The older I get, the more I dislike being a landlord. There’s too much potential for disappointment, misunderstanding, or outright unpleasant moments. When you’re dealing with people and one of your most valuable assets, the margin for frustration is high.

If you want to be a successful landlord—and not get run over—you need to set expectations clearly and enforce them. Otherwise, you’ll constantly feel like you’re letting someone down or, worse, being taken advantage of.

This post is part of a series chronicling my journey as a landlord since 2005. My goal is to give readers a clearer picture of what’s really involved if you’re considering becoming one yourself. This latest experience also underscores the value of hiring a property manager: someone emotionally removed from the process who can treat your property purely as a business asset.

San Francisco’s Hot Rental Market

After 20 years of being a landlord, I’ve experienced all the cycles. And right now, the San Francisco rental market is strong. With home prices near all-time highs, mortgage rates still elevated, and the ongoing AI boom creating more jobs, demand for rentals seems to be increasing.

Earlier this year, my tenants of five years gave notice. That meant I had a chance to test the waters again and re-rent my house. This time, the whole house to optimize our passive income, not just the upstairs while keeping the downstairs empty. I listed it on Craigslist on a Tuesday and was immediately bombarded with interest.

By Saturday, I hosted two private showings for excellent prospective tenants. Both groups wanted the place on the spot. One wife was so excited she literally shouted: “We’ll take it! I want to move in right now!” when she was leaving.

These weren’t flaky candidates either. They were organized, enthusiastic, had great jobs, and excellent credit. It was difficult to choose between them, so I asked each to submit their best offer. Within 10 days, I had selected the tenants, collected the deposit, and received the first month’s rent.

Everything was moving smoothly. Or so I thought.

Preparing the House for New Tenants

Because my wife and I were genuinely excited about this family, we went the extra mile to prepare the home. Over two weeks, we painted walls and trim, patched and sanded uneven spots, scrubbed everything top to bottom, and tackled a massive amount of yard work. It felt more like we were prepping the house for sale than for rent.

Our previous upstairs tenants had been solid, but they neglected the yard. So my kids and I rolled up our sleeves and got to work reseeding, trimming bushes, pulling weeds, and watering everything back to life. Doing property maintenance alongside my kids is something I plan to keep up. It builds their work ethic, gives them hands-on knowledge, and helps them appreciate the value of taking care of what you own. Working with them also makes me more enthusiastic about addressing issues.

On top of that, because the prospective tenants wanted to move in as soon as possible, I had to work out an earlier exit with the current upstairs tenants. That meant negotiating a prorated rent, agreeing on a comfortable move-out date, and making sure they returned the unit in its original condition. Not easy handling both sides! In the end, it all came together. I got the new family in eight days ahead of schedule. By move-in day, the house looked fresh, clean, and ready to be enjoyed.

There’s a unique satisfaction in handing over a property in pristine condition. It sets the tone for the relationship right away. You hope the tenants will see the pride of ownership and reciprocate by taking care of the place. And as a landlord, it’s also a mental reset. You feel good knowing the property is in great shape before handing over the keys once more.

The Move-In Demeanor Shift

On move-in day, the husband arrived early for our walkthrough. Calm, polite, and well-prepared, he had scheduled out the day:

1. Walkthrough with me at 10 a.m.
2. Friend arriving at 11 to help unload a van of more delicate items the tenant brought.
3. Main movers coming at 11:30 with a large truck.

Everything about him was orderly and respectful.

The wife showed up later, around 11:15, clearly stressed from the packing and logistics at their old place. The joy she’d shown when she shouted, “I want to move in right now!” was nowhere to be found.

When I greeted her with a smile and a “hello,” she barely looked up. No big deal, I told myself—this is a business transaction, not a friendship. Moving is stressful and a lot must have been on her mind.

I wrapped up the walkthrough, explained all the nuances and maintenance tips about the house, handed over the keys, and wished them the best.

The Surprise Request

A week later, I happened to be driving by and saw them outside working in the yard. This was encouraging. I pulled over to say “hello,” and quickly grab a hot tub stool and some chlorine bottles I’d left in outdoor storage.

The husband was friendly, asking how I was doing. But the wife immediately hit me with:

“Hey, I’ve got a question for you. Can you get some mulch and you pay for it? There are some bare spots here and especially in the back.”

No “hi.” No “thanks for the clean yard.” No “the house is great.” Just a request.

Her tone caught me off guard. I expected some acknowledgment of the work we’d already done. Or at least how she was enjoying the place. Instead, I felt like an employee being given a directive, something I am no longer accustomed to after retiring in 2012. All those hours my kids and I had spent reseeding, trimming, and watering? Apparently meaningless or not good enough to their standards.

I muttered a noncommittal, “Maybe,” and left with a “good-bye” for good measure. I needed time to think about her request after the lease was signed.

Setting Clear Expectations

I pride myself on providing a great product for the rent people pay. That’s why I was a little surprised by her request, and also why hiring a property manager helps with reducing emotional attachment.

My lease—which I’ve been refining since 2005—is multiple pages long and very clear. Nowhere does it say the landlord must provide mulch. In fact, it explicitly states tenants are responsible for maintaining the yard and plants.

During the private showing, they never mentioned mulch. During lease review and edits, mulch never came up. Only after signing did this “expectation” surface. Between signing the lease and moving in, the mulch didn’t suddenly disappear and this short period of time.

This is exactly why setting clear expectations is so important. If something isn’t in the lease, it shouldn’t suddenly become a requirement.

The Slippery Slope Of Giving In

Here’s the danger: once you start giving in to extra requests, expectations balloon.

If you buy and spread mulch, what’s next—a Toto Washlet and new light fixtures at your expense? The list of wants can be endless. For instance, my new tenants also asked me to cover the cost of custom paint they used in a downstairs office and bedroom. I declined. The existing paint was perfectly fine. I had just repainted one of those rooms myself. Aesthetic upgrades fall squarely into the category of tenant expenses.

Tenants are free to ask, but landlords need to protect themselves and are free to also say no. If you oblige every request, you risk blurring the boundaries. Your role shifts from owner to on-call service provider. That semi-passive income starts turning into active income, which is what you want to avoid.

And when your profit margins are already squeezed by property taxes, mortgage interest, maintenance, and the occasional late rent, doing unpaid “extras” can tip your rental into unprofitability.

Worse than the money is the mental energy drain. Once you establish yourself as a landlord who always says yes, saying no later becomes much harder. Remember, as someone seeking financial independence, your assets must work for you, not the other way around.

Finding A Compromise

After sleeping on it, I decided to offer a middle ground. I emailed the husband—who had been polite and professional from the start—and told him I’d reimburse up to $150 for mulch. They could pick it up themselves and spread it around. At roughly $10 a bag, that would cover about 15–16 bags, which felt reasonable.

This way, I wasn’t setting the precedent of becoming their personal landscaper, but I was still showing some flexibility. To make things easier, I even told them which store to go to and exactly where to find the mulch in the store. It was a small gesture, but I wanted to start the relationship off on the right foot. A little goodwill in the beginning can go a long way over the course of a tenancy.

They accepted right away and seemed genuinely thankful. As it turns out, at their last rental, the landlord expected them to mulch the garden every single year, so they assumed that was standard.

I explained that I hadn’t noticed the bare spots enough to make it part of the lease, but since they brought it up, I was fine with refreshing it every couple of years if needed. I even suggested they spray some Rock Glue to help keep the mulch in place and told them I’d cover the cost of that too.

In the end, what could have been a sticking point turned into a small win-win. They will get the spruced-up yard they wanted, and I got peace of mind knowing we’d started our landlord-tenant relationship with a little cooperation instead of conflict.

I’m confident they’ll turn out to be great, caring tenants. In the beginning, it’s always just a leap of faith.

Why Strict Rules Build Better Relationships

Think back to school. Remember the strict teacher who laid out rules from day one? At first, you thought she was harsh. But by the end of the year, she was your favorite teacher. Why? Because the rules were clear, fair, and consistent.

After three years of coaching boys’ high school tennis, I’ve learned the importance of establishing clear rules. If you don’t enforce them with firmness, teenagers will quickly test boundaries and disregard your authority.

The same principle applies here. Clear rules create mutual respect. They just need to be reviewed and understood by both parties.

If you’re a tenant: read the lease carefully, ask questions before signing, and clarify expectations upfront.

If you’re a landlord: review the lease line by line, highlight tenant responsibilities, and give tenants several days to raise questions. Ask them if they have any other concerns that is not in the lease. You must be as thorough as possible. Keep improving upon your lease for next time.

That small effort on the front end can save you enormous frustration down the road.

Why I’m Reducing My Landlord Exposure

Interacting with people can be draining, especially when expectations don’t line up or the requests feel unreasonable.

Take my old tenants, for example. They wanted me to buy three light fixtures they had installed. I declined. I had already been flexible in letting them swap out the original fixtures, so I told them they could either leave their new ones behind or reinstall mine.

They weren’t thrilled with that answer and then asked me for the new tenant’s contact info to pitch them on buying the light fixtures. I found the whole exchange draining over a few bucks. I never would have asked my landlord to purchase light fixtures I chose for myself. Maybe it was a cultural difference. But to me, it just felt like another reminder of how mismatched expectations can create unnecessary friction.

If I had simply stuck to the rules and said no to swapping out the original light fixtures, this conflict wouldn’t have taken place. But this is what you sometimes get for trying to be flexible and nice.

Although owning rental properties is one of the best ways to build wealth and secure retirement, I’ve reached the point where the constant hassles outweigh the rewards. Each turnover requires managing departing tenants, handling an exit walkthrough where damage always shows up that they have “no idea” what happened, finding and vetting new tenants, preparing the property, and then repeating the walkthrough process. It’s a demanding cycle, and after years of managing it, I’ve decided enough is enough.

I can’t wait to sell another rental property in a couple of years, as by then, I will qualify for the tax-free exclusion rule once more.

Landlording Can Be Like Working A Corporate Job

One of the main reasons I left corporate America was due to people. Office politics, difficult personalities, and constant requests wore me down after 13 years. I didn’t like managing people either.

Being a landlord is often no different. Even with supposedly “perfect” tenants, issues arise. That’s why, even though I’m still bullish long-term on San Francisco real estate, I accepted a preemptive offer in 2025 for my old primary residence that was a rental for one year.

I reinvested 100% of the proceeds into the S&P 500, individual stocks, Treasury bonds, and venture capital—investments that require zero people management. Shifting semi-passive rental income into truly passive investments has been a relief.

Once you FIRE, you might also decide you don’t want to manage rental properties, for many of the same reasons you left your job in the first place.

Lessons Learned For Landlords

Here are the main takeaways from this experience:

• Set clear expectations upfront. Your lease is your rulebook. Don’t rely on verbal understandings as it opens yourself up to misunderstandings.
• Don’t change the terms midstream. If it’s not in the lease, it’s optional, not mandatory.
• Be careful with “extras.” Once you start saying yes, tenants may keep asking for more.
• Protect your margins. Expenses creep quickly; don’t let small favors turn into big, ongoing obligations.
• Respect goes both ways. Kindness and courtesy matter. Tenants who treat you well deserve more flexibility than those who don’t. Use your emotional intelligence to make life easier for both sides.

In my next lease agreement, I plan to spell out more details around exterior maintenance, clarify that the property is rented “as is,” and specify that tenants may make improvements or aesthetic changes only with prior approval and at their own expense.

The path to building a livable passive income stream isn’t easy. The key is to always learn from each experience so the next one becomes a little better.

Let’s All Understand And Follow The Lease

At the end of the day, both landlords and tenants want a positive experience. Tenants want value for what they pay. Landlords want tenants who care for the property and are self-sufficient. Neither party wants to keep going back and forth with each other during the entire time of stay.

This balance is achievable, but only when both sides clearly understand and follow the lease. Without expectations, frustration grows. With them, the relationship has a real chance of succeeding.

Landlords, have you ever had tenants ask for things that went beyond the lease? How did you handle it—did you accommodate, push back, or find a middle ground? And tenants, I’d love to hear your side too. Have you ever convinced a landlord to go above and beyond what was in your lease? If so, how did you pull it off?

At the end of the day, I think setting expectations is the foundation of a smooth landlord-tenant relationship. But I’m curious—how important do you think it really is, and where do you draw the line?

Invest in Real Estate, Without the Headaches

Don’t want to deal with tenants, late-night maintenance calls, or chasing rent checks—but still want exposure to real estate? Check out Fundrise. With over $3 billion in assets under management and a minimum investment of just $10,

Fundrise focuses on build-to-rent residential and commercial properties in more affordable parts of the country. They handle the acquisitions, tenants, and property management—so you can sit back and focus on the parts of life you actually enjoy.

I’ve personally invested over $500,000 across multiple Fundrise funds and several accounts, and they’ve been a long-time sponsor of Financial Samurai. With the Fed cutting rates again and three years of underbuilding due to high financing costs, I expect to see continued upward pressure on rents in the years ahead.

Embattled Federal Reserve Governor Lisa Cook is facing accusations of mortgage fraud—specifically, owner-occupancy mortgage fraud. The claim is that she took out two mortgages in two states, within two weeks, while designating both properties as her “primary residence.”

If true, it’s a terrible look for someone sitting on the Fed, the very institution tasked with upholding the rules and integrity of our banking system. It’s like the referee secretly betting on the game. That said, we’re all presumed innocent until proven guilty. It’s hard to believe someone so high up in the banking system, with so many eyes on them, would knowingly commit fraud. But stranger things have happened.

Since this site is all about saving, making, and investing more money to achieve financial freedom, let’s use this latest controversy as a springboard to better understand mortgages. After all, most of us rely on them to buy our dream homes. And the lower the interest rate, the more wealth we get to keep.

The Penalty For Mortgage Fraud Can Be Severe

The penalties for owner-occupancy fraud, which falls under the broader umbrella of mortgage fraud, can be surprisingly harsh, even if enforcement is rare. Technically, mortgage fraud is a federal crime under 18 U.S.C. § 1344 (bank fraud), punishable by up to 30 years in prison and fines of up to $1 million. In practice, though, the maximum sentences are typically reserved for large-scale fraud rings, shady brokers, or lenders gaming the system.

Still, lenders have the right to call the loan due immediately through an acceleration clause, which would require the borrower to pay off the entire balance at once or risk foreclosure. They could also retroactively re-price the loan as an investment property mortgage, meaning higher rates and fees, and cut off access to favorable refinancing or future loans.

Beyond the financial hit, the reputational damage can be severe. While the average borrower probably flies under the radar, public figures, brokers, and real estate professionals risk having their credibility torched if they’re caught. That may be what Lisa Cook is dealing with now.

But here’s the reality: owner-occupancy fraud is likely far more common than regulators would admit. The financial incentives are obvious, enforcement is weak, and the dirty little secret is that plenty of borrowers have quietly bent the rules to save money on their mortgages.

The Benefit Of Claiming Two Primary Residences For A Mortgage

The main reason why someone would claim a rental property or vacation property is their primary residence is because lenders offer lower mortgage rates for primary residence borrowers. Whether you are refinancing your mortgage or buying a new property with a mortgage, the average mortgage rate is usually around 50 basis points (0.5%) lower for a primary residence than for an investment property or vacation property mortgage.

On a million dollar mortgage, that amounts to $5,000 a year in interest savings. Over a period of 10 years, if the principal balance remained the same due to an interest only mortgage, that’s $50,000.

To the lender’s credit, since the 2009 global financial crisis, they have been making mortgage applicants go through the wringer to prove their income, wealth, and credit-worthiness. Lenders have been far stricter since 2009, and don’t want to be left with huge losses again. It would often take me two or three months to get a new mortgage.

Lenders will make you sign a document stating you are refinancing or taking out a new mortgage for a primary residence. You’ll also have to share a utility bill perhaps, but that’s easy to keep in your name.

However, not once, in my more than 15 mortgage applications, has the mortgage officer ever personally come out to verify that I was taking out a primary residence mortgage. And even if they did, how could they prove I wasn’t if I showed up to my empty or not empty rental property? They can’t, unless they hire a private deceptive to watch my every move for months.

Clearly, the mortgage industry doesn’t have the resources—or the incentive—to crack down hard on owner-occupancy fraud. Loan officers are focused on earning their commissions, while banks are eager to book profits and move on to the next borrower.

Why Primary Residence Mortgages Are Cheaper

From a borrower’s perspective, paying a 0.5% premium for a vacation home or rental property mortgage feels unnecessary. If you’re wealthy—or reckless—enough to buy a vacation property you only use a few weeks a year, you clearly have cash flow. Why should the bank tack on a higher rate?

And with an investment property, you’ve got both your income and rental income from a tenant to cover the loan. Shouldn’t that make the mortgage rate the same, or even lower, than a primary residence loan? You’re less risky given you earn rental income.

Unfortunately, borrower logic isn’t lender logic.

• Vacation homes: From the bank’s point of view, these are luxuries, not necessities. When the economy sours, vacation properties are the first to hit foreclosure—as we saw in the 2008–2009 financial crisis. People ditch the lake house before their main roof over their heads. Banks hate holding foreclosed properties, so they pad rates to protect against losses. Foreclosing on and selling off a primary home is easier because the pool of buyers is larger.
• Rental properties: Lenders assume you need tenant income to afford the mortgage. But turnover, vacancies, and late payments make rental income unstable. That’s why banks typically discount reported rental income by ~30% when calculating what you can borrow. What looks like bonus cash to you looks like unreliable income to them.

Meanwhile, a steady W-2 paycheck used to qualify for a primary residence is considered much safer. That’s why primary residence loans get the best pricing.

In short, banks view second homes and rentals as “wants” rather than “needs,” which makes them riskier, and riskier loans always come with a higher price.

The Legal Workaround to Getting a Primary Residence Rate on a Rental

The cleanest way to get a primary residence mortgage rate on a rental property is simple: follow the law. Take out or refinance the loan as a primary residence, then actually live in the property for at least one year. After that, you’re free to rent it out, and you’ll still be enjoying the cheaper rate.

This is one of the big advantages of the U.S. mortgage system. You can lock in a low fixed rate for decades. For instance:

• A 10/1 ARM gives you 10 years of fixed payments. Live there for one year, then rent it out while keeping nine more years at the primary residence rate.
• A 30-year fixed works the same way—live there for a year, then rent it out with 29 years of cheaper debt still in place.

This dovetails with one of my favorite real estate wealth-building strategies: buy a primary residence, live in it for two years, then either sell tax-free (up to $250,000 in gains if single, $500,000 if married) or keep it as a rental. Do this a few times over your life and you can comfortably build 3–6 properties that fund retirement—all while staying 100% compliant with the rules.

That’s very different from applying for two “primary residence” mortgages in two states within two weeks. One is strategic, patient, and legal. The other looks calculated and fraudulent. Yes, timing applications close together in different states makes it harder for lenders to catch, but that’s risky if you’re in a high profile seat.

The Lender Can’t Control Your Life After Closing

Here’s the thing about owner-occupancy fraud: sometimes it’s not fraud at all, it’s just life. You may sign a document promising to live in the property for a year, but circumstances change. Maybe you lose your job three months later. Instead of bleeding cash you don’t have, you move into a friend’s basement and rent out the property to stay afloat.

Is that fraud? I don’t think so. You tried to honor the agreement, but the economy handed you a crap sandwich and you did what you had to do. And let’s be frank, no lender is sending someone to knock on your door and check if you’re still living there. They’re too busy trying to close their next loan.

Or picture this: you buy a home in San Francisco and live there for six months. Then a dream job offer lands in New York City—double the pay and a promotion. You plan to return to San Francisco someday, so you rent out the property at market rates while you’re gone. What bank has the right to tell you to leave it empty, or worse, decline the opportunity? No bank.

Life is unpredictable. Which is why there are probably thousands of cases each year that look like owner-occupancy fraud on paper but are really just people adapting to changing circumstances. The real distinction is intent: did the borrower deliberately misrepresent themselves, or did life force their hand?

You can’t really blame a borrower for thinking ahead either. Many people want to climb the property ladder whenever their finances or circumstances allow. And if the ideal home to raise a family comes along, the temptation is to seize it.

The Bottom Line

There’s a big difference between working the system within the law and outright lying to lenders. One is strategic. The other is fraud.

If the allegations against Lisa Cook are true, it’s not only embarrassing for her but also for the Fed. At the same time, the case highlights a reality few discuss: owner-occupancy fraud is far more common than people think. The incentives are strong, and the enforcement is weak.

Yes, many borrowers who lie are simply trying to save money. But if too many unqualified buyers take on mortgages they can’t comfortably afford, the risk extends beyond the individual. It puts the housing and lending industry on shakier ground when the next downturn arrives.

Readers, what are your thoughts on owner-occupancy fraud as a way to secure a lower primary mortgage rate? Should lenders tack on a 50-basis-point (or higher) premium for rental and vacation properties? And do you believe the Fed governor knowingly committed mortgage fraud just to save money?

Invest In Real Estate Without Needing A Mortgage

If you want to diversify into real estate without taking on a mortgage, consider Fundrise—a platform that lets you invest 100% passively in built-to-rent residential and industrial properties. With about $3 billion in private real estate assets under management, Fundrise primarily targets the Sunbelt region, where valuations are lower and yields tend to be higher.

As the Federal Reserve embarks on another multi-year interest rate cut cycle, real estate demand is likely to rebound. The sharp rise in mortgage rates from 2022–2025 has dramatically slowed new construction, which could lead to greater rent pressure in 2026 and beyond. That’s why it may make sense to invest today before rent inflation potentially accelerates.

I’ve personally invested over $500,000 in a couple of Fundrise funds, and they’ve been both a trusted partner and long-time sponsor of Financial Samurai. With just a $10 minimum, diversifying your portfolio into real estate has never been easier.

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After a week of reviewing the tax-free exclusion rule for selling a rental property, I decided not to sell. I’d already used my $500,000 tax-free exclusion amount and would need to wait at least two more years before I could potentially use the full amount again. Most importantly, I’m on a mission to boost my passive income and return to being 100% financially independent.

If you want to grow your passive income to the point where you’re truly free, you’ll need two things: relentless optimization and a willingness to sacrifice. The good news? If you commit fully to the mission, I believe anyone can get there.

Let me share what I’m giving up in the name of financial freedom. Deciding not to sell the property was relatively easy, given the tax consequences and my long-term optimism about San Francisco real estate. But choosing to rent out my downstairs sanctuary—that was the hard part.

Since January 2020, the downstairs unit of my rental house had been my all-in-one retreat. A place to:

• Escape for a few hours to write in peace.
• Host visiting friends and family long-term.
• Give the kids a change of scenery to play
• Enjoy moments of bliss in the hot tub.

During the early pandemic years, this space was my survival tactic. Three times a week, I’d take my son down there for two to three hours so my wife — and later, our baby daughter — could nap without interruption.

When my daughter turned 2½ in mid-2022, I started taking both kids. It was perfect: they could draw at the table, run around on the deck, and then jump into the hot tub to burn off more energy. I would then give them both showers, making bedtime routine easier for my wife and me.

If anyone asks me the single best material thing I’ve ever bought, I answer without hesitation: my $15,500 hot tub (includes installation). A close second? Toto Washlets. Once you have both, you can’t go back.

Why Give Up the Best Thing Ever?

I had a decision to make. Continue renting out only the upstairs portion of the single-family home while keeping the downstairs sanctuary, or rent out the entire house and lose access.

For more than six years, that hot tub gave us joy. I wrote in it through voice dictation. We played in it. I recovered from workouts in it.

So why would I give it up? Because my mission to rebuild our passive income to cover 110% of our desired living expenses by December 31, 2027 outweighs even my love for a hot soak. With my Provider’s Clock ticking loudly, leaving such a valuable space unrented started to feel like financial negligence.

With housing, tuition, and healthcare costs climbing—and A.I. putting downward pressure on wages and jobs—keeping this luxury was no longer viable. As a parent, I have to balance my family’s financial security with my desire for freedom.

Mission: Regain $150,000 in Lost Passive Income

At the end of 2023, I bought a house I didn’t need. It was a dream home — better layout, better location, the works. But it came at a price: my passive income dropped by $150,000 a year, and my “financially free since 2012” status was officially revoked.

That first half-year of being house-rich and cash-poor was rough. I had disaster scenarios constantly running in my head — trees crashing through the roof, wildfires sweeping through, a giant sinkhole swallowing the yard. I hadn’t felt this much financial stress since the first six months after I left my finance job in 2012.

The only thing that eased my anxiety? Taking action by saving and earning as much money as possible! Every month that went by with no calamities and increased cash in the bank improved my mood.

I set a goal: restore the lost $150,000 by December 31, 2027. And when I set a financial goal, I don’t let up until it’s met.

Most Obvious Action: Monetize Old Assets

I started by renting out my old house, which recouped ~$70,000 in semi-passive income after expenses. That worked for a year before I sold it in spring 2025, reinvesting the proceeds into stocks, Treasury bonds, and venture capital.

That portfolio performed better than expected, partly because I had cash ready to buy the dip during March and April’s market pullback. I started buying a month too soon, but the stock market eventually recovered. But I still had a passive income gap to close of about $60,000. Over the past two years, I’ve been able to generate about $20,000 in new passive income from saving and investing.

Which led me back to the sanctuary decision:

• Option 1: Rent just the upstairs (2/1 unit) for potentially $4,500/month (up from $4,000/month) — about $6,000 more per year than the old rent.
• Option 2: Rent the whole house for potentially $6,800/month — about $33,600 more per year. I wasn’t sure I could get $6,800 a month, but that’s what I guessed based on market research.

Given I was about $60,000 shy of recouping the lost $150,000 in passive income, Option 2 closed the gap by a significant 56%. But it meant giving up my sanctuary and hot tub, entirely.

Testing the Rental Market

Initially, my existing tenants asked if they could rent just the downstairs for 1–3 months. They were having a baby and wanted space for visiting family. Even though it was my private sanctuary, I wanted to accommodate so their parents and in-laws could easily come visit. I checked comps on Craigslist. Similar properties were listed for $6,800–$7,100/month, but they’d been listed for several weeks, so I wasn’t sure whether that was the true market clearing price.

I offered them a discount at $6,500/month for the whole place, fully furnished downstairs. They’d get one extra bedroom, an office that could also be used as a bedroom, a mini-fridge, a desk, a day bed, a king size bed, two side tables, and a large deck facing the ocean.

Somewhat surprisingly, they passed. I figured the convenience and discount made it a great short-term solution. But while I was in Honolulu for five weeks, they found something cheaper down south.

No hard feelings, as I think it’s great they found a single-family home they could comfortably afford. It also freed me to test the full rental market without half-measures. Without automatic rent adjustments, the discount to market grows wider over time.

A Pleasant Surprise: A Rental Property Bidding War

When I got back from Hawaii, I listed the house on Craigslist for $7,350/month (a bump from my initial $6,800 estimate). Listing was free, and I hadn’t tested demand in a year, so why not? My house looked nicer than the comps at $7,100/month since it was gut remodeled for us to use. And if I got no demand, I could always lower the price.

The response floored me:

• 3 inquiries in 24 hours
• 8 inquiries by Saturday (four days after first posting)
• 2 private showings that morning — both wanted it immediately

With demand that strong, it seemed I had made a mistake. So I asked for best offers. My favorite prospect came back at $7,500/month with three months’ rent upfront. Done.

Could I have gotten $7,800? Maybe as some poker dads I was discussing with said $7,500 still sounded cheap. But I wanted a deal that felt fair for both sides. I decided to pass on collecting three months rent up front as a show of good faith.

Overall, I found great tenants and had them sign the lease in just one week. Now I’ve got to hope for the best.

Significant Passive Income Progress Through Optimization

Just like that, I boost my projected annual passive income by ~$42,000, leaving me only $18,000 short of my 2027 target. I had optimized an underutilized asset.

For perspective, generating an extra $42,000 a year at a 4% yield would require an additional $1,050,000 in investments. As dual unemployed parents (DUPs), there’s no realistic way to earn that kind of money through sheer effort alone. And writing a book every 2-3 years isn’t close to enough.

The only viable path is to grow our portfolio through market returns and then rebalance those gains into income-producing assets. Relying on luck, then triggering unnecessary capital gains taxes, is not a reliable strategy for building more passive income.

Why the Sanctuary Mattered Less

One of the biggest epiphanies after purchasing a larger home was how much easier it became to host guests. Because my new home has multiple en suite bathrooms, hosting my parents for eight days—each staying in their own bedroom—was a breeze.

On another visit by my parents, I even hosted my sister at the same time. Seven people in one house with nobody getting on each other’s nerves was impressive!

This realization changed my perspective on keeping the sanctuary. One of my main reasons for holding onto it was to have a place for guests, especially during COVID. If a caretaker got sick, they could also go there to quarantine. But now that my primary residence could comfortably accommodate family and friends, and COVID is long over, that reason no longer held as much weight.

By renting out the sanctuary as well, I could optimize spending more time playing with the children at home. We’re slowly transforming our two-car garage into a multi-purpose play space for arts, crafts, and games. We’re also creating more fun activities to do in our enclosed yard. This is a further optimization of resources.

In a real way, buying a nicer home has nudged me toward boosting passive income by being willing to rent out the entire sanctuary instead of just part of it. This shift means the actual cost of owning our more expensive primary residence isn’t as high as I had originally anticipated.

Replacing the Hot Tub (Eventually)

I’m already planning a way to build a cement platform and add a new hot tub at our current place. The electrical setup will be tricky, but I think I can make it work. I just need to remember the process of what to install first, and test out the ampage.

Until then, the kids and I can visit the Bay Club in Redwood City once or twice a month. At $180/month plus $20 guest passes, it’s cheaper than operating a hot tub. In addition, members get access to multiple Bay Clubs in the Bay Area where I get to play pickleball or tennis, which is especially beneficial when it rains due to one cub having indoor courts.

Being a member of a private sporting club is a great return on lifestyle investment. With no more hot tub, I’m more incentivized to utilize my membership. This is another form of optimization given I go only once every 10 days on average. Now I will realistically go twice a week and maybe even start lifting weights.

Sacrifices for Passive Income: It’s Not Just About Spending Less

Here’s the thing. Passive income growth isn’t only about cutting expenses and investing more. It’s about opportunity cost. Sometimes you have to give up something you love now so you can afford more of it later.

Some ways to accelerate the process:

1. Maximize asset yield: Just like I rented the whole house instead of part, look at ways to squeeze more income from what you already own.
2. Side hustles as seed capital: Use short-term work (consulting, tutoring, freelance projects) to create cash you can reinvest.
3. Reinvest windfalls: Tax refunds, bonuses, one-off gains, private real estate distributions, should go into income-producing assets, not lifestyle inflation.
4. Periodic portfolio review: Rotate out of underperforming or low-yield assets into better ones. Speaking to a financial professional can help you make better asset allocation decisions as you will have blindspots.
5. Short-term sacrifice for long-term abundance: The sanctuary was a comfort, but the math showed it was a luxury I could monetize.

Alternative Passive Income Boost Ideas

If you’re chasing your own passive income target and don’t have a “sanctuary” to rent out, here are some other strategies worth exploring:

• House hacking: Rent out a spare bedroom, ADU, or even your driveway for RV or boat storage.
• Online real estate investing: Own a slice of real estate without the headaches of being a landlord. Public REITs often yield 3–6% and can be bought in small increments. Private real estate funds can also generate equal or higher returns without the visible volatility. You just won’t have as much leverage.
• High-yield savings and CDs: Not glamorous, but risk-free yields north of 4% can meaningfully close smaller gaps.
• Private credit and venture debt: Higher yields, but with more risk.
• Dividend stocks: Buy businesses that increase payouts yearly. Even a modest 2–3% yield can snowball if dividends grow 5–10% annually.
• Short-term rental arbitrage: Lease a property long-term, furnish it, and rent it on Airbnb. Higher potential yield if managed well. This requires a lot of work, so I’m not a fan.
• Licensing or royalty income: From books, courses, photography, or music you’ve created. The upfront work pays off for years.
• Peer-to-peer lending: Riskier, but can yield 6–10% if you diversify across many borrowers.

The key is to match your strategy to your comfort with risk, your available capital, and the time you’re willing to spend managing it. Here’s a more comprehensive host where I rank the best passive income investments.

Sacrifice Now, Soak Later

Giving up the sanctuary and hot tub stings. I actually feel a little melancholy, as I always do when one chapter of my life is over. It was such a wonderful place that I will miss. But the short-term sacrifice brings me closer to a long-term life where I can have more freedom.

Sacrifice now. Soak later. That’s what earning passive income is all about, if you really want it.

Readers, what are some things you’ve had to sacrifice in order to generate more passive income for financial freedom? Have you been able to optimize any of your assets to boost your investment income?

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The value of owning a big, beautiful home is underappreciated. Somewhere along the way, society began favoring minimalism and smaller living spaces, often dismissing larger homes as “McMansions.” But after spending five weeks living in a much smaller space again, I’ve gained a renewed appreciation for the comfort, privacy, and functionality that a larger home provides.

One of the unexpected “downsides” of going on a family vacation is realizing how hard it is to match the comfort of your own home. I think this rings true for most families.

You might live in an 1,800-square-foot, three-bedroom, two-bathroom house with your family of four. But on vacation, you often end up squeezing into a hotel room or a one-bedroom suite with a sofa bed. Vacation lodging has gotten so expensive! Renting a place that matches the size and quality of your own home is simply out of reach for many.

After 26 nights at my parents’ place and nine nights at my aunt and uncle’s ~1,000-square-foot, two-bedroom, two-bathroom home, I can say with certainty: I truly love owning and living in a bigger home. And, I’m not afraid to admit it!

Definition Of A Big Home

In 1981, the median size of a newly purchased home was about 1,700 square feet. By 1993, that number had grown to 2,000 square feet. This size increase was driven by the rise of suburban living and the growing demand for more space and modern amenities for families.

Throughout the 2000s, the average home size hovered between 1,920 and 1,940 square feet. When the first-time homebuyer tax credit was introduced to stimulate demand, the median size temporarily dipped to around 1,850 square feet before climbing back to 2,000 square feet between 2010 and 2015.

By the early 2020s, home sizes surged again, reaching between 2,200 and 2,300 square feet. According to the U.S. Census Bureau, the median size of a completed single-family home in 2023 was 2,233 square feet. Today, the average home size remains around 2,200 square feet.

Now that we know the median home size in America, we can better define what qualifies as a “big” home. In my view, a big home is one that’s at least 50% larger than the median—meaning it has at least 3,100 square feet of living space. You can localize the number using the figures based on where you live too.

A Big Home Over a Small One—Especially With Kids

A small home (50% smaller than median or more) is perfectly fine if you don’t have kids. I shared a studio with my high school friend and lived in a one-bedroom condo with my wife for years. But once you have kids, you’ll want as large of a home—and lot—as you can comfortably afford. Otherwise, you might go crazy.

One night at my aunt and uncle’s house on the North Shore of Oahu really drove this point home. It was a particularly windy night. I slept on a twin-size sofa bed in the living room, while my wife slept with our daughter and our son had his own room.

At 12:30 a.m., our daughter screamed out in her sleep, waking us up. Then at 1:30 a.m., a plastic cup flew off the kitchen counter. At 2 a.m., a mysterious thunk! Our son had fallen out of his bed (I didn’t realize it until later). Then another scream at 2:30 a.m. And finally, just before dawn, something flew off my wife and daughter’s bedside table, waking all three of us.

Getting woken up five times in one night will drive anyone a little nuts. I was dragging all day on the Fourth of July. If we had a larger home, we might have only woken up once or twice.

And the last time I slept on a sofa bed was in college in 1998. But with my son sleeping like a tornado, sharing a queen bed would’ve meant zero rest for both of us given I snore.

More Space, More Happiness

If possible, aim to buy a home with at least one bedroom per person. And if each bedroom can have its own en suite bathroom, even better. This setup dramatically improves everyone’s ability to sleep soundly and function well the next day.

With a big home, sound insulation and space make a huge difference. Comfort levels rise, and sleep improves, something every parent can appreciate.

Young kids are energetic. They need space to run, play, yell, and explore. If you’re considering a smaller house, at least prioritize a large, usable lot.

What I appreciate about my aunt and uncle’s place is that their house only takes up about 12% of the lot size so it was great for the kids.

The Ideal Lot Size For A Big Home

Ideally, look for a property where the lot size is at least twice the size of the home’s square footage. For example, if you buy a 3,500-square-foot home, aim for at least a 7,000-square-foot lot. Of course, in big cities where land trades at enormous premiums, this ratio may hard to find at a reasonable price. But we’re talking ideal here.

Try not to let the house take up more than 75% of the lot. Even with a large house, a lack of outdoor space can make things feel cramped. Sunshine and fresh air are essential for your well-being—especially if you have little monkeys running around.

Here’s a big, beautiful house I’d enjoy living in.

A Big Home Is Better for Work From Home

One of the hardest parts about sleeping on a sofa bed in a 1,000-square-foot, two-bedroom, two-bathroom home with three other people is the hit to my productivity. As a writer, I need peace and quiet—something that’s nearly impossible to find in a compact home on one floor with two young kids.

My AirPods became my best friend, but even they couldn’t block out all the noise. As a result, I had to wake up by 3:30 a.m. just to get some writing done before my son wakes up—sometimes as early as 5 a.m., and always by 6.

If I were a single guy in my 20s or 30s, sharing a place like this with a two or three roommates for several years wouldn’t be a big deal. After all, I shared a studio for two years with a friend. But as a 48-year-old writer who’s paid his dues, I’d much rather live in a larger home on two levels.

When I’m in a flow state, I want to write uninterrupted. A small home constantly pulls me out of that zone.

Downsize Later, If You Want

Living in a modest 1,000-square-foot home gave all of us perspective and appreciation. More importantly, it taught my kids to adapt to a smaller living arrange and show respect for their grandparents’ home.

In San Francisco, I’ve been fortunate. After renting a 600 square-foot one-bedroom condo with my wife, I finally took a leap of faith and bought a 990-square-foot 2/2 condo in 2003. In 2005, I upgraded to a 2,070-square-foot single-family home with three bedrooms, two bathrooms, and a bonus room. Then I downsized in 2014 before buying larger homes again in 2019, 2020, and 2023.

Going from big to much smaller is like going camping—you give up creature comforts and appreciate what you have even more when you return. One of my biggest concerns with climbing the property ladder was giving my kids a warped sense of reality. That’s why trips like these are helpful resets.

If your first car is a brand-new BMW instead of an old beater, you might end up forever spoiled. That’s not great for building appreciation and work ethic. That’s part of why I drove for Uber for a year and gave over 500 rides. Working a near-minimum-wage service job was humbling, but it grounded me and made me more grateful. Partly as a result, I’ve been able to continue writing 3-4 posts a week on Financial Samurai since July 2009 without fail.

If you feel bad about living in a big, beautiful home. Don’t be. you can always downsize later, or after the kids move out. Just don’t downsize too small, otherwise, your kids may never come back to visit!

Yes, Big Homes Are More Costly To Maintain

A key principle of achieving financial independence is keeping your living expenses as low as possible. One way to do this is by getting neutral real estate and paying off your mortgage as quickly as you can. Another is by buying or renting the cheapest place you can tolerate for as long as possible.

I’m a big proponent of saving aggressively on housing costs so you can invest more in the stock market and other risk assets to build wealth faster. Big homes have higher utility bills, higher maintenance expenses, higher property taxes, and more things that can break or go wrong. An expensive home can derail your FIRE plans, for sure!

That said, if you’ve got a family and want to YOLO more, a bigger home can significantly improve your quality of life. More space often means better sleep, fewer arguments, and a more peaceful household.

It’s not just about luxury—it’s about functionality and family harmony. Many people came to this realization during the pandemic, when cramped living quarters became all too real.

So if you’re in a position to do so, enjoy your big, beautiful home. Just don’t forget the value of living simply and the lessons that come from making do with less.

Readers, do you own a big, beautiful home? If so, how large is it, and how does it compare to the median home size in your city? In your opinion, at what point does a home become too big? What do you consider a “big” home, and what are some downsides of owning one—beyond the higher carrying costs?

Surgically Invest In Real Estate

If you’re looking to invest in real estate without the headaches of dealing with tenants or maintenance, check out Fundrise—a private real estate investment platform with nearly $3 billion in assets under management.

Fundrise focuses primarily on industrial and residential commercial properties in the Sunbelt region, where valuations tend to be lower and yields higher. With mortgage rates gradually declining, valuations still soft from the Fed’s aggressive rate hikes, and a continued structural undersupply, commercial real estate looks increasingly attractive.

I’ve personally invested over $430,000 with Fundrise, and they’ve been a longtime sponsor of Financial Samurai.

Subscribe To Financial Samurai 

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your shares, ratings, and reviews are appreciated.

To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is among the largest independently-owned personal finance websites, established in 2009. Everything is written based on firsthand experience and expertise.

One of the most overlooked risks in real estate investing isn’t rising interest rates, leverage, or even tenant issues—it’s execution fear.

You run the numbers. The property checks all the boxes. It fits your timeline and lifestyle. You can even picture the steady cash flow hitting your account…

Yet you still don’t pull the trigger.

It’s not because you’re being irrational. It’s because real estate is a heavy lift—mentally, financially, and emotionally. The fear of committing to such a large, long-term decision can quietly kill what might have been a life-changing investment.

Fortunately, with mortgage rates still elevated, there’s no rush to buy. But as inventory builds, more opportunities will emerge. The question is: Will you try and pounce on a deal before mortgage rates finally come down?

A Reader’s Reflection On Missing Out On Real Estate Opportunities

Here’s what a reader recently shared on my post, How To Survive The Most Dangerous Time After Purchasing A Home, that inspired this post:

“There’s another real estate risk—and that’s execution. I’ve twice held back from what would’ve been outstanding property investments due to what I guess you’d call ‘execution fear.’ Maybe a topic for another article: how to overcome the fear so you don’t miss the opportunity and actually execute the deal.”

This reader isn’t alone.

Before and after every single home purchase, I’m full of fear too.

I’m always cautious about buying near a market peak—especially after the mistake I made in 2007 when I bought a vacation property I didn’t need. Even though I got it for about 12% below the previous year’s sales price, it still went on to drop another 50% at one point!

Before submitting an offer, I wonder whether I should really buy something nicer I don’t need. I never do.

While I’m in escrow, I’m scrambling to uncover any maintenance red flags. Sometimes, I delay the close because the dread of making mistake is overhwhelming.

And after closing? I’m stressed about how long it’ll take to rebuild my liquidity and feel safe again. In the meantime, I hope no unforeseen disaster happens that bleeds me dry.

What Is Execution Fear?

Execution fear is the resistance that shows up after you’ve done the research. It’s that gnawing hesitation right before committing.

It sounds like:

• What if this is the top of the market?
• What if something breaks and I can’t afford to fix it?
• What if I’m not cut out to be a landlord?
• What if a president enacts a policy so asinine it tanks the global economy right after I buy?
• What if a wildfire ignites in the middle of the night, torching my property and every one of my neighbors?

These are all valid questions. Because unlike stocks, where you can more easily buy the dip, real estate isn’t a click-and-buy-and-sell asset. It’s hands-on, debt-laced, and slow to give feedback. Once you’ve purchased the property, you’re likely stuck with it for years.

Why Execution Fear Happens

• The weight of responsibility. Real estate isn’t just a purchase—it’s a multi-year commitment.
• The permanence. You can’t unload it with one button.
• Analysis fatigue. The more you research, the more “what ifs” you find.
• Perfectionism. You want a unicorn property that might never exist.

Out of fear of making the wrong decision, many people end up making no decision at all—which, of course, is still a decision. But over time, regret tends to creep in as missed real estate opportunities quietly pile up.

Therefore, I thought I’d write a post about how we can all overcome execution fear to build more wealth and happiness.

How to Overcome Execution Fear In Real Estate

There’s always a bit of fear when you’re about to buy a high-priced asset or step outside your comfort zone—like asking someone you find incredibly attractive on a date when you barely know them.

But with time, that fear tends to fade. As you get older, you become wiser, more self-assured, and more comfortable taking calculated risks. You’ve learned how to properly value and analyze an investment property, Further, you’ve also made more mistakes and have learned from them.

Let’s walk through some tips to help you move past the hesitation and start going after what you truly want.

1. Ask: Can I Survive the Worst-Case Scenario?

This is my ultimate gut-check.

If the property cash flows less than expected, the roof leaks, or I get a nightmare tenant—can I survive financially and emotionally?

In expensive cities like San Francisco or NYC, negative cash flow is common, especially in year one or two with 20% down. These are appreciation-focused markets, not yield plays. Know what you’re walking into.

If you dare to buy a $10 million property, be prepared to stomach $1–$3 million in potential paper losses during a housing downturn. If you can handle the downside, the upside might just be worth the risk.

2. Go Through A Regret Minimization Exercise

Risk can often be managed. Regret, on the other hand, tends to linger.

Whenever I’m facing something risky, I like to run a regret minimization exercise. It’s a simple process of weighing the upside against the potential downside—and asking myself which feeling will last longer: the pain of failure or the regret of not trying.

For many boys, our first taste of this comes from asking a classmate out. Since girls still rarely make the first move, only the most confident boys end up with dates or prom partners.

The mental calculation is straightforward: is a few minutes of embarrassment worse than the excitement of a yes? After freshman year, I decided the sting of rejection was manageable. And with each attempt, it hurt a little less, making it easier to keep choosing bravery.

Regret Minimization Exercise With My Current Home

More recently, I went through a regret minimization exercise after stumbling upon an ideal home to raise a family. It had panoramic views of the Bay and the Golden Gate Bridge, along with a large, enclosed lot.

I had to weigh the regret of selling stocks and bonds and potentially watching them rise, against the regret of missing out on this “once-in-a-lifetime” home. In the end, I chose the house and the life it could help create.

21 months later, I’m grateful I prioritized a better environment for my family over the possibility of higher returns. Boy do kids grow up fast! But it sure would be nice to have greater stock returns. Oh well. You can’t have it all!

3. Build an Execution-Ready System

The more prep, the less panic. This is called pre-mortem planning.

My checklist includes:

• Financing pre-approved + 10% of home value in cash reserves or low-risk assets to follow my 30/30/3 home-buying guide
• A vetted contractor or handyman
• A property manager or DIY plan
• Insurance quotes + estimated closing costs
• An expert to talk the deal through

Preparation kills fear. Want fewer surprises? Review all the hidden homeownership costs after purchase. The more you familiarize yourself with the potential surprises, the fewer surprises you will have.

4. Learn from the Real Estate Deals You Didn’t Do

Use past hesitation as fuel. Ask yourself:

• What made me hesitate last time?
• Was it valid—or just fear wearing a logical disguise?

Missed opportunities are painful. But they’re also teachers.

And if you miss one dream property? Don’t worry. There’s always another one down the road. The world doesn’t run out of homes. Only your courage to buy them.

5. Set a Greenlight Framework

Instead of waiting for a “perfect” deal, define what’s “good enough”:

• Cash-on-cash return > risk-free rate + 3%+ premium to compensate you for the risk you take
• Cap rate > borrowing cost
• Location with real economic drivers you believe in
• A life stage where you can commit to 5+ years of ownership, the longer the better

If the deal meets your framework, it’s time to buy. The people who never build wealth are the ones who never take calculated risks.

6. Reframe Your Identity

Tell yourself: “I’m someone who takes informed risks and follows through.”

This isn’t bravado, it’s about self-belief. You did the work. You ran the numbers. Now it’s time to let your preparation pay off. Words have power. Remove the negative self-talk from your life.

If you never act, all that diligence becomes wasted energy.

Execution Regret Hurts More Than Execution Mistakes

One of the hardest parts about real estate is that inaction doesn’t hurt right away.

You feel safe. You preserved your cash. There is no uncertainty.

But five or ten years later?

That “safety” often turns into stagnation.

Inflation marches on. Asset prices tend to rise. That once “too expensive” home? Now it’s a bargain.

And your peers? They’re buying their next home while you’re still stuck in the same place, older, and maybe a little resentful. Life moves on with or without you.

Comparing Houses Hurts More Than Comparing Stock Portfolios

Here’s another nugget of truth: It stings more to see a peer living better than investing better.

A friend with a bigger stock portfolio? Meh. No big deal. Stocks don’t bring joy. They’re just funny money on a screen that can ocassionally make you moody during violent corrections.

Sometimes you can feel a little sorry for peers with massive stock portfolios who still live far below their means. It’s as if fear and frugality have paralyzed them—trapping them in a hoarding mindset that prevents them from truly enjoying their wealth.

But a friend with a nicer home? That’s harder to ignore.

You’ll have to find a way to appreciate what you do have because envy doesn’t build wealth. It just breed unhappiness.

Execution Fear Will Naturally Decrease Over Time

The next time you’re paralyzed with execution fear, take a deep breath.

Run the numbers again. Model out the worst-case scenario. If you can handle it, move forward—knowing you might still lose money, and that’s okay. Even pocket Aces get cracked around 15% of the time pre-flop when you’re going heads-up.

If you decide not to execute, be patient. The market always brings new opportunities.

Eventually, for the sake of living your best life, you’ve got to make a move.

Real estate, over the long run, tends to go up and to the right. If you desire, climb that property ladder until there aren’t any more rungs. You don’t want to look back at 70 and wish you’d taken a few more calculated risks to live better.

I’m 48, and I still wish I had bought more property in New York and San Francisco when I was younger. I’d be at least $2 million richer today. But I’ve learned from my fears and I’m applying those lessons now. It’s never too late.

Your Turn: What’s Holding You Back?

Have you ever passed on a great deal due to execution fear? What kept you from moving forward—and what did you learn? This doesn’t just apply to real estate. Stocks, careers, businesses—we all hesitate.

So why do we fear taking risks when the wealthiest people in the world are often the biggest risk takers?

Drop your story in the comments—I’d love to hear it. You might just inspire someone else to overcome fear and move forward.

An Easier Way To Invest In Real Estate

The biggest reason people are so afraid of buying real estate is the sheer amount of money they have to borrow. Even with a 20% down payment, borrowing 80% on a typical property in San Francisco still means taking on a $1.4 million mortgage, for example.

This is where Fundrise comes in. With a minimum investment of just $10, it’s easy to gain exposure to private real estate across the country. No leverage is required, and you can dollar-cost average in at your own pace.

Fundrise primarily invests in residential and industrial commercial real estate in the Sunbelt region, where valuations are lower and yields tend to be higher. As someone who owns real estate in expensive markets like San Francisco, Honolulu, and Tahoe, I truly appreciate the diversification this offers.

If you want to stay informed about everything personal finance, join 60,000 others and subscribe to my free weekly newsletter. You can also get my posts immediately sent to your e-mail as soon as they are published by signing up here. My goal is to help you achieve financial freedom sooner so you can do more of what you want and less of what you hate.

Financial Samurai began in 2009 and is now one of the largest and most trusted independently owned personal finance sites. Every article is based on firsthand experience and knowledge—because money is too important to leave in the hands of the inexperienced.

Emily is nervous that buying their first home will derail her family’s journey to financial independence. What’s the smartest way to deploy their savings and stay on track?

Based on cap rate calculations, Paul’s real estate investments have appreciated beyond their sensible holding point. Should he sell his assets, or is there more to consider here?

Mike is recently retired while his wife still works. With a paid-off home and healthcare already taken care of, what are best practices for drawing down an investment portfolio?

Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

_______

Emily asks (at 1:14 minutes): As young parents, how do we plan for a major move and our first house purchase without throwing a wrench into our financial independence goals?

I was so happy to hear your defense of renting on Episode 559. My wife and I have taken that perspective to heart as renters for the past 15 years. But now, we’re ready to buy a home.

We’re in our early 40s, married, with two kids—a 3-year-old and an almost-1-year-old. We’re approaching Coast FI, and want to be work optional within the next 10 years. We plan to move home to the Midwest and settle into a great school district before our oldest starts kindergarten.

We have $1.2 million in investments, plus $120,000 cash earmarked for a down payment. We also have $85,000 in cash as our emergency fund. We may be able to save a bit more depending on when we move, and we’re also open to renting in the Midwest before we buy.

We currently spend $11,000 monthly due to high rent and childcare. But we expect that to drop to $6,000 once both kids are in school and once we move, depending on our mortgage.

We’re estimating a housing budget of $500,000, which should be enough to get us into a good school district with access to strong job markets. That number could be higher or lower depending on what we find.

Given our ages, net worth, and timeline for reaching work-optional status, how should we approach financing this home? Should we make a large down payment? Should we consider a 15-year mortgage? Or is it okay to carry a mortgage into our seventies?

Paul asks (at 26:20 minutes): Does it make more sense to keep a high-value rental that brings in solid income, but comes with landlord headaches, or to sell, invest the proceeds, and live more passively off a 4 percent withdrawal rate?

In 2011, I bought a 3,300-square-foot primary residence as a short sale in a highly desirable neighborhood for $645,000. After a year-long battle for permits, I built a second home on the same one-third-acre lot: A 1,800-square-foot house that’s perfect for me.

I moved into that smaller home in 2017 and have been leasing out the larger one ever since. The lot can’t be subdivided, so if I ever sell, I’d have to sell both homes together as a single property.

Here are the numbers:

• The original 3,300-square-foot house (now a rental) is worth $2.3 million and brings in $10,000 a month.
• The house I live in cost $450,000 to build and is now worth $2 million.
• Together, the two homes are worth $4.3 million.
• I owe $350,000 on a 15-year loan at 2.75 percent, with six years remaining.

I love my house and the neighborhood, but I don’t love being a landlord. The time commitment is minimal, but living right next door makes it hard to hand off responsibilities to a property manager.

And at $10,000 a month, tenants tend to treat it as a short-term rental while they shop for a home to buy. So far, I’ve had almost no vacancy, but I don’t get multi-year tenants either.

The cap rate on a $2.3 million valuation isn’t great, but the rental income is $120,000 annually. If I sold and invested the proceeds from that portion of the property into a total stock market index fund, a 4 percent withdrawal rate would give me $92,000 annually.

That’s less than the rent, but it would be completely passive. Of course, I’d have to factor in long-term capital gains taxes and real estate commissions — and I’d also need to buy a new home, which would likely cost me $1.75 million to stay in the same neighborhood.

For additional context, I have a well-diversified investment portfolio of $3.5 million that already generates more than enough to cover my lifestyle.

So my question is: is it smarter to hold onto the rental and keep the $120,000 in annual income, or sell and invest the proceeds for a more hands-off return, even if it’s a bit lower? And how should I think about taxes, commissions, and housing replacement costs in this decision?

Mike asks (at 47:53 minutes): I’m 61 and recently retired. My wife is 54 and earns $100,000 a year as a W-2 employee. Our home is fully paid off and is worth $1.5 million. My healthcare is covered by my former employer.

We have $5 million in investable assets held across a rollover IRA, a Roth IRA, and a taxable brokerage account:

• $500,000 in cash
• $1.5 million in a Schwab dividend ETF yielding around 4%
• $1.5 million in Schwab’s U.S. Large Cap Growth ETF (SCHG)
• $1.5 million in Schwab’s S&P 500 index fund

I plan to withdraw $100,000 per year. Which accounts and assets should I draw from first?

Resources Mentioned:

#609: Q&A: How Not To Screw Up Retirement Spending – Afford Anything | Podcast

#595: Q&A: The Scary Shift from Saving to — Gulp! — Actually Spending Your Money – Afford Anything | Podcast

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