Answering a Reader Question

The author of Master Your Card asked me a great question on my last post:

Do you include the income from your second job in these calculations? I'd think that a second income would help significantly with this goal.

It's good that you were able to get lower mortgage payments, but you also mentioned tenants. Are you renting out a room, or do you own another house? If the latter, have your considered selling that, or are you looking at a loss there as well?

This is going to require a fairly long answer, so instead of putting it in the comments, I thought I would write a post about it:

Second Income:

I do have a variety of second jobs. I call all of this work "part time temp" because these jobs are intermittent - I do a little here, a little there, then run over and do a bit over there. For example, one of my part time temp jobs needs me just 3 weeks of the year. (These are not consecutive weeks, there is one in October, one in February and one in May.) Another one of my jobs needs me for scattered evenings during 2-4 week job cycles. These cycles happen 5-7 times a year. Yet another part time job just needs me one night every now and again. So basically, instead of having one steady part time job, I have a variety of them. This system works out for me really well as it means that almost every month I have some work. (January was kind of an exception to this - although I did work in January at a part time job, but it was at the tail end of the month and is a 4 week job cycle. I'll get that check next week sometime.)

Most importantly to me, having these multiple intermittent jobs means that my schedule is flexible. While I do have some late nights, I am not burned out trying to work 60+ hour work weeks every week. As it is, sometimes the running from one place to another, not getting home until 10:00 p.m. (or much later) can wear me out. I don't think I could do it every single day. Right now I do work some weekends at these jobs, but typically it is Saturday night and Sunday afternoon, which still leaves me time to putter around the house or do some errands.

There is one other reason these jobs work so well for me - they are in an industry I love. The people that have hired me are all friends and people I respect and love working with. I like what I am doing and where I am working. I like my coworkers and I like the companies I work with. Enjoying what you do is such a huge bonus and it makes going into work so much easier. So far, it has been the perfect solution.

Would I change it and get one steady part time job if I needed to? Sure, and here's why...

I will do what I have to do to survive,. If my part time temp jobs dried up or weren't enough for me to get by, I'd start combing the want ads. Mrs. Micah wrote a post last month asking What Kind of Work is Beneath You? which I found very thought provoking. I don't think there is any work that is beneath me, nor am I unwilling to work extra hard to make ends meet. If I thought some other type of part time work like waiting tables, working in fast food, working in a coffee shop or cleaning people's houses would make the most sense for me, I'd do it - no hesitation. However, at the same time, I try to keep my work/life balance in mind. Frugal Dad had a nice post yesterday about How Much Does It Cost in Life Energy? and I think that is an important distinction. Some thought should go the cost in your life vs. the money you are bringing in. My part time temp jobs probably pay as much as an average part time job, maybe even a little less, but the enjoyment level is quite high.

Properties and Rentals:

I own not one, but two houses. And no, I don't rent the other one out, despite the fact that it could be "easy money." To explain why, I have to include a little back story:

I own "the house" which is the one you usually see me writing about. It is a Victorian home built in 1847 and is the one the one that my husband and I bought just before we were married. This is the same home that he was supposed to take over when we became divorced, but didn't. (It's the entire reason I need the $900 and I started this blog.) Three quarters of the home is my space. One quarter of the second floor is a one bedroom apartment. It is a cute apartment with its own entrance, French doors upstairs and a big walk in closet. I currently have that rented. When I mention my tenant, that is who I am referring to. That income ($550) is not part of the $900 I need. The math goes something like this: 40 hr. week salary + rental income - bills = -$900.

I also own a cabin in the woods on a little lake. This home is mine and was to be mine after the divorce. It is about 1.5 hour drive from where I live. I initially planned on renting this cabin out. In fact, I have an aunt and uncle that rent their cottage and I had a meeting planned with them to pick their brains about it. I also had done some research on the cost of advertising on cabin rental websites. However, there are a couple of reasons why I haven't done this:

1) The cabin is not really "rental ready." I bought this as a distressed property and "fixer-upper." It wasn't quite a handyman special, but it does need lots of love. I'm not talking about just little things, I means some fairly large (expensive) projects to make it suitable for someone to pay to use. Until those are done, I am not comfortable renting it.

2) I have enough landlord issues already. Being a landlord ain't easy - whether we are talking about a week to week rental or a yearly lease. I had no idea how hard it would be until I took over "the house" and became the landlord myself. (My ex-husband had always handled it before.) I've written a bunch of posts on this before and always comment on it when someone writes about owning rental property as easy money. It isn't. Finding tenants, vesting them, making sure they don't destroy your property accidentally or otherwise, plus added expenses and handling maintenance issues - it isn't for the weak of heart or those with two left thumbs.

In the 7 months I have been a landlord I have had to replace the seal on the tenant's freezer, rebuild her toilet, unclog her shower drain, buy her a space heater, and spend hours shoveling her walk. My heating, water and trash bills are all higher than they would be if I lived alone, and when something breaks I have to get it fixed fast. There isn't a lot of time for searching for frugal deals. I can't ask her to use another toilet, for example, while I hunt down the best deal on parts. Now, just imagine that with a property that is 1.5 hours away... one that I know has septic problems. When you add that to the increased cost of insurance on renting out waterfront property, it just isn't worth it to me.

Now that isn't to say that being a landlord or renting out a cottage can't be a viable way to make money. My aunt and uncle do very well by it, but... they are both retired and my uncle is very, very handy. I do think it can be a good way to make money, but it isn't passive and it isn't easy. Not if you want to do it right.

So what about selling the cabin?

I've certainly thought about it. Here's why I don't:

1) Pretty much the same reason as #1 for rental. Unlike the house, rough estimates actually show the cabin going up in value. (Yay lakefront!) However, in order to get the full value out of it, I should complete those home projects. Could I sell it as it is? Probably, after all, I bought it knowing they were there. However, when I think about the value of this land, I think of it a little like a 401K. Yes, if I were desperate I could cash it out and stop paying into it. However, I would take a huge loss in actual value today and by selling at this time I would be "buying high and selling low." Financially speaking, unless I have no other alternatives, it makes far more sense to ride out the market, fix the problems and then list it when people have more money and are shopping for their own vacation property.

2.) The cabin is my haven. It is my own little place that I go to relax. I am happiest there, most myself, most comfortable. I don't know if I can describe it, but it is the place I would rather be more than all others. If I could live there all year (and teleport to see my friends and family whenever I wanted,) I would. When life has gotten terrible it was the once place I could go that would make me feel like everything was going to be okay. In short, I am in love with my cabin.

3.) And I am stubborn. Yes, I realize this is an asinine reason not to sell, but I am trying to be completely honest. I don't like to write bad things about my ex-husband here, but part of the reason he reneged on our agreement for him to take the house was that he wanted to see me in a place where I had to sell the cabin, precisely because he knew all the things I wrote above. He admitted to me that he wanted to hurt me. However, putting that aside for just a moment - when I first realized how much money I was going to need each month to stay afloat, the only two ways I could think of for getting the money was to either sell the cabin or take in roommates. Both ideas sent me into an anxiety attack. I've written about why I couldn't have roommates before, so I won't go into that again now, but suffice it to say, this was not an option. When my therapist saw what a state I was in she asked me, "If you didn't have to take in roommates how would you feel about taking over the house?" I admitted that if it weren't for that, I could do it. I wouldn't be in a panic. "So," she said, "then don't. Find another way to make the $900. Other people have done it. Why can't you?" It was like the clouds suddenly lifted and I could see again. Honestly, it was one of the most amazing moments of my life.

Of course, I think she was thinking that I should sell the cottage. But her statement lifted me into a whole different place - what could I do to get that $900? How could I make that happen? How could I keep my haven, not have roommates and still pay all my bills on time. How can I turn this all around into a positive?

I sat down and made a list of all the ways to (legally) make money that I could think of. It is a good sized list - several pages of a legal pad. My brain was hurting it was buzzing so much with plans; and that's when I knew I had to have a place to put them, a place to track my ideas, my successes, my failures. I needed a place to write and keep myself accountable and to remind myself of what I am fighting for - and that was the day I went to blogger and started "Fighting Foreclosure."

I took the list and went through and ranked every item on it on a 1-5 scale, from "no brainer" to "only if I have no other alternatives." On that list are both renting and selling the cottage. Before falling off any financial cliffs I will do either, or both, if I have too, but they are pretty far down the list. I have a lot of things I haven't even tried yet far above them. For now, they are back up plans of back up plans. The fact is, I am making it happen. So far, I haven't even had a late payment. As long as I can continue to do so, I am going to do it. Plus, in a few months time I have a bunch of good things coming up, for example, both my car and my credit card will be paid off. That will make a big dent in that $900!

One last big picture item to consider with all of this, the silver lining if you will: when all is said and done, I will have two very valuable properties. For various reason, both are in desirable locations. When the time is right to sell, I will do so on my own terms, knowing that I will have significant gains. It is just making it through the "meantime" that is the exciting part!


Photo by: Ezu