Financial Independence Daily FI discussion thread - February 04, 2020 |
| Daily FI discussion thread - February 04, 2020 Posted: 04 Feb 2020 12:08 AM PST 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]  |
| Annual Post #3 - Middle Class Path to FIRE Posted: 03 Feb 2020 04:22 PM PST Hi all, this is part of our ongoing progress reports from our journey to FI. Here are the links to my posts for 2017 and 2018 (note new username, was looking for a change from my Chinese themed one). We're a 28/27 y/o couple with masters degrees in social service fields living in the midwest on middle class incomes of about 50k each. Before getting into it, I want to acknowledge how wide and varied the middle class is and how lucky we are to now be crossing the 100k income mark. Our hope is to show that FI can be achieved without high incomes often seen on this thread. 2019 Personal Goals:
2019 Business Goals:
INCOME/EMPLOYMENT SUMMARY ME (28y/o) - SOCIAL SERVICE PROGRAM MANAGER - $51,452 +7.5% match ---My company has been moving paybumps back to align with calendar year. So this increase actually represents two paybumps, a 2.5%, followed by a 3.5%. I'm becoming less content with my employment. I love my company and company culture, but am beginning to see the cracks. I'm also starting to have personality issues with my supervisor that is making me look for other opportunities. I was approached by a recruiter last week that has an interesting opportunity with a 40% pay increase. The job is in an area that is about 40% more expensive, but it might be worth it just to get out of the midwest. The position would be a big jump financially and professionally, so I guess we'll see what happens. SPOUSE (27y/o) - TEACHER - $50,549 ---This represents the boost from my wife's master's degree. She is planning on getting enough credits to push her over the salary schedule and bring her to about $53,000 at the start of the new school year. She will continue getting yearly 2k increases as long as she continues earning 8 credit hours/year. 3k if the school does CoL increases like they have yearly since we've been here. Spouse still loves her job and colleagues. BUSINESS SUMMARY Property #1 - 20% down on $60,000 SFR,$800 base rent with $40, and later $60 in pet rent. Rental income went without any major issues and performed similar to what was expected. Net cashflow to date is $1480, bringing us to a 12.34% cumulative return on our down payment. This includes a month of 2018 in which we did some minor renovations to the property to get it rent ready as well as 1.5 months of vacancy. We lucked out and got A- tenants in a C+ neighborhood, though I don't think this can be expected going forward. The family is moving out at end of lease, which we expected. However, our city's market appreciated significantly and our realtor thinks $1500 in renovations could result in a $75,000 sale price. Given this and how we want a lower maintenance house/neighborhood for when we transition abroad again, we've decided to try to sell. The house taught us a lot and was meant to be educational at relatively low financial risk. Selling will likely eliminate a lot of our gains, but it was meant to be a first foray into REI and has made us comfortable doing real estate more generally, which leads me to property #2... Property #2 - 10% down on $270,000, Duplex Househack, \$2500 rent*, estimated $2800 rent potential* We just closed on this property a few days ago and are living in the freshly renovated side. We aimed for a househack because it allowed us more flexibility to move abroad when the opportunity comes. This is an A- property in an A+ neighborhood. Our side could probably go for $1400, but we will be paying ourselves "rent" at *$1300* until my spouse's salary is made whole again (see family summary). The other unit has been rented out by the same family for four years at $1200 and they've expressed a desire to stay until their kids are out of high school (6 years).They've already agreed to a $25 increase after we install a fence (already doing it for our dogs), $50 for new carpets, and $50 for new laminate floors. Their unit hasn't seen renovations at all since they moved in so there's plenty of room for rent increase.We also have a great proof of concept from our side and plan on making the sides look the same, bringing total rent potential to $2800. Cool thing about how we got funding for this property. Back in the Spring our backyard flooded due to a month of heavy rains and made me pissed off at homeownership. In hindsight, the whole city experienced issues with drainage and we weren't in an expecially bad position. However, Zillow advertised their "Make Me Move" service to me, which is basically you putting up a price and say you're willing to move for that offer. No formal listing, no agent, FSBO. So pissed off PackDaddyFI put up a price 30k higher than what we purchased for and quickly forgot about it after the rains stopped. Fast forward to November, a family contacted us and we had a signed offer within 5 days. Zillow discontinued the service in early December. Talk about luck! We were between investing the cash in indexes and buying a rental, then this duplex came up. We went with duplex for diversification/other benefits. FAMILY SUMMARY We lost our DINKY status this year and gained a beautiful baby boy in December. We are incredibly fortunate that we are both on parental leave. I have 12 weeks 100% paid leave, while my spouse has 8 weeks unpaid that is being prorated out over the rest of her school year. Having a kid at about the same time that we all but eliminated our mortgage payment via househacking has really motivated us to continue pursuing REI. While we'd like to purchase another this year, SO's reduced paychecks for another 6 months may make that impossible. THE NUMBERS Index Investments (403b/457b/Roth) ---$56,641.54 ---SO Pension $7084.47 (unhealthy pension, but guaranteed 4% returns withdrawable at separation) ---Real Estate Investments Equity/mortgage #1 - $12,691.16/$47,308.85 #2 - $27,000/$243,000 ---Cash $11,817.26 No debts beyond mortgage and monthly cc paid in full Total Networth=$115,234.43 Similar to last year, our cash holdings should be much higher. Especially given our real estate. While we do want a more substantial EF, we have several stopgaps that make us more comfortable not having significant cash on hand. Home warranties, umbrella insurance, $0 deductible health insurance, short/long term disability, life, ability to live off single income, willingness to move abroad should things get tough (or just because we love it so much), 40k in lines of credit at 7% interst. And now we are househacking, theoretically reducing our monthly expenses. That being said, I imagine the EF will see a substantial increase this year now that we have eliminated the majority of our mortgage and we have a kid. Other than that, I'd say we're doing pretty well. We spend where we find value, more than we should but not so much that we don't make progress. [link] [comments]  |
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