgetbytes.com, cut cable TV, cut newspaper subscriptions, reduced spending on "Merchandise" category, installed efficient lights and shower heads) I suspect there are other painless things we can do, like dropping life insurance and shopping around for better home/car insurance. We're also raising some of our rents. We're very close to being able to live on just my wife's salary. If all of our household and rental appliances and fixtures would stop self-destructing it would be a lot easier. . We're hesitant to refi our properties because we just finished a big round of that as well as some new RE purchases within the last couple years. Half of our properties are on 15-yr mortgages, the other half on 30-yr. None will be paid off before 2028 if we pay minimums each month.

Totoro: great suggestion on looking at return of individual properties. We bought four rentals in 2004. Three are back up above purchase price and renting at decent levels. The fourth is a bust ( mkt value = loan balance). Loan is 30yr fixed at 6.5% with balance of $145k. Rent relatively low at $1280/mo, although long term tenant is extremely clean and dependable. Can't refi At decent rate because condo complex is not Fannie Mae approved (builder still owns 20 of the 76 units). It burns $200/month cash flow. Difficult but not impossible to sell due to prospective buyer financing difficulties. We need to think hard about getting rid of this one somehow. Maybe current tenant would like to buy it. She's lived there for 9 years and just renewed for another year.

Aja8888: thanks for the much-needed reality check on a RE career. You raised several excellent points I wasn't aware of. RE is definitely cyclical and I'd hate to get fully acclimated to it just about the time the bottom drops out of the market again! Also I'm pretty sure I don't want to be that busy. In fact I'm definitely sure I don't want to be that busy.

Heeyy_joe: that's a cool idea. I'm gonna have to noodle on that and see what I can come up with.

Jerome Len: all very good thoughts, and thanks for recommending I look for other part time IT work. The thought has occurred to me before in kind of a "how the heck am I gonna do that" way. . But somehow it helps to hear it from someone else. It might be feasible to talk to some of my former employers and see what they can offer. I've always left prior jobs on good terms and on occasion have been asked to come back after leaving. I suspect folks who've worked with me before might be more flexible than a brand new employer.

Again, thanks to all for the great comments and recommendations!

 

[Golden sunsets]

aa4rent; DS is a software engineer and has his pick of jobs as a consultant. Salaries are awesome. Telecommuting in that field is very commo, as I'm sure you are aware. Could you not replace your large client with another "at home" gig and continue on as is?

 

[foxfirev5]

Unless you want to be on call 24/7 you don't want a career in real estate. Since you have a steady income with DW, I'd look into adding part time IT work. Franchises cost money, owning a franchise is a lot of work......very little free time. I'd look at fixed expenses, try to improve cash flow, have either you or DW have a job with benefits, health care expecially, and move on from there. I don't think you'll find many opportunities over 100k working 30 hours per week. But.......I could be wrong......Ann Arbor is a nice place to live, lots of educated people with growing RE values So, you have a lot going for you......good luck in the future.

+1 on the realtor avenue. You have to be a special breed of cat to be successful in that field. Besides, you already have a great skillset in your current field. Rather than jump ship, adjust and adapt to use your strengths. Unless you absolutely are done with your current profession. ( I am beginning to see that a lot around here. Very successful people with great skills who are looking to hang it up at a relatively young age. Makes me wonder why the profession was chosen in the first place.)
In any event your in good shape so you should be able to make it on the path you choose. Best wishes.