Usually, our 30s are when we get serious about buying our first home. It is also when we are most likely to set ourselves up for failure.
Welcome back to the Real Estate Investing at Any Age series (20s), where we build a path to lifelong real estate success. Please read the companion article “Retirement Planning in Your 30s.”
Failures. Now, back to our biggest failure in our 30s—buying a dream house. I asked, “Your First Home: Investment Property or Dream House?” to get you thinking about your future purchase.
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Chances are you will buy a home that is too big, too expensive, needs too much furniture, and requires too much maintenance. It will be a money pit that will take you years to overcome.
Wedding Bells. Yes, I get it. You just got married, and your spouse wanted a wedding, dream house, to become a stay-at-home parent, private schools, etc., and you want to give it to them.
This is a rich person’s lifestyle. One of my first articles was “So You Think You Are Middle-Class? …Haha.” I’m sorry to report you cannot afford it in your 30s.
I see people every day on my Facebook feed living the dream lifestyle in their 30s. Big houses, nice cars, private schools, vacations, etc., are what they present via social media. However, this is a stressful middle-class lifestyle that will implode.
I saw a good quote somewhere saying, “People want to acquire everything their parents worked 30+ years to obtain—but in 5 years of marriage.” Going out and buying a house that is over 30% of your total earned income will cost you.
I’ve been there, done that. Guys & Gals, I bought an expensive home in my 20s. It didn’t work out. It took us 14 years to get ahead with this house dragging us down.
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The most important part of real estate investing in your 30s is avoiding the “dream house” trap. Yes, channels like HGTV promote buying big houses, renovations, and furniture. However, when was the last time they did a 10-year follow-up to these mansions?
Relationships buckle under the pressure of paying 50% of your household income towards your house. Then, you have maintenance, property tax increases, and insurance hikes on top of your standard mortgage.
Dreamhouse with sacrifices. If you must purchase a dream house, you’ll have to make sacrifices. I always recommend buying a colossal home but adding roommates to supplement your income.
For example, if you buy a home with two huge master suites, you can rent them for the price of a studio or one-bedroom apartment. These one or two roommates can significantly assist your wealth-building endeavors.
Yes, your friends will laugh at you for having roommates—you should expect this. However, your friends won’t be there as you gain wealth and success. They stop laughing when you have +$200,000 in the bank.
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Avoid Lifestyle Inflation. Your 30s is when lifestyle inflation can start to weigh you down. It seems everyone has nice furniture, renovations, and swimming pools on social media. Don’t fall for this trap.
If you can live below your means, stay on budget, and purchase real estate with an investor mindset, you will be head-and-shoulders above your peers.
The key to this process is setting goals and sticking to them. The best plan you can put in your 30s is plotting your retirement age. If you tell yourself (and your spouse) that you want to retire by age 40, then you will make those tough decisions.
Passive Income planning. When you set your retirement goal, use the passive income method (versus the capital gains method). You and your spouse can sit down and say, “How much passive income do we want when we retire?”
You can deduce how much of that you want from real estate investing from that overall number. Now, you can base all of your real estate and investment strategies on a solid foundation grounded in reality. Let’s do an example.
How to Passive Income for Beginners
Let’s say at age 30, you and your spouse decide you want to retire by age 40 with $6,000/month in passive income. You decide that $2,000/month will be from rental income from that overall number. Now the fun begins because you can give yourself massive options.
- If you have two roommates paying $1,000/each, you can decide to pay off the mortgage on your primary residence. That would leave you with $2,000/mo in rental income from roommates.
- You can pay off a rental home mortgage that rents for $2,000/mo.
- You can acquire four single-family residences that pay you $500/mo in rents.
- You can pay off your primary home, move to a small city, and rent out your primary residence for $2,000/mo.
Make a plan. These are just one of the thousands of ways to achieve a successful rental income stream. The idea is to set a goal and work towards it. Yes, things will always change, but the overall mission stays the same.
In the Marine Corps, we call this Commander’s Intent. When we have a mission, the Commander gives us his intent, not a step-by-step guide on accomplishing the goal. This way, when things go to shit, we know our overall objective.
The Passive Income Grind
So you may start buying real estate or having roommates but don’t like dealing with tenants. You decide to convert your rental income into rental dividends from REITs or Fundrise.
So you can shift priorities to investing in stock market real estate funds. The most important concept is working towards your $2,000/mo in rental income ($6,000 total).
Most people don’t set goals. Your 30s is where your life will change. Once you place your goals, you will get on your purpose. I gear my Military Family Investing content towards people who want to find and pursue their true purpose.
In your 30s, life becomes high school again. Your friends will show off nice cars, new homes, boats, and vacations—please let them. You should be happy for them because they make you stronger.
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Each liability they buy adds more years they will need to work. It also adds more relationships and emotional stress. They go to work and pay for liabilities, literally the worst position to be in as adults.
You have to pursue passive income. You may not have the “ideal” version of life in your 30s, but grinding on real estate books, roommates, RVs, mobile homes, storage units, duplexes, and buying homes under market value will create the life you want.
Conclusion. I can talk forever about things I wish I knew in my 30s. The main takeaway is to not fall for the “American Dream.” You don’t need a big house. You will need to live below your means until you have enough passive income to upgrade your lifestyle.
Whatever your friends are bragging about, do the opposite. They will be going on hunting trips, dunes, buying RVs and camping, vacations overseas, etc. Grind, grind and grind some more.
Learn how to find distressed properties and land. Focus on tax liens or foreclosures. Build a business where you can work from home and move to a small city where you can become a real estate tycoon.
You have to separate yourself in your 30s, be different, think different, and walk an entirely alternate path than everyone you know. They want to be happy and content NOW; you want to be happy and satisfied NOW & LATER. Getting on your purpose will achieve these objectives.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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