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What is the Best Way to Earn Money as a Stay at Home Dad?

Summary: Our latest post is dedicated to stay at home parents, written from the perspective of a stay at home dad. In this post, I provide the reasons why real estate investing and, more specifically, buying and managing your own rentals is hands down the best way to earn money for your family.

 

Through our blog, we get a lot of requests from readers asking us for real estate advice or help getting started.

Recently, I’ve found myself talking to more and more stay at home dads (SAHDs). While I’m not sure of the statistics on the number of SAHDs, there does seem to be an upward trend in recent years.

As a SAHD myself, I have an obvious affinity for other SAHDs.

I find myself thirsting for knowledge about how to run our household better, how to deal with threenagers and how to handle the isolation of being at home instead of working alongside your co-workers in an office.

One of the most popular topics is about money and how to best contribute financially as a SAHD. When it comes to this topic, though, I find myself advising them instead of the other way around.

So what exactly do I tell SAHDs them about money?

I tell them the following:

 

Real estate investing, specifically buying and managing rentals, is hands down the best way to earn money for your family.

 

Why?

Let’s jump in and cover all of the reasons!

[Author’s note: While I am writing this post from the perspective of a SAHD, this applies to stay at home moms too! Also, this post contains affiliate links. If you choose to make a purchase using our link, we will receive a small commission at no additional cost to you]

 

What are the financial benefits of real estate investing?

Many of the SAHDs I’ve spoken to are not only looking for a way to earn money, they are looking for a way to earn it quickly. They want to help their families achieve financial freedom while they are still young (we call this Fast FIRE). They want to free up their spouse, so they can enjoy time together as a family NOW, not when they’re 65.

Many of the SAHDs I’ve spoken to are considering startup businesses as a path to Fast FIRE.

I’ve started three companies myself, and I can tell you from personal experience that it takes a long time to earn significant money with a traditional start-up business. Even if you can generate revenue from day one, it’s likely you won’t be profitable for a while.

So what’s different about real estate?

 

You can make money immediately

With real estate investing you can start generating profits within months of picking up your first real estate book or even just reading this blog.

For example, we bought our first duplex four months after reading Rich Dad, Poor Dad and Millionaire Real Estate Investor. And we probably would have bought our first rental even sooner if we knew the difference between an investor agent and a residential agent (read about the differences by clicking here).

We bought our first duplex for $170,000 with 25% down ($42,500). The property immediately cashflowed approximately $300/month. Within five months of buying it, we had increased the cashflow to $600/month or $7,200 annualized (we did this in part by raising rents and tapping into hidden value by renting out the detached garage).

 

Rental income is usually tax-free

In addition to the yearly earnings generated by rentals, there are also significant tax benefits.The $7,200 we made from the one duplex above was earned tax-free (click here to see how this works). Making $7,200 tax-free is equivalent to making around $10,000 in a W2 job (the actual amount varies depending on your tax rate).

 

You can shelter your spouse’s W2 income

Besides earning the rental income tax free, there is an additional benefit to owning real estate. And this is probably one of the biggest benefits.

This is the ability to shelter your spouse’s W2 income.

How this works is: if you are actively managing your rentals, you can deduct any losses from your real estate off of your spouse’s income.

If your combined income is less than $100,000, then you can deduct up to $25,000 in real estate losses off of the combined income. So for example, if your spouse makes $75,000 and you show a $25,000 loss from real estate (even though you are cashflowing), you are only taxed on $50,000.

If your combined income is more than $100,000, then this $25,000 benefit starts to phase out. Between $100,000 and $150,000, this benefit is gradually phased out until it is completely phased out at $150,000. This means, if earn more than $100,000 as a couple per year, the best way to get the maximum benefit is to claim real estate professional status (click here to learn more about real estate professional status).

The reason why this makes sense for SAHDs or any stay at home parent is that you automatically qualify for one of the two criteria needed to qualify for this status (real estate has to be your primary occupation and as a stay at home parent, you automatically meet this criteria!).

In summary: you can earn a lot, you can earn it quickly, you earn it tax-free and you can shelter your spouse’s income.

I can’t think of a better way to make money as a SAHD.

 

What are the intangible benefits of real estate investing?

 

Starting a rental business is less risky

While most traditional startups fail, I would bet that most rental businesses are successful (assuming you do your homework). The reason for this is that the business model for rental ownership is well established since it’s literally been around for hundreds of years. There are also lots of free resources out there to teach you how to run your business.

This is in contrast to a unique startup business where you have to come up with a new product, you have to educate the customer about your product, and you have to come up with new systems to manage your new business. As I mentioned above, I’ve started numerous businesses in my career. Of those, our rental business is hands down the easiest business I’ve ever started.

 

A rental business requires less effort

Owning and managing rentals requires considerably less effort than a start-up.

Part of the reason for this is that the resources for outsourcing tasks (e.g., property managers, contractors, real estate agents) are readily available. In contrast, when we started a healthcare services company, we had to find and train people on our unique systems and processes because it was a new business.

On a day-to-day basis, I find that our rental business is much easier to manage than any of my previous startups. There just isn’t the volume of transactions or the endless number of tasks that come from all of the uncertainty of a startup. When you own are rental business, there is more certainty and as a result, a more finite set of tasks. Most importantly, you don’t HAVE to work 80 hour weeks on a real estate investment business.

 

You can involve your children in the business

I don’t know if this is true, but my impression is that a rental business is one of the few businesses that I know of where it’s (maybe) socially acceptable to bring your children with you to meetings. I can’t tell you how many meetings I’ve had with bankers, property inspectors, real estate agents and title companies where I’ve taken my children along with me and it didn’t seem to negatively affect our business.

Not only that, I believe the experience is good for my children. They can learn about money. They can learn how to negotiate. They can learn the good and bad of owning rental properties. The opportunities for learning are limitless.

We’ve also come across stories of numerous people having their kids help out with the family rental business at an early age, as early as age 6! The beauty of involving them is that you can actually start paying them a salary and putting this money into a 401(k) for them at an early age! Imagine how much that money could grow by the time they are 22, and they are ready to liquidate their 401(k) for their first real estate investment (click here to read about why we are liquidating our 401(k)s).

 

Real estate gets you around people

I think one of the hardest things about being a SAHD (or any stay-at home parent) is the feeling of isolation from the outside world. Sure it’s amazing to be able to spend so much time with your children, but sometimes we all need a dose of adult-level interaction.

The cool thing about the real estate community is that it is huge and engaged.

You can find fellow investors online (like in our Facebook groups: Semi-Retired Physicians and Semi-Retired Professionals). You can find them at local meet-ups or conferences. And if you’ve ever attended a local meet-up, you’ll also know that it’s OK to bring your children if you don’t happen to have childcare lined up!

 

So if you are a stay at home dad (or a stay at home parent!) and you are ready to take that first step, read through our blog or sign up for our new coaching program if you’d like one-on-one guidance to fast track your way to Fast FIRE!

 

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

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Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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