Day to day money decisions - what would you do?

[Stormy Kromer]

A wise old farmer told me once. "You can have problems in the field, you can have problems in the barn, but if you have problems in the HOUSE, then you've got REAL problems.....


Simple answer from me:


- Pay off the contractor today.
- Pay the HELOC payments as scheduled, maybe try to pay down sooner if you have a windfall.
- Recognize DW's sacrifices and do something fun together.


Good luck to you both.

 

[pb4uski]

Take a spreadsheet and schedule out your income and outgo for the rest of the year. Include paying off your contractor friend on an accelerated rate and at least the minimum payments for the HELOC. Then, how much is left to go towards you home improvements and vacations? What middle ground is there?

Sketch a plan out and then go over it with her and adjust as needed. Plan the work and then work the plan.

 

[mystang52]

If I understand correctly, the contractor has been nice by agreeing to extended payments,. If that is true (vs. not a contractual agreement) I believe paying the contractor should be top priority. If paying off the HELOC means foregoing a vacation, one that clearly the DW wants, then just make the HELOC payments and take the vacation.

 

[dd564]

I'd go on a vacation as soon as possible.

We are! Just a few weeks away! Looking forward to it!

If I understand correctly, the contractor has been nice by agreeing to extended payments,. If that is true (vs. not a contractual agreement) I believe paying the contractor should be top priority. If paying off the HELOC means foregoing a vacation, one that clearly the DW wants, then just make the HELOC payments and take the vacation.

Contractor is like an uncle. He doesn't "need" the money urgently and has told me such. I just don't want to take advantage of his patience so I'll write him a check either today or as soon as I hear back from tax guy on tax statement. (We expect a rebate but want to hold off until I know for sure).

Paying off the HELOC won't be to bad. My mindset is "pay it off in 6 months" instead of an easier "pay it off in a couple years" difference.

 

[pb4uski]

Happy wife..... happy life.

Just sayin....

 

[Silver]

I'm thinking that the missed vacations have little to do with your wife's reactions. I would be unhappy too if my DH and I had agreed to spending $40k, but ultimately he spent $150k.

I imagine I may begin to have some trust issues, and may even begin to distance myself from the relationship.

 

[Another Reader]

Her opinion of your real estate investing skills was positive at the outset. As you got further into the property and the bills mounted, her confidence disappeared. That makes perfect sense as the best you can say about your investment today is that the property is worth about what you put into it.

I would not be on board with more spending on what has turned out to be an unprofitable money pit if I were in the spouse's shoes. Furthermore, I would not agree to any additional acquisitions, and I would ask whether it makes sense to sell this one. You are apparently not a very good real estate investor and the money might be better placed in another asset class that requires less hands on management.

Pay off your contractor ASAP, pay the HELOC as scheduled unless the rate is onerous, and learn from this mistake.

 

[38Chevy454]

It seems your issue, besides the financial disagreement on paying back HELOC, is that you have a rental house that is nicer than yours. Wife not happy all the money spent for rental when she wants something for her at her house. My suggestion, after the vacation and the contractor is paid off, is rehire contractor to do some remodeling work on your house. Make that work something your wife would really like. Just pay the HELOC down on the std payment schedule, use any excess from rental house to help pay for the remodeling on your house.

 

[dd564]

Her opinion of your real estate investing skills was positive at the outset. As you got further into the property and the bills mounted, her confidence disappeared. That makes perfect sense as the best you can say about your investment today is that the property is worth about what you put into it.

I would not be on board with more spending on what has turned out to be an unprofitable money pit if I were in the spouse's shoes. Furthermore, I would not agree to any additional acquisitions, and I would ask whether it makes sense to sell this one. You are apparently not a very good real estate investor and the money might be better placed in another asset class that requires less hands on management.

Pay off your contractor ASAP, pay the HELOC as scheduled unless the rate is onerous, and learn from this mistake.

We have agreed no more house buying right now. I'm fine with that because I want a fair amount of our net worth to be between real estate and the market.

My "other" real estate investments have done well for us. This was the worst.

It seems your issue, besides the financial disagreement on paying back HELOC, is that you have a rental house that is nicer than yours. Wife not happy all the money spent for rental when she wants something for her at her house. My suggestion, after the vacation and the contractor is paid off, is rehire contractor to do some remodeling work on your house. Make that work something your wife would really like. Just pay the HELOC down on the std payment schedule, use any excess from rental house to help pay for the remodeling on your house.

It's not that it's nicer, but when a tenant has an issue, (bad appliance) we always replace with better. White appliance to stainless steel. Something breaks, we fix it better. They are renting nicer places so we try to treat them well. So she has items around our house that need attention (updating the deck, etc) that simply haven't been a priority because houses had to get fixed first.

Now we have a backlog of "nice to have" improvement projects:
1. Repaint trim in house.
2. Replace deck
3. Convert screen porch to 3 / 4 season porch
4. Repaint front of house

She has a high standard. To me the house paint is fine, and most neighbors wouldn't even notice, but she doesn't like the fading. (Not a small price). We live in a nice neighborhood. A lot of people who have two good incomes. One in particular who seems to "refresh" their house every 3-5 years.

With that said, we don't have the best paying jobs in the neighborhood but we might be the wealthiest, but it doesn't look like it.

 

[pb4uski]

Painting is pretty easy to do and paint isn't horribly expensive Would she be willing to repaint the trim in the house with some occasional help from you? Ditto re: repaining the front of the house.

 

[Dtail]

Happy man, happy clan?

Happy spouse, happy house....

 

[dd564]

Painting is pretty easy to do and paint isn't horribly expensive Would she be willing to repaint the trim in the house with some occasional help from you? Ditto re: repaining the front of the house.

Outside I think we can do ourselves and save good money.
Trim inside.. when I do it, it doesn't meet expectations of a sprayed enamel finish. (Hire out).

At this point it will need to be her ranking her priorities on which projects and when.

 

[pb4uski]

Interesting... we've done a lot of painting of interior trim over the years, but never sprayed and rarely enamel.... usually a high quality interior trim paint applied with a good quality paint brush.

We gave up on oil-based trim paint many years ago... today's high quality latex paint is pretty good and much easier to apply and clean-up.

 

[ivinsfan]

I'm thinking that the missed vacations have little to do with your wife's reactions. I would be unhappy too if my DH and I had agreed to spending $40k, but ultimately he spent $150k.

I imagine I may begin to have some trust issues, and may even begin to distance myself from the relationship.

Really, rehabs are full of these details and overages, granted this house seems like the perfect storm but your take on this is more then harsh.

 

[Another Reader]

Really, rehabs are full of these details and overages, granted this house seems like the perfect storm but your take on this is more then harsh.

No, it's not. Any experienced flipper would have seen the house's issues and known the building codes. This guy kept throwing money into the pit without knowing how deep the pit was. That's how you go broke in real estate investing. You do your homework before you buy, not after.

If this had been his first property and he did not have the cash/HELOC available, he would have lost a lot of money. As it is, he has lost money on paper because it is worth "almost" what he has invested (whatever that means) plus he would have to pay selling costs to dispose of the property. Time may bail him out, but the yield will likely be very poor.

Hope he is correct that his other properties are better investments.

 

[ivinsfan]

No, it's not. Any experienced flipper would have seen the house's issues and known the building codes. This guy kept throwing money into the pit without knowing how deep the pit was. That's how you go broke in real estate investing. You do your homework before you buy, not after.

If this had been his first property and he did not have the cash/HELOC available, he would have lost a lot of money. As it is, he has lost money on paper because it is worth "almost" what he has invested (whatever that means) plus he would have to pay selling costs to dispose of the property. Time may bail him out, but the yield will likely be very poor.

Hope he is correct that his other properties are better investments.

Time will tell on the losing money and experience is the best teacher......are you a real estate investor flipper?

 

[Another Reader]

Time will tell on the losing money and experience is the best teacher......are you a real estate investor flipper?

35+ years in real estate. Have owned a lot rentals. His experience with previous properties should have told him what to look for.

 

[Philliefan33]

We have agreed no more house buying right now. I'm fine with that because I want a fair amount of our net worth to be between real estate and the market.



My "other" real estate investments have done well for us. This was the worst.









It's not that it's nicer, but when a tenant has an issue, (bad appliance) we always replace with better. White appliance to stainless steel. Something breaks, we fix it better. They are renting nicer places so we try to treat them well. So she has items around our house that need attention (updating the deck, etc) that simply haven't been a priority because houses had to get fixed first.



Now we have a backlog of "nice to have" improvement projects:

1. Repaint trim in house.

2. Replace deck

3. Convert screen porch to 3 / 4 season porch

4. Repaint front of house



She has a high standard. To me the house paint is fine, and most neighbors wouldn't even notice, but she doesn't like the fading. (Not a small price). We live in a nice neighborhood. A lot of people who have two good incomes. One in particular who seems to "refresh" their house every 3-5 years.



With that said, we don't have the best paying jobs in the neighborhood but we might be the wealthiest, but it doesn't look like it.

Yeah, that would annoy me. Scrimping around the house that we live in so we can pay off bills/loans for a rehab rental that went more than 300% over budget, but the renters get the good stuff?

Is it really a surprise that your wife is not happy?

 

[MarieIG]

I would

1) pay off the contractor - now.

2) there is a certain amount of money per month that was going to the contractor - put maybe 30% of that towards the HELOC;

3) save some money for vacation;

4) stop buying real estate for a while, your cash flow is too tight, and your wife is stressed out.

5) for the home upgrades - now this is a shocking idea, save up the money for them, and when you have the money, THEN do the upgrade. Gasp!

 

[dd564]

35+ years in real estate. Have owned a lot rentals. His experience with previous properties should have told him what to look for.

Thanks. There were things I could have done to better spot it. I know that now, and some of it I knew would be issues, but they became bigger.

But there were many things I've done right to this point and the houses were done well without cutting corners, which is seen frequently in our area.

You are wiser than me, but unfortunately I wasn't able to jump in with 35 years of experience. I was able to jump in with a year or two of experience and bootstrapping it for the first couple years part time.

So my option was to either get in and learn the hard way or to never jump in.

I got in and learned and it's been rough along the way but even with this setback real estate has been a big contributor to my increase in net worth.

 

[dd564]

Update on the day, I got rent checks today, paycheck and a bonus.

I was able to send final check to contractor today.
Taking wife out to dinner tomorrow.

Tax refund will be coming soon.

Definitely seeing the light at the end of the tunnel which lowers the stress.

 

[Another Reader]

Most real estate investors make mistakes. I made plenty in the early years. The trick is to make small ones and learn from them. Not $110k of cost underestimation because you overestimated your skills and knowledge.

You can make good money in this business, but you can lose a lot of money as well. Overconfidence can bankrupt you. Your wife assumed you knew what you were doing. She trusted your skill and experience and you disappointed her.

In your shoes, I would try to make her a full partner in the business decision making. If she wants no part of that, I would reduce the risk and the amount of new capital I invested. Run your current portfolio efficiently and harvest the cash flow. When the market becomes more favorable for investment and you have shown her a few years of solid cash flow, talk to her again about putting capital to work.

 

[Amethyst]

No matter how avuncular your contractor may be, he will respect you when you pay promptly. Do it.

Wife's wants are next. Not because of that tiresome "happy wife" cliche, as if wives are angry shrews who must be propitiated, but because she's your partner, and her wants are exactly as important as yours.

 

[Maenad]

Yeah, that would annoy me. Scrimping around the house that we live in so we can pay off bills/loans for a rehab rental that went more than 300% over budget, but the renters get the good stuff?

+1 on this. I've changed jobs recently, and spend most of my days working from home now. I'm now seeing all of the little annoying things that grow into big annoying things when you're around them all day. Since the OP's wife has been doing a lot of SAHM stuff, I'm guessing she's seeing a lot of that too.

Even after your talk, it may be a good idea to work with a couples counselor that specializes in money discussions. While you've said that your wife is not a money person, she likely still has some expectations around money, and a lot of those can be subconscious. A neutral third party can help you discuss these things more productively, understand each other better, etc.

Every couple has some money disagreements now and then, so it's not a crisis, but if there's differences in assumptions and expectations, figuring out how to find them and resolve them is a good skill set to develop.

 

[dd564]

Most real estate investors make mistakes. I made plenty in the early years. The trick is to make small ones and learn from them. Not $110k of cost underestimation because you overestimated your skills and knowledge.

You can make good money in this business, but you can lose a lot of money as well. Overconfidence can bankrupt you. Your wife assumed you knew what you were doing. She trusted your skill and experience and you disappointed her.

In your shoes, I would try to make her a full partner in the business decision making. If she wants no part of that, I would reduce the risk and the amount of new capital I invested. Run your current portfolio efficiently and harvest the cash flow. When the market becomes more favorable for investment and you have shown her a few years of solid cash flow, talk to her again about putting capital to work.

We are doing the bolded part.