I love reading the Millionaires in the Making from MSN Money. Sometimes people are way off base and other times the family is on track to be millionaires. I’ve been reading money for a few years now, but in the past say 5 years I’ve noticed an overabundance of potential millionaires from real estate.
That being said the Rodrigueses are the newly featured millionaires in the making. Well they are making great money for a young couple @ $174k/year! So they are definitely on track to have the ability to save $1m by 40. They also have a $146k in retirement and $137k cash savings. Looks like they are doing well.
Problem? They have a lot of mortgage debt and they live in none of the properties. Ouch. Currently they are renting his parents house for $600/month in Northern California which is quite a huge and lucky break. Studios can’t even be rented for 2x usually. So where’s the problem?
They own 3 properties bought at the height of the real estate bubble, one in Phoenix, AZ for $141k and 2 in San Antonio, TX for $150k/each. They refinances the Phoenix house to $190k to buy the other homes. They are currently paying $9k/year to carry all the properties with paying renters. I have to wonder what the homes are really worth and if they aren’t “overinflating” the values. Also I wonder if it wouldn’t make more sense to drop these rentals and sell and perhaps stash all their extra cash into their savings accounts?
They will have more risk and a lot of real estate exposure when they finally buy their own home. They want to buy a home for $400k with the $450k in investment real estate that’s potentially $850k in mortgage. Wow. Sure they have a great income but it’s scary to see that number. What happens if any of their renters move out or stop paying? Can they really afford to keep carrying money losing properties?
Recently the couple bought a business for Gina selling imported soaps and handbags. I think it’s a great opportunity to own ones own business. But I wonder if it would work out better if they invested in this business rather than financing the real estate investment properties?
The couple admit that perhaps they are squeezing their dollars to tightly and not enjoying life. I wonder if perhaps things will change once they have kids and the ability to save goes down with more expenses? It sounds like they have a good savings habit and potentially to save a lot of money. As long as nothing goes wrong with their RE investments and they keep their jobs. But I can definitely see a lot of problems potentially with their RE investments.
What do you think? Are they really millionaires in the making?
6 responses so far ↓
1 tom // Sep 13, 2008 at 11:25 am
I think they are millionaires in the making, but they need to shed some of their real estate investments. I also question the timing of buying their business. Imported soaps and handbags seem to be one of those luxuries that people are no longer buying. I’d like to know how much of that $174K is the business income. They should start to enjoy life.
2 Jen // Sep 13, 2008 at 5:32 pm
I am guessing a lot of their $174K comes from the husband’s job at Microsoft. I think it is great that they can live so frugally with such a large income. I am not sure why they made the decisions they did on the real estate rentals though. They are losing $700 per month on their rentals. I guess with tax deduction, they are getting a real nice break on income taxes? I think it is great that they have a real goal and I would not be surprised if they do achieve it. But I can’t imagine that they can live off their savings for long in CA if they do indeed retire at 40.
3 Livingalmostlarge // Sep 13, 2008 at 7:44 pm
I think the real estate investments might be a disaster waiting to happen. If a renter stops paying or something it could be bad.
Also I don’t think much of the income is from the business. They just started it and usually it takes awhile to get going.
4 tom // Sep 13, 2008 at 7:53 pm
I thought as much. They really should get rid of those real estate investments and start enjoying the money they are earning. Even in an expensive part of the country they make enough to live quite comfortably. I respect their decision to live frugally, but I wonder how much of that decision was based on the RE investments. If they bought them at the height of the bubble, then they should have a tremendous amount of negative equity.
5 LivingAlmostLarge // Sep 13, 2008 at 7:56 pm
Unfortunately they bought at the peak in very hot markets. Also unfortunately, I think they are way more upside down than they admit. It’s gotta be hard to walk away.
Plus the guy admits he hates feeling like a failure. Thus why they won’t dump the property.
6 fitwallet // Sep 15, 2008 at 8:26 am
I remember reading this a couple of weeks ago. I’m envious of their retirement savings–I’m 27 and mine is a whopping $600 (yikes). I think they’re in fine financial shape, but it seems like they’re trying to do too much too soon. Oh well, it’s their life…
Leave a Comment