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F/T job is ending
Warning, some of this post is a "woe is me".
I've mentioned here and there that things weren't looking good at my work. The big boss told my friend/coworker to get his resume freshened up because our project is ending. Not sure when the ax will come down, but the end of December is the best I can hope for.
I've sent resumes here and there a few times, but now I'll ramp things up. Which I hate so much. I hate crafting the perfect cover/resume for each job posting...and then be lucky to get a response for a few.
Now for the MM part. I did some quick and dirty calculations. My current gross income is $5,670, not counting my f/t income. I'm not worried about taxes at the moment, because that gets figured out with my return each year anyway. And there are a lot of expenses deducted. My monthly expenses are $3,300, NOT counting my HELOC payment or putting anything aside for future maintenance and vacancies.
The difference is $2,370 in the green. Which sounds okay, except my HELOC payment is around $2,200 and might be going up a bit as we finish our reno on the new duplex. However, once the reno is done and the duplex is rented out, that will add another $1800-$1900 to my gross income. It would be such a huge relief if this happens before I'm laid off.
Some of the reason my HELOC payment is so high is I already had a good sized balance and then bought the new duplex "cash" with it (long story). The current balance is around $160K. The HELOC is a 10-year product as opposed to a 20-30 year amortized real estate loan. This is the payment I feel the most stretched on and is stressing me out the most.
I'm thinking about doing a cash-out refi on one or both of my other two properties. One of them has $50K-$70K in equity (depending on the appraisal) and the other has $65K-$75K. Then using the cash to pay down my HELOC. Sure, I'd have larger mortgage payments. But it would bring the HELOC payment down by substantially more than the larger payments. I've actually been thinking about it for awhile, but I'll have a lot more options if I do it (start to close) BEFORE I'm laid off. Which is now also stressing me out that there is a timeline I don't even know if I could make.
Ironically, I'd also be eligible to collect $950/month in unemployment for up to 6 months. Yes, you have to report weekly income...but only W-2 weekly income. And none of my other income is in that category. But I don't want to count that yet.
I really want to put my head in the sand like an ostrich and pretend everything is fine, lol. I feel overwhelmed! I know I will make it all work and I'm much better off than others in layoff situations. However, right now I am wishing for that magic wand to make my perfect job appear, my HELOC balance disappear, and my new duplex finished/rented out.
I'm also toying with the idea of becoming a real estate agent. That has always been my eventual plan when I have enough rental income to be independent. But, the same thing I have always been scared of, it's a commission-only job and the first year will be the hardest.
I'm not sure I even have a question in there, but always appreciate words of wisdom/suggestions.
Re: F/T job is ending
I know you don't want to count on unemployment benefits, but there is no reason you shouldn't unless you don't intend to draw on those benefits.
If I understand your post you WILL have enough to cover your current expenses, including your HELOC, but just not a lot for savings/emergencies, is that right? If so, I would trim back on some non-essential items and use your unemployment benefits for savings/emergency funds while you job hunt.
And some tough love for your and your husband. Unless I missed an update your DH REALLY needs to get a job, any job to help contribute to the household budget. It isn't fair that this is all on you all the time, especially now that you will likely be laid off sooner rather than later.
I would be hesitant to do a cash out refi, but I fully admit I'm not well educated on what exactly that means. When I hear that I think back to the housing crisis of 2008 that was partially caused by people using their houses like credit cards.
If you refi one or more of your properties to pay down your HELOC will your current rents still cover the higher mortgage cost and other expenses?
I have to agree with April about your H... he needs to get some kind of job, even if it's a retail seasonal job, or drive for Uber, or whatever. I get that he is trained to do more than that, but it's not fair for all of this to fall on you.
I might be reading this wrong, but what would be the benefit of paying down your HELOC with mortgages pulled on your other properties, if the mortgage payments on the other properties are HIGHER than what your HELOC is right now?
And, you should count your potential unemployment income when figuring this out. It's your money, you've paid into the system for years, to use that money for times like this, think of it as an extra savings account. Then, take that money you do get, and sock it away for after you stop receiving it.
You are exactly correct, I would have enough but BARELY to cover all my expenses, including the HELOC. But there is no room, other than CCs or to draw more from the HELOC, for maintenance expenses or if one of my tenants moves out. I'm chalking up UE benefits as more of a temporary cushion to help out if that happens.
Once I get my new duplex rented, that will give me a lot more breathing room. That should happen in December, January at the latest. But I never want to count chickens before they hatch. I can also pick up more income with gigs like more mystery shopping, demonstrating/sampling, merchandising, etc. Which also falls in the "don't count chickens" area because it's not guaranteed income.
Unfortunately, you have not missed an update. My H is still not working. I've gently...probably too gently...pushed and prodded a number of times. He's not lazy about working, but he is lazy about looking. We will be having a harsher, more serious discussion tonight. We BOTH need to be hitting the job search NOW. And he needs to look beyond tech jobs, even if it means half the income. Because my soon-to-be gone job is about half his previous income, so if it's been good enough for me, it needs to be good enough for him.
Cash-out refis, or even HELOCs for that matter, can be a really bad idea if the money is used irresponsibly or allows "income creep", like buying new expensive cars/boats, etc. But, in my case, I'd be using it to pay down the other loan...which would bring down my monthly expenses. And that loan has essentially come from investing in real estate. I'd still cash flow on both or either property if I did a cash-out refi.
Originally, my plan was to do a cash-out refi with the duplex I just paid cash for. Because I never wanted to use cash for it anyway. But it would need to be in good condition and with renters for that to work best. And I'll be laid off before that happens. So I was thinking of one/both of the other properties instead. However, I was only going to do that to have down payment money available for more properties. Which I wouldn't buy anyway until I had another f/t job. So perhaps not as big of a deal as I was thinking. (Sorry, thinking out loud there).
No, it would be the other way around. That would be the advantage. Rough estimate, a cash-out refi of $70K would be less than $500/month loan, but putting that money against my HELOC would reduce that payment by about $1200/month.
I definitely plan to file. It isn't that. I just like the comfort of looking at only the money I'm taking in right now.
I probably am being a tad more alarmist than I need to be. Hopefully I'll find another job within a few months. And, even if I don't, the rental income for my new duplex will start rolling in before the UE ends.
It's so funny you should say this. On Tuesday, I had sent my resume/cover letter to a realtor who was looking for a weekend part-time asst. I was like PERFECT. It would be crazy busy working 7 days/week for awhile, but I was planning to ask if I could go p/t at this job after the holidays. Because it seemed like that p/t job was a great long term strategy for me. Of course, that was before I heard today that everything is ending.
Unfortunately, that realtor hasn't gotten back to me
. But thanks for the info! It's good to hear this is something that is not uncommon for agents to look for. I have a good rapport with both my previous landlady (she's an REA) and my current REA. I'll hit them both up to see if they know anyone looking for an assistant.
If I still haven't found something by the time I'm laid off, I'll dress up in my best suit and go cold calling at RE agencies. And start with Keller Williams, lol. If anyone would appreciate that kind of go-getting, it's probably a real estate agent.
I agree with PPs so I won't rehash much other to say that H went the temping route (in IT) when the money was needed. Being overqualified made him less desirable to hire for a FT job but a good catch as a temp.
It is also a good time with seasonal jobs. Around Mother's Day I saw fruit bouquet advertising on CL for people just to work that weekend in the store or making deliveries...there are probably similar gigs coming up with Thanksgiving and Christmas.
I think looking into real estate related jobs is a good idea. Along those lines maybe there is also something in home improvement that would be an ok job? You would probably be qualified to be a manager at Home Depot---am I right that you probably already know where all the stuff in the store is?
1) Cut back on your nonessential spending (fun money, entertainment, cable, etc.) as much as you can without being completely miserable.
2) Your DH needs to get ANY job he can find, even if it is a part time retail job that only nets $100 a week. He can continue to look for tech jobs in his downtime. That $400 can be a big difference in case of an emergency. Lots of places are hiring seasonal workers right now, it isn't glamorous, but he needs to step up and contribute to the household. It is one thing if you both decided that he would be a stay at home spouse, but this has gone on long enough.
3) I would look into a cash out refi for one property to give you some wiggle room, but I probably wouldn't do both UNLESS your current rent values will cover the increased mortgage amount and your expenses and the rates are comparable to your HELOC.
4) Start applying to jobs now (I'm sure you are already on top of this) and try to pick up side work where you can until you are laid off. If you are laid off before you find a new job I would apply for your unemployment benefits and continue to work on finding a job.
On the REA front, right now might be a rough time, just because it's heading into a very slow season with the holidays etc. Many agents start gearing up for the busy season in Feb/March so don't get discouraged if you don't find much now. You could use this time while you're still employed to work on getting licensed. You'll be more marketable if you've already gotten through the licensing process since a licensed assistant can do a lot more than an unlicensed one. I'm not sure how LA works but you may need to have a place to hang your license before they'll give you one, but you can at least get everything done so you're ready to go. For my licenses, I did an in-person class on Saturdays for my first license in California, but I did it online for both Illinois and Colorado.
I bet you are so glad you started on the journey of being a self-sufficient landlord... you're in a much better place than many people who are in a similar position to you. So yay there!
Thanks! It's not all from my rentals. $4,070 is from my rentals and the other $1600 is from my p/t job taking pics of hotel event boards.
In reality, the rental income sounds like a lot more than it is, lol. It equates to about $2,650/month cash flow, which includes an 18% deduction of the total rents to account for vacancies and maintenance/repairs. I have included the hard expenses (mortgage, insurance, property taxes) in my $3300 monthly expenses. Still not too shabby!
Plus my other duplex will (hopefully) be up and running soon. That will add another $1800-$1900 gross which equates to about another $1200/month cash flow.
That also isn't taking into account the taxes I have to pay on that income or the interest on my HELOC. But I still come out WAY ahead. Which is especially helpful right about now!
Thanks for the game plan. It makes a lot of sense.
1) We live pretty frugally anyway. But I'm sure we can trim at least $100 off our monthly grocery bill and cut back on fun money.
2) Right now, my H is over at our new duplex 5-6 days/week doing DIY work. So I wouldn't want him to leave that or cut back on it for a lower paying/temporary job. Though maybe late in November or in December he can look into that. Things should be wrapping up by then. But for a permanent f/t job. Yes! Then we can hire someone else to do some of that work.
We had a discussion last night about what is happening at my work, what that means for our short-term finances, what we need to cut back on and...most importantly...we both need to look under every rock for good, potential job opportunities. I reminded him about also looking outside of tech jobs. He agreed to all of that and understood the gravity but, we'll see. I'm also going to bring up every 2-3 days, "I'm excited/hopeful for X,Y,Z jobs I sent a resume in for. What have you applied for that sounds good?" Because it's a good conversation to have anyway to keep us both motivated...and I can also check he is living up to his promises.
3) I was thinking about this last night and came to the same conclusion. I want to do a cash-out refi to ease up some of the monthly expenses, but only on one property. I'm going to do it on the rented out duplex I have $50K-$75K in equity on. With a cash-out, I can get 70% of that value...so paying down my HELOC by $40K-$50K. That will roughly add $300-$350/month to my mortgage payment for that house, but lower my HELOC payment by more than double that.
4) (Incorporating comments to other posts) Most definitely. And thanks to @julieanne912 and @smerka for pointing out this is a slow time for jobs. I wasn't thinking about this, but I will take that advice to heart if I'm not seeing as many opportunities as I'd like or hearing much back.
@julieanne912 and @csuave, I'm pretty sure I can get my REA license with an online course. I think it's a few hundred dollars. I don't think you have to be associated with an agency to get your license, but it is something like an $1800 payment up front to get access to the MLS and become part of the Louisiana Realtor's Association (something like that), which is required to be an agent in this state.
I set up an appointment last night for Dec. 2nd to speak to a local, extremely successful REA who owns his own agency about becoming an agent with his company. He is in the top 1% of REAs in the US, not just Louisiana. He claims most of his agents earn a 6-figure income, even in their first year. (Note to self: don't be lured by the promises, obviously he is a top-notch salesperson, lol).
I would look at it this way. Either way you have $X debt. If doing the cash-out refi gives you a lower interest rate/payments and allows a faster payoff, I'd consider that a win.
And from my understanding, it lowers the risk to your current residence while moving it to your business where it probably belongs.
The rented out duplex I am leaning towards, currently has a mortgage balance of $49K. My payments each month are $360/month. Zillow says it is worth $100K, but my appraiser a little over one year ago said it would be worth $125K, once it was fixed up. There was a similar property down the street that sold for $110K a few months ago. I suspect it would be around there.
The other property I bought with cash, ie HELOC, for $38K. It does need a new roof sometime in the near future. The exact same house one block over, but with nicer finishings, sold for $80K about 2 months ago. So I think that house would appraise for $70K-$75K. But, if I re-fi'ed that house, it is less equity than the other one PLUS then I would have to add "named storm" coverage to my insurance. That would add about $80/month to my insurance. Just not a good idea for both those reasons, after I thought about it.
First bolded: Yes! That is exactly it. For my "net worth", it is essentially moving equity to pay down debt. My current interest rate is 5.5% because it is a non-owner occupied property. I don't necessarily expect the interest rate to change much, up or down. The HELOC payment will go down much more than what will be added to the mortgage payment; however, that is because the same money on the HELOC is amortized at a 10-year payoff. Whereas the refi will be a 20 or 30 year amoritization. So, actually, it's a much slower payoff. Not a faster one.
However, that doesn't bother me. My goal is always more monthly cash flow for my short and medium term goals. On the long term, once I reach the level of cash flow I want, than I'll refocus on paying off whatever mortgages I have as opposed to growing faster. Alas, I need to temporarily put off growing at all until I have a new f/t job.
Second bolded: That is a good point I hadn't thought of! I do own it under my LLC, whereas my personal home that has the HELOC is under me personally.