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Hi, I am RenoJay
Old 07-10-2016, 10:24 AM   #1
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Hi, I am RenoJay

Hi All,

I've been contributing to the forum for a while, however, I don't believe I ever formally introduced myself, so here goes:

Divorced, living in Nevada.

Age 44

Paying alimony for another 7 years, and child support for another 12.
Total annual expenses for now ~$180k/year. This does NOT include taxes. I do a lot of investing in highly taxable deals that are sporadic, so estimating taxes is very challenging. However, the higher my taxes, the better for my returns and passive income. For planning purposes, my minimum taxes if I stopped the hard money lending would be ~$15k/year, brining my annual spend to ~$195k. Expenses will dip by around $60k/year when alimony expires.

FI since early 30's, but w*rking since I have two young kids in schools, so I can't really pursue my passion of world-travel while maintaining a stable home environment for the kiddos. So I dink around, do road trips, and when I date I treat them to nice meals, weekends away, etc. I am bored a lot and always seeking to quell that feeling.

I still work, although it's very part time. It's 100% commission, and the average pay is ~$200k/year. It's a flexible job that requires just a laptop and cell phone and maybe 1-2 hours/weekday. If it ever becomes a headache I'll quit, but for now it's great income given the low workload and geographic flexibility.

Total passive income, not including w*rk pay, is ~$225k year mostly from dividends, interest and rent.

Portfolio:

Roth IRA: $410k in Vanguard Total Intl.
SEP IRA: $70k in Vanguard Total Intl.
Taxable Accounts:
Vanguard Total Intl: $860k
Vanguard Total Stock Mkt: $2.2 MM
Vanguard Equity Income: $400k
CDs yielding 2-3%: $670k
Cash and Equivalents: $350k
Hard Money Loans: $1.2 MM (These are loan to strangers, backed by first liens on significant real estate equity. Generally the payments are monthly, and yield 8% - 10%. These deals come and go, and I jump on the good ones whenever they cross my desk. In three years, no borrower has ever missed a single payment.)
Primary Home: $650k, paid off
Vacation Home: $400k, paid off
Rental Home: $300k, paid off, rent $1,500/month
Land Investment: ~$300k, highly illiquid, wish I never did this one
Small company investment: $100k, highly illiquid, wish I never did this one

I've read a few of these Hi I Ams, so anticipating some questions:

1. I made the bulk of the money via entrepreneurship. It was not a smooth path. I started 3 businesses in my 20's that did not succeed. I tucked tail, took a j*b, and did it for six months. Then, I got the inspiration for business #4. I quit the j*b, and the new business made a fortune very quickly. Phew. I was near the end of my entrepreneurial rope at that point.

2. The large amount in Roth IRA is due mostly to rollovers and backdoor contributions in the past few years.

I would like to reduce my equity exposure, however, there are large unrealized cap gains in the taxable portfolio so I'm reluctant to realize those. Of course I could sell stocks from the IRAs, however, I don't have a great alternative investment in those vehicles. So I feel a little bit stuck with my AA.

Anyway, great to "formally" meet my forum mates!

Cheers,

RenoJay
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Old 07-10-2016, 12:26 PM   #2
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WOW RenoJay, way to go! I think you may be in a league of your own compared to many of us myself included. Someday I'd like to attempt some sort of entrepreneurial project or company, and I will surely try to reach out to you for advice.

Regarding retirement or investing advice, I would simply say that I wouldn't let taxes get in the way of rebalancing to a safer mix. Just pay the taxes and move on.




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Old 07-10-2016, 12:41 PM   #3
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Welcome. Well, as you probably know, there are many facets to this ER life... overall personal satisfaction, health, relationships , financial etc. And many of us feel that the foundation for all these areas are build on a solid financial footing. From that respect (financial), it seems like you have done exceptionally well. Kudos's. Hopefully, you'll find that this site can offer you some advice in other areas so that you really can have it all!
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Old 07-10-2016, 03:10 PM   #4
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Why are borrowers willing to pay 8-10% on first lien real estate loans?



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Old 07-10-2016, 04:35 PM   #5
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Why are borrowers willing to pay 8-10% on first lien real estate loans?



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Great question. Typically they fall in love with a house, make an offer, and realize at 11th hour they can't qualify for a bank loan. In other cases they have borrowed "hard money" for years and are simply accustomed to rates that most of us in this forum would never consider. But frankly, I wouldn't loan to strangers for less than that, would you?


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Old 07-10-2016, 07:06 PM   #6
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Quote:
Originally Posted by RenoJay View Post
Great question. Typically they fall in love with a house, make an offer, and realize at 11th hour they can't qualify for a bank loan. In other cases they have borrowed "hard money" for years and are simply accustomed to rates that most of us in this forum would never consider. But frankly, I wouldn't loan to strangers for less than that, would you?
No, I would not. (Actually, I probably would not loan money to strangers at all; but that doesn't mean it is a bad idea -- I just personally would not be interested). Of course, if I were able to originate conforming first lien mortgage loans and then sell them to a GSE, I guess maybe I would...

In any event, you seem like an entrepreneurial guy who has had a lot of success. Congratulations!

Regarding the AA question, I have some of the same concerns you do. I would like to dial back my exposure to equities -- I feel like I am taking more risk than I need to -- but I don't want to pay the resulting capital gain tax. For now, I am investing new dollars mostly in fixed income and am dialing back equity exposure in the tax deferred accounts. That won't completely get me to where I would like to be. But it heads in the right (for me) direction.
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Old 07-10-2016, 07:58 PM   #7
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Medved: with the scaling back of equities in your retirement accounts what are you putting it into? I'd hate to have zero yielding cash in retirement accounts and I'm not a fan of bonds at today's yields.


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Hi, I am RenoJay
Old 07-10-2016, 08:45 PM   #8
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Hi, I am RenoJay

Combination of short and intermediate term bond funds and a treasuries ladder.
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Old 07-20-2016, 06:36 AM   #9
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Wow, I wouldn't even know what to advise. You seem like a guy who knows how to make money anyway he wants. You're all set now and after child support and alimony stop you'll be way too wealthy . Maybe take something/somebody new to support later on or send checks to Bill Gates foundation.
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Old 07-20-2016, 10:15 AM   #10
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Welcome and congratulations on your success.

I'm sensing mixed messages... in your OP you say that you want to reduce your equity exposure but in your last post you say you are not a fan of bonds or cash due to their low yields. I agree on both counts.

If you really want to reduce your equity exposure, you could move your tax-deferred accounts to fixed income... that will reduce your equity exposure by about 7%. For cash about the best you can do is 1-1.25% in an online savings account. For fixed income, you may want to look into CDs or bonds... if you stick with 5 year your interest rate risk is manageable and they pay about 2-2.5% for investment grade bonds.
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