Welcome to Rent the Mortgage.
My name is Charlie and I became a first-time homeowner in 2010 after my wife convinced me to purchase a foreclosed 2-bedroom 2-bath condominium during the subprime mortgage crisis. The entire apartment complex was completely abandoned and the number of renovation projects was daunting. I had taken woodshop in junior high school but this renovation was entirely next level. Together with my wife, we successfully rehabbed and rented that unit over the next 6 years until selling it to buy our current home in the Bay Area. From that moment on, we have purchased and rented two more homes and currently renovating a south bay home.
Through real estate, my wife and I have embraced the FIRE (financial independence, retire early) movement and are determined to exit the rat race together as a family with our two kids. FIRE is not just for Millennials because my family of four is living proof that it can be done and we can show you how!
FIRE (financial independence, retire early) through real estate
My wife and I have always been diligent savers. We budget our spending every month to ensure that our 9-to-5 paychecks would be enough to cover expenses. However, to embrace FIRE, we knew we had to create more streams of income and not just depend solely on our jobs. Renting property creates another stream of income and gets us closer to FIRE. Our budget goals suddenly shifted from saving every penny to eliminating any debt with rental cash flow. Having a FIRE mindset also meant becoming more financially savvy by understanding how to control our money spend. Taking actions that make financial sense such as opening a bank account that avoids foreign transaction fees or accumulating credit card points for travel rewards.
Building my finances
Living in the Bay Area means that I work in technology where part of my salary is paid in RSUs. Watching my colleagues waste their paychecks on things with zero ROI such as rent and avocado toast was the last thing I wanted to do. Instead, I wanted to change the way I thought about money and finances to become financially independent and eventually retire early. I still need to figure out the health insurance part. My career in Silicon Valley is like a ticking time bomb as I continue to age yet watch my colleagues become younger all around me. Immediately I started making the necessary changes in my life to get to where I am today.
Related Post: Are RSUs taxed twice?
Give up the luxury car
I sold my shiny Lexus IS300 with less than 40,000 miles. I miss that car but I saved $200 annually for insurance after I switched to a used Corolla. My shiny Lexus IS300 was classified as a coupe (2-door) sports car with dual-exhaust versus a cheaper sedan (4-door). I know it is not much savings annually but I needed to change my financial mindset so every penny counts. I also became a cord cutter and gave up cable tv, canceled my gym membership that I hardly used, and ate out less while learning to cook for my family.
Save and invest towards a $1-million nest egg
My dad showed me the power of stocks very early in life at age 11. As a result of his advice, I have always maxed my 401k contributions every year that I have worked. I started working in 2001 when the 401k limit was $10,500. In 2019, the 401k limit is $19,000. The sum of all the 401k limits between 2001 and 2019 is $299,500. The power of compound interest and honest stock returns have blessed me with a nest egg of $700,000 $630,000 where I expect to pass $1,000,000 before 2024 2025 when I turn 46 47 years old.
Damn you Coronavirus.
Buy property and “Rent the Mortgage”
Real estate has been good to me. During the subprime mortgage financial crisis, I acquired two key investment properties. In 2010, I purchased a foreclosed 2-bedroom 2-bath condominium in an abandoned complex. In 2011, I purchased a short-sale townhome that was desperate for a buyer after a failed deal. Both of these properties had hidden equity where my wife and I have been fortunate to unlock. Owning the properties have not only created the rental income stream we were looking for but also increased our overall net worth. Another residual benefit of owning a home is learning from DIY projects where we even impressed ourselves.
| Property | Monthly Mortgage | Rental Income | Cash Flow |
| Peninsula House | $2,806.26 | $1,800.00 | -$1,006.26 |
| South Bay House | $4,365.97 | $7,200.00 | +$2,834.03 |
| South Bay Townhome | $1,225.82 | $3,500.00 | +$2,274.18 |
| Chicago Multi-Unit | $1,589.81 | $2,750.00 | +$1,160.19 |
| ——– | ——– | ——– | ——– |
| | $9,987.86 | $15,250.00 | +$5,262.14 |
| | Total Monthly | Total Income | Total Cash Flow |
The South Bay House renovation is finally finished after 2-years and my cash flow has turned positive. My wife and I are proud of our real estate portfolio which has been a long road (10+ years) with much blood, sweat, and tears.
Learn from my financial lessons
Before my first home purchase in 2010, I was always a tenant who paid rent and never thought about owning a home. My wife likes to remind me that, Rent money is paying a mortgage for somebody else in the game of Monopoly except in-real-life (IRL). I started Rent the Mortgage using Bluehost to help document my financial lessons with the intent of inspiring others to start their FIRE journey through real estate.
Related Post: Playing the Game of Monopoly IRL (in real life)
Rent the Mortgage will share mostly my own thoughts (with some sprinkles of influence from my wife) about my financial experiences and lessons learned from being a homeowner while embracing FIRE. Adding real estate to your FIRE investment strategy is not as easy as pushing a “BUY” button like when buying stock. Real estate involves making important financial decisions such as:
- Choosing which type of mortgage: 7/1 ARM versus 30-year fixed.
- Purchasing decisions such as switching to a tankless water heater or installing solar panels.
- Deciding when to Do-it-Yourself (DIY) or hire a good contractor.
My articles are mostly moments in time about what I was thinking or what lesson I learned from the experience. If there is one lesson to take away from Rent the Mortgage it would be that passive income from rental property is really not so passive income. FIRE through real estate is hard work but will pay off in the long run if you stick with it as I have and I will teach you how.
My Recommended Books
