Can someone help me understand DH's decisions?(10 Posts)
I think this will be long, apologies.
DH has been with the same company for almost 20 years. He's worked his way up to an excellent salary plus bonuses and stock options. He's now becoming bored and disillusioned with the job. The problem is that he is generally an insecure person and he's so comfortable with his role and status in the company that he won't get a different job. Instead he's trying to build up a property portfolio that will replace his income. So far he's purchased two studio flats, turned them into one beds and makes a monthly rental income though we absorbed the mortgages on the flats into our house mortgage, so still have that debt to pay off. In order to replace his salary he would need 8-9 similar flats, and that's not counting his bonuses. He would like to do this within 2-5 years. I don't see how that can happen without us having huge debt.
I'm wondering if this idea of property income is a pipe dream that DH tells himself to make staying in his current job more bearable. He certainly enjoys the money that he makes and I can't imagine him being happy with less. I wish that he had the confidence to change jobs while he's building up the property portfolio but he says he can't think of anything he could do for the same income and that it would take him a couple of years to establish himself in a new role and he'd rather work on the property investment. With his current plans the property income would be about half of his current income anyway, so I don't really understand his reasoning. Why shouldn't he find a job that makes him happy now with perhaps reduced income rather than staying in an unhappy role and working on something that may or may not happen.
We do have other investments in stocks, his company's stock options and a pension.
Yesterday DH had an offer accepted on another studio flat that he thinks he can turn into a one bed. I asked if it was a good time to buy since the market is so high but he says that it is. We'll have to take out another mortgage on the new flat, put a big chunk of our savings into it but DH says we should be able to pay off that mortgage at the end of the year with his bonus and by cashing in some stock. I'm concerned that he's reacting to a recent frustration at work and perhaps not making the right decision but I don't have a good grasp of investments. If it was me in charge of it all my approach would be to find a well paid salaried job that I enjoy, pay off any debts including the mortgage, pay up the pension and keep all of our savings in a big ball in the bank and just skim off the interest.
DH thinks of himself as a money person and he wants to make our money work for us. He also says he wants a more eclectic income rather than a salaried role. To me that just feels less stable. I'm very uncomfortable with the current situation and wonder if his ego is getting in the way. I don't want for DH to be in a job that makes him unhappy but I'm not sure that he'd be happy working on his own either. I think he needs the structure of working for a company and the camaraderie of an office. He seems to thrive by hitting set targets and getting good reviews. He's not good at gauging his own success and I don't think he would enjoy not having an 'audience'. As I said, he can be extremely insecure and I think he needs the structure of working for a company to feel he's achieving. We've talked about all of this but his response is generally, 'Yes, I agree but...'
Am I being silly? It is very scary to place all my trust in DH's decisions as I think there's a lot of underlying psychology tied up in his choices. I'm a SAHM, worked in the arts before children and don't have a grasp of investments, don't follow the markets, etc. I just don't know what to think but my gut is telling me something isn't right. I am willing to accept that I'm wrong. In fact, I would love to know that I'm wrong so I can stop worrying about but I don't want to just stick my head in the sand. Can the wisdom of MN reassure me?
I should also add that if not for the flats we could have paid off our mortgage and be well on the way to maxing out our pension. I asked DH if we did that wouldn't it free him up to do something with less income now without the worry of debt and retirement but he dismissed the idea. I think he likes for it to complicated and stressful because he's bored and it makes him feel more important to juggle things around.
savings interest doesn't work at the moment as it is below real inflation, although everyone needs some backup.
you need to see some calculations. Get him to make them and talk you through them.
concerned that you appear to have no say in this.
Without seeing the numbers/details, it's hard to say if DH's recent decision on the new property is wise or not - but from the other points you make, I think DH is taking some of those decisions for non-financial reasons. I suppose it depends what your (combined) longer term aims are. If it's to reduce debt as rapidly as possible, then DH is obviously not following that road. I agree with you that there may be a "requires audience" element to his professional life. Why not see if he can take a longer holiday from the day job (e.g. a month) and ask him to concentrate on the portfolio intensively for that time. Then at the end of the month see if he really likes that or if he begins to realise that buying/selling and administrating property on a full time basis can be as boring as hell :-) - aside from the risks.
It may just be a case that you're more risk averse than him.
You mention chunks of savings - where have they come from? If it's from saving from his salary and bonus, then he doesn't sound like someone who makes silly financial decisions.
How are you getting on with the 2 properties already bought? Are they making money?
He sounds (only based on this) quite savvy - he knows how many properties he wants, and he's got an eye for increasing value immediately, with the conversion from bedsit to one bed.
I think you need to get him to sit down and take you through the plan properly.
Thank you so much for your replies. We've had a long chat about it and I think it makes more sense to me now. To be honest, after half an hour or so all the numbers get muddled up in my head and I find all the tax stuff very confusing.
Cabriha, you're very correct in saying that I'm less risk averse than DH. He actually finds the investment stuff fun. I do not. I just want safety and security but DH likes to play around a bit. He's made some mistakes in the past and he seems to have learned from them but there's definitely more than just taking care of our finances in this for him. His favourite film as a teenager was Wallstreet and I know that he's watched it on Netflix recently. I think there's a midlife crisis element to the latest investments. We could pay off debt but that would be boring. Much more fun to own various properties, etc.
As for his plan to build up a portfolio and quit his job he admitted that he might be kidding himself but that it's what keeps him going. I said again that he should get a job that he enjoys but he's afraid he'd have to take a pay cut and he does enjoy seeing his salary every month. To be honest, I don't know how he'll ever be able to walk away from that. His identity is so wrapped up in how much money he makes.
There has been income from the flats, but it's being spent on this third flat rather than using it to pay down the mortgages. So we still have the mortgage debt. From what I can tell we haven't lost any money. It's all still there in the property and the value has increased so there is potential money made if the flats are sold. DH isn't planning to sell now though. So, at the moment, we're not really making cash out of the flats but we're not losing money either.
I have to say, I wouldn't be happy about this in your shoes. As well as now extending your debt (the house mortgage) you're sinking your savings into a third property and extending the debt again. And all this before your DH really knows what the true costs of being a landlord are.
I'm not quite sure how he's turning studio flats into one-bedroom flats, putting a few internal walls in? Does he need planning permission for that?
If the flats aren't in London, he may have periods where they are empty (voids) and there's tax to pay on the income, as well as capital gains on sale.
I'm also worried that you seem to have no say in all this. No way would I have extended my mortgage to take on a rental property without a very solid business plan. What if he lost his job? Or became ill? This feels too risky for a single-income family, even where the income is good.
I don't think what he is doing is wrong or particularly risky, sounds like he has his head screwed on. Surely the rent pays for the mortgages on the flats so although the capital outlay may be some more debt it is being serviced and you probably making money out of it so you have a net profit. If the debt is not being serviced then I would be worried.
You could try earning your own money like the rest of us. It's his money. He can do what he likes with it. If you want stability get a job that pays as well as his does or more to spread the risk.
His plan seems really sensible to me. Do you both have a pre nup?
I disagree btw. This is your family's money and your status as a sahm has nothing to do with it. Whatever decision you make, don't believe that everyone else sees it as his money.
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