Author Topic: I want to be FIRE  (Read 4109 times)

TacklingTriplets

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I want to be FIRE
« on: April 27, 2019, 10:05:17 AM »
Hi all.  Long time FS reader.

A little about myself.  Today is the big 40.  I'm no spring chicken, but I've set my family and I up fairly well for the future.  But, I don't want to stop here, which is why I'm posting.  A quick overview:

- Live in Gilbert, AZ - W-2 income annual about 140k between wife and myself.
- No debt other than mortgages and 1 car
- Primary Residence worth around 450, owe 219
- Primary rental (Cleveland Triplex, fully rented brings in $2100, mortgage/tax/ins 630, water 200, PM 10%)
- Secondary rental (Cleveland Duplex owned by solo 401k) - fully rented brings in 1300, fully owned, water, 100 - needs about 25k in repair work because I bought poorly.

Other than these, I've got about 85k coming into my 401k from a property I invested in, and about 50k in various other retirement accounts.  Also have about 50k coming in from the primary rental refi.

Now the challenge.  As you can probably see from the name, I've got triplets, 4 yrs old.  So this coming June 2019 to June 2020 will cost me $30,000.  That being said, I have all that budgeted for in my normal budget - it is just hampering me from doing any big moves OTHER than what I have listed above.    Of course, once June 2020 hits, I'll have that 30k to put into something else, which I plan to do.

So here's my question - and if you need more info, feel free to ask.   What do I look into next?  I'm slightly hesitant to over commit to REI, even though I believe in it strongly.  I'm putting as much as I can into my wife's 401k (12k a year), which I'm sure I'll max out after 6/2020.  I read about Sam talking about Muni bonds, but I don't know anything about bonds.   I don't want to go full bore back into the markets, as I'm hesitant with all that's going on. 



whitetail

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Re: I want to be FIRE
« Reply #1 on: April 28, 2019, 02:13:03 PM »
What's your time horizon? Income goals? Risk profile?

TacklingTriplets

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Re: I want to be FIRE
« Reply #2 on: April 29, 2019, 07:56:59 AM »
Kids are 4.  Would love to be ready to send them to college and go off traveling with the wife.  So let's call it 15 years to build a buffer.

Income goal needs to be around 10k a month. Normal budget is about $5000 monthly, so I view this as sufficient for what I'd want to do.

Risk tolerance.  I have a decent tolerance.  My two properties I've bought in Cleveland are testament to that. 

AdamJane

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Re: I want to be FIRE
« Reply #3 on: April 29, 2019, 04:15:14 PM »
Hi all.  Long time FS reader.

A little about myself.  Today is the big 40.  I'm no spring chicken, but I've set my family and I up fairly well for the future.  But, I don't want to stop here, which is why I'm posting.  A quick overview:

- Live in Gilbert, AZ - W-2 income annual about 140k between wife and myself.
- No debt other than mortgages and 1 car
- Primary Residence worth around 450, owe 219
- Primary rental (Cleveland Triplex, fully rented brings in $2100, mortgage/tax/ins 630, water 200, PM 10%)
- Secondary rental (Cleveland Duplex owned by solo 401k) - fully rented brings in 1300, fully owned, water, 100 - needs about 25k in repair work because I bought poorly.

Other than these, I've got about 85k coming into my 401k from a property I invested in, and about 50k in various other retirement accounts.  Also have about 50k coming in from the primary rental refi.

Now the challenge.  As you can probably see from the name, I've got triplets, 4 yrs old.  So this coming June 2019 to June 2020 will cost me $30,000.  That being said, I have all that budgeted for in my normal budget - it is just hampering me from doing any big moves OTHER than what I have listed above.    Of course, once June 2020 hits, I'll have that 30k to put into something else, which I plan to do.

So here's my question - and if you need more info, feel free to ask.   What do I look into next?  I'm slightly hesitant to over commit to REI, even though I believe in it strongly.  I'm putting as much as I can into my wife's 401k (12k a year), which I'm sure I'll max out after 6/2020.  I read about Sam talking about Muni bonds, but I don't know anything about bonds.   I don't want to go full bore back into the markets, as I'm hesitant with all that's going on. 




Hi TacklingTriplets,

We have been buying individual muni bonds since 2010. Below is a link to a post where I wrote about my criterias for selecting Muni bonds. At the time of my post (12/31/2018), a 4% bond was around PAR ($100). Now (4/29/2019), a 4% bond is around $105-106 and a lower coupon bond would be less expensive. Just read about it to get your feet wet and if you are interested then buy when the prices drop.

https://www.financialsamurai.com/forums/stocks-and-index-funds/advice-on-which-muni-funds-to-buy/msg1972/#msg1972

Adam

Deanna - Ms. Fiology

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Re: I want to be FIRE
« Reply #4 on: April 29, 2019, 06:03:40 PM »
I don't have advice as I am still a new investor but I wanted to see the replies here.  Additionally, I am a Clevelander but I cannot tell if you actually live in CLE or just invest in rental properties there. I'm curious if you'd buy in CLE if you could do it over?

Sam

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Re: I want to be FIRE
« Reply #5 on: April 30, 2019, 06:28:53 AM »
Triplets! Praised be! Congrats!

Have you considered doing any work from home work? It’s really help that I’m able to work on Financial Samurai from about 5:30 AM until 7:45 AM and then take care of my boy.
Regards,

Sam

whitetail

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Re: I want to be FIRE
« Reply #6 on: April 30, 2019, 08:48:51 AM »
I'm going to make some big rounding assumptions on the numbers, but from reading your post I'm trying to plug in some numbers that make sense.

If you pay off and keep the CLE rentals you move your annual income desired from $120,000 (I'm ignoring taxes but you shouldn't) to about $83,000. To collect $83,000 in passive income you'll need about $2MM. To get to $2MM starting from around $200,000 over 15 years you need to save between $54,000 and $65,000 and net 6-7% returns start to finish.

If you guys can each max out a 401(k) you're already at $38,000 a year. Matching would actually count in this case toward your savings total, but if you want to be conservative it makes sense to ignore those.

There's $11,000 - $16,000 per year left if you deploy that much into equities or more REI in 401(k)s.

Judging from your income level and likely tax burden I don't think at a glance that muni bonds are going to get you into the 6-7% conversation for 15 years. Unless your other investments are taking bigger risks you need to smooth out I think you need to either save more cash than I note above or invest in more aggressive options than muni bonds in the next decade and a half.

There are some exceptions for bonds, but it primarily requires interest rates to go down.

I'm not sure what your IRR is on those CLE properties. The local stuff to me rents for much more, but I'm sure costs more capital. You can get to 7% if you buy well.

I don't know of much with a good shot at 7% aside from equities or REI. If you're more comfortable with REI I think that makes sense. I think your success is more likely with something you feel better about.

Another issue with the plan above and your age with FIRE is that in 15 years you'll only be 55 and can't tap 401(k) funds for several more years. That'll require some planning and maybe less lifestyle out of the gate.

There is one high risk, high input option that Sam represents: you could build a business. Especially an online one.

I've got three kids that are a little older and I don't save 65%+ of my income primarily because I wouldn't trade the time camping in the woods, trekking in the mountains, fishing at the lake, or playing in the snow for a few extra years of retirement time.

TacklingTriplets

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Re: I want to be FIRE
« Reply #7 on: May 01, 2019, 04:13:03 AM »
I don't have advice as I am still a new investor but I wanted to see the replies here.  Additionally, I am a Clevelander but I cannot tell if you actually live in CLE or just invest in rental properties there. I'm curious if you'd buy in CLE if you could do it over?

I live in Phoenix, AZ.  Out here, average cost of housing is probably $250k for a SFH.  I bought a triplex in Cleveland for $73,000.  It's been a headache to some degree, but I think I would.

Triplets! Praised be! Congrats!

Have you considered doing any work from home work? It’s really help that I’m able to work on Financial Samurai from about 5:30 AM until 7:45 AM and then take care of my boy.

I hadn't, honestly.  I do a few things in the morning (it's 4AM), but I should be able to squeeze in an hour or so of work each morning if I had something like that.  Hmm.


I've got three kids that are a little older and I don't save 65%+ of my income primarily because I wouldn't trade the time camping in the woods, trekking in the mountains, fishing at the lake, or playing in the snow for a few extra years of retirement time.

- The duplex is paid off, I just refinanced the triplex (haven't even gotten the check yet). 
- 401k maximizing is planned for after June 2020.  Wife is already mostly there, I haven't started mine (couldn't afford, her's has better options)
- I haven't calculated IRR on the REI, as I've only held them for 1 year.  Additionally, I'm not sure it would tell much as it was an expensive year (put at least 35k into them in CapEx)
- We did start an online blog, but we targeted it too narrowly (tacklingtriplets.com). 

Recovering Engineer

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Re: I want to be FIRE
« Reply #8 on: May 03, 2019, 08:42:52 AM »
Now the challenge.  As you can probably see from the name, I've got triplets, 4 yrs old.  So this coming June 2019 to June 2020 will cost me $30,000.  That being said, I have all that budgeted for in my normal budget - it is just hampering me from doing any big moves OTHER than what I have listed above.    Of course, once June 2020 hits, I'll have that 30k to put into something else, which I plan to do.


Can you clarify what this means?

TacklingTriplets

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Re: I want to be FIRE
« Reply #9 on: May 28, 2019, 01:19:18 AM »
 Pre-K.

$895 for first child a month, 5% discount for other two.  Dependent care maxed at $5k, but the rest.....

TacklingTriplets

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Re: I want to be FIRE
« Reply #10 on: August 28, 2019, 09:04:44 PM »
So, an update.

Took my refinance money and bought an up/down duplex in Cleveland.  Numbers say I should make about $3,000 a year after I raise rents, cash out of pocket $28, mortgage $720 a month.

Also, have convinced my wife to move, and qualified to get a home and keep my existing one.  This would generate between $700-1100 a month in profit.  The trick is finding a house my wife likes and waiting for Phoenix prices to fall some more.

Once this is done, I'll have 8 units under management and potentially some more money to play with on adding more (cashout my current home, reinvest in more rentals).  Once we're here, I'll evaluate and see what makes sense.

Sam

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Re: I want to be FIRE
« Reply #11 on: August 29, 2019, 04:35:13 PM »
So, an update.

Took my refinance money and bought an up/down duplex in Cleveland.  Numbers say I should make about $3,000 a year after I raise rents, cash out of pocket $28, mortgage $720 a month.

Also, have convinced my wife to move, and qualified to get a home and keep my existing one.  This would generate between $700-1100 a month in profit.  The trick is finding a house my wife likes and waiting for Phoenix prices to fall some more.

Once this is done, I'll have 8 units under management and potentially some more money to play with on adding more (cashout my current home, reinvest in more rentals).  Once we're here, I'll evaluate and see what makes sense.

Good luck! And hope the tenants cooperate. My tenants were too rowdy that I decided to sell and redeploy my funds into 100% passive investments. I do sometimes wish I had held on, but not when I think about all the stuff I didn't want to do.
Regards,

Sam

TacklingTriplets

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Re: I want to be FIRE
« Reply #12 on: August 30, 2019, 01:39:31 PM »
Thanks, Sam!

Offer submitted today.  As luck would have it, my wife fell in love with a property right after I posted this, so here we go!