We (I) are worried because all the money coming in can stop nearly on a dime due to pay cuts and furloughs. I don’t plan on keeping this income coming in for long so I am making the most of it for now.

You guys out there with vacation houses, fancy cars, airplanes etc amaze me!

My appliances are all 12+ years old and still going strong. I kinda wish a couple of the would die so I have an excuse to upgrade.

I would not live your life in fear of what might happen. Once you have 15% below you on the seniority list a quick stoppage of income is highly unlike. The things you mention can be sold if needed. A vacation home for me was always a investment with the added bonus that my family gets personal enjoyment out of it. You want a diversified portfolio and one part of that should be real estate. The real estate side of my portfolio is what is allowing me to enjoy a great retirement without financial issues.

You need to let a tenant abuse them a bit! You will be able to get new ones quicker!

At some point you have got to live life. After a year or two on property, most of these things can be had if you buy smartly, build a realistic budget (not at 85 hours at your current rate) and have an exit strategy in mind. Extra revenue streams are helpful as well. It’s smart to exercise caution, but no so much that you let life pass you by in constant fear of the next black swan.

You guys haven't read his previous post where he was afraid to go to work yet claims to be/have been a SF operator?

MODS, AGAIN, didn't chop anything out using quote function yet the quotes are messed up, AGAIN.

Go ahead and upgrade. You won't regret the increased QOL at home. New appliances are so much nicer and not only cost less than a days pay, but has 0% financing for 12-24 months depending on retailer. Dishwasher cleans, sanitizes, and dries everything. Frenchdoor fridge has all kinds of space and looks good. Washer dryer sleek and quiet. Also super clutch phone notification when cycle complete. Annoying forgetting clothes in the washer and gotta rewash cuz they musty

This! Also upgrade before they break when there are specials. I always buy our appliances either on memorial weekend, Labor Day, Black Friday or after the holidays when their revenue slows down.

Taco cat is the same spelled forward and backwards.

Also, Tenet was a rare Christopher Nolan miss.

Are you forgetting about Covid? Not sure about Delta, but UAL was going to furlough guys with 5+ years seniority, with huge amounts of downgrades to boot. Can’t imagine having any expensive toys when things like that are right around the corner. Any pilot who wants any form of stability picked the wrong field.

What would you say is a conservative/liberal debt to income ratio.

I have read banks generally don’t like to lend more than 40% of gross income tied up in payments.

People balk when Dave Ramsey says 25% of net at 15 years for an home and 0 other debt.

Is it reasonable for a mid age pilot earning 25k-35k a month gross to have 10k-14k a month tied up in payments to a bank for toys or a mortgage or vacation home.

Aware. And thrilled to have been born here, and to be able to raise my kids right where they were born, in a land of safety and prosperity. Happy to pay my taxes, and don’t see any other nation doing it better than my own.

I absoulutey agree with your overall point, but I would also point out it's not so much that your house is worth more, it's that the dollar is worth less.

I actually liked Tenet, though not nearly as much as his other work. Inception is a masterpiece.

FWIW, Sonic spelled it Tenat. 3x. ;)

Yeah Dave's advice on this is unrealistic for most people that aren't high income earners. Look at the average/median home price and then compare the average/median income and one will quickly see that the numbers don't work.

People like to say Dave Ramsey's advice is outdated or doesn't work, but we just paid off our house in our early 40s and it has absolutely worked for us. The key is being able to stay humble and say "no" to the consumption culture. We are still in our regional airline house that's nice but definitely not a "major airline captain" mansion. All kids have a room and walk to good schools and we have great neighbors. We followed Dave's advice, took out a 15 year mortgage and made extra payments along the way. So now no payments other than taxes and utilities and the peace of mind is real.

And yes I understand math and interest rates, and we have plenty invested outside of our primary residence already.

Of course the best decision I've made so far was marrying a great woman who's frugal and happy without needing all the new shiny things.

In my case once off the B scale at Delta I was probably never near 40% of gross. The B scale years I probably exceeded it. My main home we paid cash for from equity of our prior homes. The vacation house I could pay off and have the cash set aside but the money market account is paying 5.11 as of a month ago. Mortgage rate is far less not to mention the property has doubled in value since 2018. I can thank all the Floridians fleeing their summer heat for that!
How much money you want tied up is really a personal choice. As long as I could fully fund my tax deferred options and save another 5% I did not care. During the bankruptcy I sold one of my favorite toys but could have kept it. Wife wanted the cash in the bank.

The last paragraph bears emphasis. Just don’t tell my wife I said that 🙂

Similar demographic (slightly older) and situation as you. Agree on the peace of mind vs. math piece. It is real. Scoop’s book rec (Die w/ Zero) merits a bump.

To the poster a few posts back asking if $15k/mo of “payments” is reasonable, I’d say no. Yes, it can be done and sure you can spend that if it makes you happy.

But IMO that’s far too much FIXED overhead. If you’re talking VARIABLE burn rate (travel/food/whatever) that could be cut way back at the first glimpse of the black swan - different story. Skipping the next ski trip is much easier than unloading the McMansion in a down market.

It will come sooner or later. In my “short” time in the industry:

- EAL strike/shutdown (Dad)
- 9/11-> BK
- Age 65
- 2008
- COVID (which mercifully was quick and atypically mild for pilots in general)

A lot of his advice is great, but some of it isn't. Again, most people in the US are unable to do a 15 year mortgage and still have it less than 1/4 of their takehome pay. Most of us here are in a position that we can. But that's not the average American.

Another component of the equation is that the debt is worth less thanks to inflation. This is one of the reasons leveraged real estate investments have such a big impact on wealth. Unleveraged real estate is a great hedge against inflation. Smartly leveraged real estate has a multiplier effect equivalent to the leverage ratio.

100% equity = inflation hedge
50% equity = hedge + gains equal to inflation
25% equity = hedge + gains equal to 3x inflation

Yes very true but that is incredibly high risk

​​​So is flying, yet hear we are.

This exchange reminded me so much of this King of the Hill bit

"guns and gun accessories"

The biggest problem with any of this is you really need to be into it, or it becomes a huge PITA, you start to slack off or never fully engage. 90% of the result comes from the last 10% of effort.

That means if you're doing it solo, you have to be all in on your days off, and probably your SO's days off as well. Answering phone calls from angry tenants, dealing with retail contractors, insurance companies, banks, government paperwork, lawyers, etc. Fallen tree on the roof, tenant twists an ankle on the steps, those sorts of things absorb a huge amount of time. It's going to take some real effort until get to be where it's on autopilot, or earning enough where you can shunt it off to a management company (or start your own, which is another set of headaches). It is a LONG term play.

If you're really into it, it's not really work. If you're not, it's one big headache after another, and you're probably better sticking to the index funds, and flying on days off if you want.

Airline pilot travel schedules make hands on landlording a difficult task and poor choice in most cases. When you consider the hourly/daily pay rate in our profession the opportunity cost of working "in" your business instead of "on" your business is too high. It is far better to hire/delegate the hourly tasks. This can be problematic in the SFR space, although not impossible. I've met several out of state investors who BRRRR their SF properties. It takes education, networking and a fair amount of trust.

Understanding the value of your time both quantitatively and qualitatively is a key factor in successful real estate investing while working a full time job. Over the last few years, I've put considerable effort into separating which tasks I should do, which tasks I should hire and which things shouldn't get done. Going through that exercise will shape your investing approach. The only SFR I've done in the last decade was a hands on training exercise for my daughter. The ROI on money was high, but the ROI on time was insignificant. The value was in working with my daughter.

SFR is the domain of middle class workers aspiring to me millionaires. It is a great place to start and a good option for early career airline pilots. 30yr fixed rate financing contributes to the low risk nature of this asset class. Mid career pilots well into six figure incomes should consider being LPs in larger commercial deals or direct owners of larger properties like storage facilities, RV parks, apartments or NNN commercial property. Financing on larger properties generally isn't as safe as the 30yr fixed rate mortgages available in the SF space, so you need to learn and DYODD far more than SF. My personal RE portfolio looks nothing like it did as a new hire because as income and net worth increase the ROI on time becomes more of a factor than ROI on money.

I agree with almost all of NuGuy's assessment. Even though RE is a LONG game, it's a much shorter game than index funds in a 401K. You can build a retirement income in 10 years vs 30.

While this timeline can be true, it requires more time and education to perform the due dillegence bercause the consequences are high if you don't. The index fund is reliable and completely free from time and effort consumption. Once I got to the realization that my SFR investments would never yield anywhere near the value of my time, I was at an inflection point. While there are opportunities for commercial deals and larger properties the learning curve can be steep and costly. You really have to be all in at that point and operate as a business. Lack of knowledge and failure to comprehend all aspects of a deal have cost me. I got burned and realized my education was lacking, and the time and effort to gain that knowledge was a greater commitment than I was willing to make. This isn't an argument with your RE investing but a warning to those who might consider the next level from SFR when their time becomes the trigger point. The 10 year investment timeline still requires a great deal of time commitment but it centers around learning the business and deal structures. Admittedly, it was too much for me. The SFR world was a great start but transitioning to a passive investor took me back to equities. DYODD indeed and know that it will be time consuming.

These are two nuggets of wisdom worth highlighting. The % return on money can be great in SFR, the return on time depends on what your alternatives are. When the tradeoff is a 3 day trip (even at straight pay) the calculus changes. As income grows, Return on Time becomes a bigger factor. SFR is very forgiving and the 30 year fixed rate mortgage is a life perserver if you jumped into the deep end of the pool. It is rare to find an equivalent financial tool in the commercial space, so conservative underwriting is a must. One huge plus side on the commercial space excluding apartments is that you don't have judges, politicians and attorneys advocating free rent for deadbeats. Your tenants are mature adults that don't have a government babysitter playing Robin Hood.

IMHO as high income airline pilots with access to even more earning power on our days off, SFR and heck even property less than 10 doors is not worth out time. As accredited investors being a limited partner on a large apartment complex or self storage unit is far more efficient use of time and resources.

Only caveat I would add is if you have a spouse that is either a real estate agent and/or willing to manage the property then SFR or AirBnB could yield substantial tax savings as a pilot could write off the depreciation against pilot W2 income if you can prove "material participation". DYODD/Consult with a tax professional

Pair the real estate professional with combined activity grouping for maximum tax benefit. DYODD and consult with a CPA who knows and preferrably invests in RE. This can be a huge windfall for high W2 earners. SFR is the most common way to qualify as a "Real Estate Professional" but there are other avenues including direct ownership or GP on larger properties. Cost segregation and bonus depreciation can make a huge difference when you are in a high marginal tax bracket.


I'm curious about the calculations for a pilot to qualify. Is the 50% of work based on credit hours, block hours, duty hours, TAFB hours, hours spent on reserve? If I am managing contractors while on LC or SC does that count as RE hours, pilot hours, both, neither? Can a single pilot get a RE license to qualify without meeting the 50% or 750 hour requirement?


How to increase your net worth in real estate:
1-Equity capture or value add
2-Cash flow
3-Loan amortization
4-Property appreciation
5-Tax savings

Bonus depreciation tax laws were never never meant to be used by rich pilots to avoid W2 income tax. Good luck to you and your CPA with your inevitable IRS audit in 18 to 24 months.

Its not what they are meant to be used as. Its what the laws are legal to be used as.

Do you think a self employed business owner really needs a 150k G wagon for whatever business they have? absolutely not. But it hits the weight minimum and is driven around for "business" so it gets the bonus depreciation. Its legal, but is most cases its not morally right.

Do you think most of the front half of every plane you fly needs to be paying for expensive seats? Are the seats in the back not satisfactory? When the business buys the seats, they are now a business expense and the tax liability for whatever business is now less. That surely does not invite an audit and keeps you getting paid twice a month.



Don't hate the player- hate the game. Taxes are a game. If it was not a game the government would just tell you exactly how much you owe each year. They leave it up to you.

Pay a good accountant that knows all the legalities to make the game work for you.

An audit would be about as dramatic as a sick call verification. Here's my paperwork.

The tax laws were meant for investors and developers who risk capital in support of economic growth. The fact I have a W2 from an air line is irrelevant. The tax code is a rule book. Just like the PWA, the better you know the rules and follow them the more you can benefit.

The tax code was written by rich politicians with lots of earnings from capital gains and passive income. Earned income, especially from high W2 earners gets hit the hardest. It's an easy target. Risking capital to provide housing or a place of business is rewarded. Come on in, the water is fine.
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As long as they can as a couple meet the test for active participation in the business they will have no issues with the IRS. Those running into audit problems usually are actually passively involved and can't use the depreciation against other income like Delta earnings. Depreciation does however have to be recaptured at some point. Lots of ways to delay that but the bill does come due.

They’re used by business owners to write off depreciation of certain assets. Who the business owner is should not (and does not) change the equation, either in reality or even ethically.

It may be a lower bill when it finally does come due. For simplicity sake assume a taxpayer took 100,000 in depreciation deductions, resulting in a 37,000 tax savings. The bill for depreciation recapture is 25,000. In the meantime the taxpayer has use of 37,000 for other investments. Executing a 1031 or 721 exchange kicks the can further down the road.
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The goal is to kick the can until you kick the bucket and your heirs inherit it with a stepped up basis...

winning.


filler

What he did is certainly fine but if he had jumped into the best house he could afford he would have generated a tremendous amount of equity in recent years. He could sell the fancy house and pay cash for a nicer house than he has now and bank a bunch of cash on top of that.

Not everyone wants a massive house. Some people don’t want to be in the rat race of ever increasing escalating consumption and fancy and fancier everything. Plus he saved money all along by not paying for “the best house he could afford.”