Red Light Green Light

A Three Properties Five Years Seminar Post

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There are only two ways to make more money.

Cut expenses.
Make more money.

And, you can’t depend on a W-2 job to do either for you. That of course doesn’t mean you necessarily quit your 9 to 5. My wife’s administrative support position at UNH comes with four major benefits: family health insurance, access to a 403b with university matching funds, half-off tuition, and a regular predictable bi-weekly paycheck. We’re not giving any of that up any time soon.

My job, before I got into real estate, was teaching at Great Bay Community College. My first year, I received under $2000 per class and I was limited to three to four classes per semester. There was a clear path laid out for controlled over-time pay raises, but eventually I topped out—there were no more raises to be had except through intense negotiations between the administration and the union. In 2023, I made just under $18,000 teaching.

We didn’t eat out, we didn’t buy toys, we didn’t go on vacations, we were on food stamps and all the rest. And the job had me trapped because I signed a new contract every three months that locked me into my position. If you’re around me long enough, you know about the conversation I had with the school administration telling me I should consider food stamps, Medicaid, and state heating and rent assistance as a part of my pay. The position had no health care, no retirement, no nothing.

Honestly, during that time in my life, cutting expenses was impossible. We were already cut to the bone. I spent a lot of summers making pizzas, working at TJ Maxx. I had a weekend gig putting on a flimsy hazmat suit cleaning t-shirt designs off nylon serigraphy screens. But still, we seemed to only tread water.

Just after the 2020 pandemic real estate boom, which I really knew nothing about, my wife and I had been doing a lot of research on money and how to increase our money. She managed to restructure her entire 403b to reduce the amount of fees she paid because of this research. And I saw a for sale sign in the yard of a house. I remember commenting off-handedly to my wife as we drove by, “I bet there’s money in that.” I did not mean rich-person money, but just average money. I couldn’t imagine anything more than average money.

We had about a $1500 credit card investment starting the real estate business with zero intention of quitting my teaching gig at Great Bay. My first year in, I made $17,000 selling three houses. The second year, $38,000. This year, at the end of June, I’ll have profited $40,000, and the year is only half over. I quit teaching May 3, 2024.

We are not at the point yet where we can buy a house in the traditional sense. We did, however, just make an offer on our rental. And we went from Netflix’s one screen service to two screen service.

I’ll play a lot of green light/red light. This a concept from Gary Keller’s book The Millionaire Real Estate Agent. Keller explained in his book that green light/red light is a strategic approach to business decision-making. The idea is to continuously monitor your actions and investments, ensuring those actions and investments produce desired results. Although I use this system to monitor expenses in my real estate business, I also use the green light/red light to monitor my personal finances.

A green light in personal finances indicates that a financial habit or strategy is working well and should be continued or even expanded. When I identify a green light, I not only maintain the effective habit, but I also try to expand that habit, increasing contributions or investments or whatever.

A red light, of course, is the exact opposite, indicating a financial habit or strategy that is not working and needs to be stopped or at least reevaluated. That doesn’t mean you give up everything you enjoy! Remember, we green lit the two-screen Netflix service, when we could have dropped down to the new ad-supported subscription, or (gasp) cancel the service altogether.

Because of the convenience of online banking, I don’t really know anyone who actually balances their checkbook anymore. Most of my “balancing” is checking on my balance to see what I can spend and what I can’t spend. But every quarter, I print out the transaction register, sit down at the kitchen table with one green highlighter, one yellow highlighter, and one red highlighter. Line by line, I decide green light, caution light, red light.

I can tell you my weakness is eating out. I am yellow lighting that all day. Well, Taco Bell is a definite red light these days, and Breakaway Café is pretty much a green light because I couple that with a business meeting and declare as an expense on my taxes.

Buying your first house or your first real estate investment should always be a green light. If our landlord says yes, we’ll make a whole whopping $158 more a month from the rental income next door. By the way, our apartment building is not on the market, and $158 doesn’t sound like much but the amount in mortgage we would pay versus how much we are currently pay in rent would be the same. Stick those 158 buckaroos into a money market paying out at a 5.3% interest rate, in five years you have $11,116. Additionally, we’ll have enough equity built up in our first property to purchase the house we want.