Financial Independence Daily FI discussion thread - August 08, 2019 |
- Daily FI discussion thread - August 08, 2019
- Will accumulating rental properties still be a sound path to FI/RE long-term? Are private REITs a good alternative/complement?
- Has anyone tried intermittent retirement? Like what if I just want to take off work for 2 months unpaid, not retire just longer breaks than a vacation. I already get 4 weeks vacation.
- Can plumbing lead me in the path that I want? As far as FI
- Update #2: $1.75M Invested, $2.5M Goal | 31M & 31F w/ 1 Child | Liberal Arts Degrees from State Schools, 4 Years to go
- Paying off mortgages before retiring?
- How do I keep things in perspective when pushing for FI? I've become obsessed with saving to an unhealthy level.
- A relevant video that I think a lot of the "FIRE at all cost" people need to watch.
- Running away vs Running Toward
- FI Tools
- Looking for a mentor to meet with in person. (Tampa Fl)
- How Net Is Net Worth?
- Is a master's degree worth it?
- What would you do in my situation?
| Daily FI discussion thread - August 08, 2019 Posted: 08 Aug 2019 01:07 AM PDT Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| Posted: 08 Aug 2019 05:17 AM PDT Good morning, FI. Long-time lurker here. This community caught my eye just as I was entering the real world at 22, and it's been a tremendously positive influence on my financial decision making (thanks!) I'm 25 now, and my effective income is just breaching six-figures between my salary and some freelance work on the side. My COL is quite low as I live in the midwest, so I've managed to accumulate $96k (20% cash, 30% 401k, 50% index funds). I've always wanted to follow my uncle's path to FI. He was the youngest person to retire in my sphere of influence growing up, and my dad always praised him for the path he chose. My uncle started building his rental property portfolio in his early 30's. He retired from his day job at 45. In his early 60's now, his real estate portfolio consists of ~130 units worth $12m to $15m. This community's affection for landlording as a path to FI/RE sort of solidified my plans to pursue that path. Now that I have some money, I've been thinking more seriously about buying a tri-plex or quad-plex on an FHA to kick off my portfolio. My uncle agreed to sit down with me and discuss my plans and share some more details about his journey. He attributes much of his success to dumb-luck in the early days. His salary was incredibly strong in real dollars for the job he was doing (blue collar), the market was great to him for nearly a decade straight after starting, and the lending environment was much more favorable. He pretty much went all-in at the right time and was lucky to reap big rewards for it. He says now that he understands finance and real estate, he can't in good conscience recommend I approach this path in the same fashion. Fair enough. If I put $20k down + fees on a $400k multi-family, I would still have $60k to $70k in liquid assets but ~400% of my NW would be in a single, highly-leveraged asset. What surprised me was his recommendation to look into private REITs as a starter instead. I had no idea what a private REIT was, and searches in this sub turned up almost nothing as I was conducting my research. Basically, these private REITs are structured like the high-yield private equity RE deals only accredited investors like himself could participate in. In 2016, the JOBS Act created several new 'crowdfunding' exemptions that make it legal for non-accredited investors to contribute. Unlike public REITs, they raise capital directly from investors, bearing no broker or exchange fees. Because they are private, they make for a stronger diversification away from the stock market without actually having to do the work. He says he's been slowly liquidating his properties and putting the proceeds in private REITs as a means of de-levering for old age, reducing his workload, and diversifying outside of the midwest. He suggested I pick a fund and 'dig deep' to familiarize myself, then report back on my findings. Fundrise seems to be one of the most popular, but then I came across one called DiversyFund in a comparison article. I chose to look at DF first because their growth REIT's strategy is very similar to my uncle's-- acquire then renovate multi-family properties (value-add). This fund claims 0 'management fees', which is great, but hard to believe. I decided to read the SEC filings to see what other fees are built-in (that's where things got interesting). The filing does list a 2% management fee, but that has been waived. The next fee is a development fee, which is about double the industry average at 6% to 8%. I presume this is because the strategy requires more renovations (value-add). Lastly, the sponsor charges 1% of financing amount for work to acquire that financing, and 1% of purchase price on all property acquisitions. These fees seemed pretty outrageous to me when I first read them for myself. But further research tells me that's just how REITs work (public or not). While the development fee is twice the average due to strategy, the others are average or slightly below average. These fees seem sufficient to cover costs for the sponsor, and aligned with the claims that private REITs are more efficient because they have no broker or exchange fees. But how do these private REIT sponsors actually make money when they don't charge management fees? For one, they may invest alongside the fund. One transaction I reviewed showed this sponsor holding ~30% while the fund held ~70%, but I'm not sure if that's a consistent and/or regular split . Second is something called 'promote interest', or, 'the waterfall'. So if you invest in in a private REIT as a preferred equity shareholder, and you get the first X% per annum free & clear (7% in this case). After the first 7% is a 'catch-up'-- the sponsor gets 35% relative to your 65%. After the catch-up, and until 12% return to preferred equity partners, profits are split 65% for investor to 35% for sponsor. After 12%, profits are split 50/50. The structure of the waterfalls vary across funds. While these splits are significant, it's nice to know that the people managing the fund are motivated to create returns. At this point, I feel I have a good grasp of how these private REITs are structured, and the relative fees involved. I need to research more funds, and look deeper at the individual investments/properties within. Has anyone here looked deeply at these private REITs? Invested in them? If so, how do your private REIT investments suit your path to FI/RE? It seems smarter than buying an individual property now, as I can maintain a relatively balanced total portfolio, have stakes in these smaller, high-yield projects, and avoid actually playing landlord. Plus, I can open a self-directed IRA to keep these private REIT holdings in a tax-advantaged account. Downsides: (1) many of the funds don't let you take money out for several years without penalty, and (2) these crowdfunded real estate funds only became legal for non-accredited investors in 2016, so track records are short or non-existent. [link] [comments]  |
| Posted: 08 Aug 2019 06:42 AM PDT I figure I already save about 50% of my income, and this would make it longer for me to retire all together, but maybe I don't need to retire in my 30s if I can enjoy my 20s a little more I'm fine with pushing it back to late 30s early 40s. Does anyone have experience with this? [link] [comments]  |
| Can plumbing lead me in the path that I want? As far as FI Posted: 08 Aug 2019 08:22 AM PDT Okay, so Im 20 years old and live in South Carolina. Charleston to be exact and I just started my apprenticeship as a new construction plumber a month ago. I'm earning $14 an hour and I was just curious if this is something that could benefit me in the future? Long term goals that I have is to be able to invest in real estate. Have rentals, flip houses, that kind of thing. But I also want to have my own business so being in plumbing helps there. What I'm thinking is finish up as an apprentice which is about 4-5 years, start working as a journeyman making better wages, and whenever I feel ready, go off on my own. I would appreciate any help possible to be honest because sometimes I feel lost about what to do EDIT: I want to be able to invest In rental properties in the hopes that I won't have to physically work once I'm older and not as young. Thanks so much for everyone's input. It really does mean a lot guys [link] [comments]  |
| Posted: 08 Aug 2019 03:37 PM PDT This post is a 1-year update to my first post "$1.5M Invested, $2.5M Goal | 30M & 30F w/ 1 Child | Liberal Arts Degrees from State Schools, 5 Years to go". Read that post for all the personal background, life story, career progression. A few people were asking for an update 1 year later. ( Yes the title is dramatic, we both graduated in the middle of the great recession with damn liberal arts degrees (economics). ) "My plan is to retire by 35. I won't get too preachy and will make sure to share as much detail as I can. I know my favorite posts in the subreddit are the ones that include the raw details." My Favorite Charts (Updated 8/7/19):
FIRE Goal: $2.16M Invested to provide ~$75k Per year (3.5% withdraw rate) +400k Set Aside to Purchase a House. (My original plan was $75k per year with a paid off house. That was easy to think about in Florida, but I am not certain where I will settle just yet. Current expenses when adjusting for non HCOL area have us very comfortable at 75k including housing costs.) 1 Year Progress: Overall Invested Assets increased by $225k YoY. Over the last 12 months I contributed $~230k. Basically if it wasn't for contributions I would be flat YoY. I also saw a 7% increase (+15k) in my base income to $225k. My expenses also increased by more than 15k due to additional housing/childcare costs. I do anticipate a liquidity event this year allowing me to add an additional 75k. Income: My partner and I both work for one of the FAANGs in the Bay Area and had total compensation north of $450k (Salary + Bonus + Equity). I am a "Data Science manager" and my partner is in a non-eng tech role (Silicon Valley jargon). Savings Goals: >$150k per year into 401ks, After Tax 401ks and taxable accounts. I front load most of my employer investments each year (max out contributions in the first 6 months). I did contribute 225k the past 12 months and should be able to match that again. Major Expenses: Usual Bay Area headaches with housing and childcare making up >$100k per year. Luckily my FIRE goal also lines up around when they would be able to public schools for elementary. Allocation: 54/34/12 (Domestic Equities/ International Equities/ Bonds) Remember this doesn't include my emergency fund which mentally I include in my bond allocation but do not include in the above. My goal bond holding are 15% which I have been heavily investing into muni bonds the past year via contributions to get my ratio's closer to my goal. Personal Base Salary History (Later on equity contributes a large portion of my salary but isn't included here)
Again, want more of my life story be sure to read my original post from last year $1.5M Invested, $2.5M Goal | 30M & 30F w/ 1 Child | Liberal Arts Degrees from State Schools, 5 Years to go. [link] [comments]  |
| Paying off mortgages before retiring? Posted: 08 Aug 2019 03:18 PM PDT Quick question I wanted to ask here as I plan on retiring early in the next 3-4 years. We have around 1.8m of mortgage in real estate investments (multi family, and warehouse) currently being serviced without issues and cash-flowing. With the cashflow and index funds +wifes pension, we will be able to retire early with a good income. One thing I'm unsure of is the whether to pay down the mortgages for the real estate investments aggressively before we retire. Would that make sense to do? I know the goal is to be debt free in personal regards but does that apply to business debt as well? [link] [comments]  |
| Posted: 07 Aug 2019 10:54 PM PDT I think about money all day every day. I get on my wife for having Panera delivered when she could have chosen a cheaper option. I sign up for every overtime shift I can get. I'm constantly checking our bank account and credit card transactions/balances. [link] [comments]  |
| A relevant video that I think a lot of the "FIRE at all cost" people need to watch. Posted: 08 Aug 2019 03:04 PM PDT https://www.youtube.com/watch?time_continue=109&v=fssFXlNk6vw FI is powerful tool for gaining freedom and choice. But if you have to sacrifice your friends, physical health, mental health, social life, etc then what is the point ? You don't get a prize for finishing early. There is no point in FIRE if you just end up miserable at the end. Money can buy security,power and influence, but it won't buy you happiness, and it won't buy you more time One of the best counterexamples to this toxic mentality was this classic post: "Build the life you want, then save for it" EDIT: To be clear this is not aimed at the entire subreddit or FIRE people in general. [link] [comments]  |
| Running away vs Running Toward Posted: 07 Aug 2019 05:11 PM PDT They say that FIRE is more fulfilling when you are running towards doing something in retirement rather than running away from something (say work stress) How true is this in your case? For me I really don't have any passions to look forward to in retirement. May be watching videos online, browsing and going to library and reading books, that's all. For me the main driving factor is running away from work life. I just can't do it for long. Each day tires me out further. [link] [comments]  |
| Posted: 07 Aug 2019 10:14 PM PDT Hello there, I'm curious to see what tools are used by the FI Community. I'm currently using a Google Sheet to centralize data from multiple sources and generate graph based on said data. [link] [comments]  |
| Looking for a mentor to meet with in person. (Tampa Fl) Posted: 07 Aug 2019 11:24 PM PDT (21M) I am currently stationed in Tampa, and would like to meet with someone I could learn from. I am more than willing to go through whatever vetting process deemed necessary! Any investment/financial knowledge at my age will be very helpful, as I am looking to get started on my financial independence as young as I can. [link] [comments]  |
| Posted: 07 Aug 2019 07:44 PM PDT Tracking my net worth is a good barometer financial stability/independence. However, not all pieces of a portfolio are created equal. Over time, I have tried to track my "practical" net worth: the value of all of my holdings, not including my principal residence, less any taxes would be due if I liquidated the assets. This accounts for taxes on pre-tax retirement accounts and unrealized capital gains. Is this too conservative? My assumption is that knowing how much cash I could obtain by liquidating everything — except my home — is a better marker than tracking net worth gross of taxes. I am curious to hear how others think about this. Thanks. [link] [comments]  |
| Is a master's degree worth it? Posted: 07 Aug 2019 05:16 PM PDT So I'm about to graduate in 6 months with my BS in Computer Science. I picked the degree because the job prospects were one of the most in demand and highest paying for an undergrad. I don't like it a whole but I'm not terrible at either. Getting a master's wasn't something I wanted to do because of the high cost of tuition but my employer is offering to pay 100% of my grad school tuition with the stipulation that I go right after I graduate. I do not have to get my masters in CS it can be anything and I'm wondering if I should take the offer? I'm wondering if there's a master's degree worth pursuing? (Doesn't have to be CS related) [link] [comments]  |
| What would you do in my situation? Posted: 07 Aug 2019 04:03 PM PDT I (24m) am in an interesting situation, and I'm not fully sure what I should do with the next few years of my career. I'm confident either way I'll likely achieve my goals, but I want to make good long term decisions, not fly by the seat of my pants. I'm currently making a very good amount of money for my age (recently got a raise to a minimum $90k/year including my bonuses which are paid weekly). My biggest concern is the company is not very stable, and has a lot of up and down. It's great while it's up, stressful when it's down. In my career path, I am at a point where a lateral move would mean going down to about $50-60k a year, or basically a 40% pay cut. This would likely give growth opportunity though, with the ability to match my current income within 2-5 years, possibly exceeding it by the 5 year mark. Here's a breakdown of my pro's and con's. Current job pro - immediate income building, easy day to day (easy to do, but lots of stress from things I don't control over time) Cons - long hours (60/week every week), no work life balance, stress about future if the job goes away, boring work, lack of life fulfillment due to not having time to do things for myself New job pro - work life balance, no mandatory OT, long term opportunity, growth availability, more engaging work Con - Immediate 30-40% pay cut Plan a - stick it out as long as I can keep my sanity and the company runs, building the biggest nest egg I can, move on when I have to. (1-2 years) Plan b - finish current commitments (one month), get a new job, work my way up to the same financial position. (2-5 years) I have purchased a lot of things I need (vehicles mostly for commuting), and I'm currently purchasing a home (via mortgage) with the down I saved in the last 6 months. [link] [comments]  |
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