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Major life change, seeking financial wisdom
Old 06-06-2019, 06:59 PM   #1
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Major life change, seeking financial wisdom

Good evening FI community! I have been strongly considering uprooting from my home state (California) and moving to another western state and starting my own personal welding/fabrication business. I’m currently making $180-210k annually as a pipe welder in California working far more than 40 hours a week for an employer. My base bills are 48k annually. I have $235k in 401k and $165k in Vanguard. I have around $400k in equity in my house. So with all that on the table, if I were to sell my house and purchase/build a home in another state, would it be a better option for me to keep the equity and invest it and then finance the new property? I like the idea of having an available cushion while I pursue my new endeavor, but also the thought of owning my house and not having a house payment is also appealing. I’m sure there is some financial science behind the right decision and would love to hear many points of views on my scenario and if you’ve consider or made a big change for your own personal happiness and how it payed off.... or didn’t. I’m not
married and have no children and I’m 29 years old. I would like to raise a family, but under the right circumstances and in the right area.
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Old 06-06-2019, 07:02 PM   #2
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Also, the basis of buying the new home outright is also based off of having to provide my own health insurance at an additional $1000 monthly, sending my base bills up to $60k annually.
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Old 06-06-2019, 07:13 PM   #3
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For me, it would depend on what the investment returns would be vs. the mortgage rate. That's much easier to determine when primarily investing for income, such as interest and dividends.
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Old 06-06-2019, 07:14 PM   #4
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Two questions. Are you sure you will stay in the new area? Are you certain your business will work in the new area? If the answer to either is "I am not sure", I would park the house sale money somewhere safe and rent. Once you know if you like the area and that your business will succeed, you can purchase.

At 29, I would be tempted to leverage the equity in the house and take out a mortgage. But, in the short run you may need some of the funds to help establish your business.

Congrats on your progress. You are killing it!
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Old 06-06-2019, 07:22 PM   #5
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Two questions. Are you sure you will stay in the new area? Are you certain your business will work in the new area? If the answer to either is "I am not sure", I would park the house sale money somewhere safe and rent. Once you know if you like the area and that your business will succeed, you can purchase.

At 29, I would be tempted to leverage the equity in the house and take out a mortgage. But, in the short run you may need some of the funds to help establish your business.

Congrats on your progress. You are killing it!
That is an excellent point of view I hadnít even considered. I could simply put the $400k into a high interest savings at 2.25% with no risk and it would at least pay my interest on the loan so I wonít techinally be losing money until I decide if I want to pay it off. And Iím not 100% sure on either of your questions, but it is highly likely that could provide a decent income for myself and would enjoy the area. Iím looking into Missoula, MT. One of the reasons being their decent sized economy to support my skill set.
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Old 06-06-2019, 07:23 PM   #6
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For me, it would depend on what the investment returns would be vs. the mortgage rate. That's much easier to determine when primarily investing for income, such as interest and dividends.
Great assessment. I have an 800 credit score so Iíd be planning on a 5% loan? Or possibly 8% investment return?
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Old 06-06-2019, 07:31 PM   #7
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Iím looking into Missoula, MT. One of the reasons being their decent sized economy to support my skill set.
Cool town. I was out there last summer trout fishing. Good luck.
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Old 06-06-2019, 07:32 PM   #8
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Originally Posted by flintnational View Post
Two questions. Are you sure you will stay in the new area? Are you certain your business will work in the new area? If the answer to either is "I am not sure", I would park the house sale money somewhere safe and rent. Once you know if you like the area and that your business will succeed, you can purchase.

At 29, I would be tempted to leverage the equity in the house and take out a mortgage. But, in the short run you may need some of the funds to help establish your business.

Congrats on your progress. You are killing it!
I think those are great points. You may also need to dip into some of those funds in a downturn. You may think it'd be nice not to have a mortgage to make in that case, but you'd have the mortgage money and a whole lot more set aside to get you through a bad year or two. I'd like having the leverage at your age.
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Old 06-06-2019, 07:35 PM   #9
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Cool town. I was out there last summer trout fishing. Good luck.
Thatís great to hear! Iím an avid outdoorsman and they have an excellent fish and game department with lots of public land!
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Old 06-06-2019, 07:38 PM   #10
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I think those are great points. You may also need to dip into some of those funds in a downturn. You may think it'd be nice not to have a mortgage to make in that case, but you'd have the mortgage money and a whole lot more set aside to get you through a bad year or two. I'd like having the leverage at your age.
I fully agree after having this scenario brought to my attention. Even though I hate paying interest haha.
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Old 06-06-2019, 07:58 PM   #11
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Good luck! You've put yourself in a great position and I bet you'll really enjoy Montana!
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Old 06-06-2019, 08:19 PM   #12
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I'd definitely rent first to learn the nuances of the area. You never really know a place until you spend some time there in my opinion.
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Old 06-06-2019, 08:22 PM   #13
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Originally Posted by flintnational View Post
Two questions. Are you sure you will stay in the new area? Are you certain your business will work in the new area? If the answer to either is "I am not sure", I would park the house sale money somewhere safe and rent. Once you know if you like the area and that your business will succeed, you can purchase.

At 29, I would be tempted to leverage the equity in the house and take out a mortgage. But, in the short run you may need some of the funds to help establish your business.

Congrats on your progress. You are killing it!
+1 Excellent advice.
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Old 06-06-2019, 08:24 PM   #14
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I'd definitely rent first to learn the nuances of the area. You never really know a place until you spend some time there in my opinion.
+1. Also great advice. Sounds like you have your head on straight. Good luck and let us know how it goes!
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Old 06-06-2019, 08:39 PM   #15
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I'd rent and then mortgage. Be modest on housing maybe in both cases until income and location are deemed satisfactory. Interest rates are really good now for borrowing. At 29, I'd recommend investing some more aggressive than MM or go ahead and pay mortgage ahead of schedule but not to extent you'd have liquidity risk.
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Old 06-06-2019, 08:48 PM   #16
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It may take a bit to build up your business. Smallish towns can be sort of cliquish. Hard to break into. The "you ain't from around here are you" comes to mind. All of the people there that need fab have someone already. And probably one behind him.

What kind of fab are you thinking? Trailers? Gates? Custom fire pits? Truck bumpers?

I'd rent both your home & your shop. Just to get the lay of the land

*and i love watching a good fab guy work. Make something out of nothing is awesome
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Old 06-06-2019, 10:56 PM   #17
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Thank you all for your time and replies! I really appreciate the insight and different points of view! My original plan was to stay with my current employer for another 7-8 years and build a much larger portfolio, but Iím always worried about something/someone coming along and handicapping my goals or out look. Like an unintended child with the wrong person, or meeting the right person and having to convince them of such a big change. So Iím considering fast tracking my plan just so I can start my actual life haha. I do love my life and like my job, but having an employer dictate what you do 40-60 hours a week just isnít the freedom Iím seeking, even though Iím very well off financially in my current situation. Never thought Iíd see this day hahaha.
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Old 06-06-2019, 11:40 PM   #18
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Just 2 cents:
You will have multiple employers telling you what to do all day and how. On top of this bureaucracy to manage employees, your business, rules, regulations and authorities.
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Old 06-07-2019, 06:49 AM   #19
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Some comments:

You are doing very well for yourself already and thinking ahead. At the rate youíre going, youíll be FI much earlier than most. Getting out of California is a smart idea, due to high COL. Missoula is a nice choice, and since it is a university town, it will not be as cliquish as a previous poster alluded to, as well as a more active community.

Are your skills in demand in such a community? Be sure you can make a living there before settling down.

Regarding housing-rent a small place for a time, make sure you want to settle in a place before you buy. It takes much longer to buy and sell homes in most communities than you are accustomed to. Get a 15 year mortgage when you buy and make extra principle payments if you can. Your 400K current home equity is better off invested-it will get you farther ahead faster than not having a house payment. If you pay 3.5% interest and have a 7% rate of return on money invested, youíll do better with a mortgage and more money in investments than paying no mortgage in the long run.

I think you overestimated your HI premium costs at $1000/month by a lot. Your premium at age 29 will be about $350/mo without subsidy. Of course if you know you will have high out of pocket expenses thatís different.

Good luck to you!
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Old 06-07-2019, 07:35 AM   #20
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You will really need to do investigation into local industries and their outsourcing of welding in order to figure out specific markets. Many of the western states outside of California don't have the heavy industrial customer base that do so much welding. We have a great demand for welders in the southeast,.however.

My son runs 4 huge laser cutters fabricating all kinds of metal parts for factories. They also have a bunch of.industrial presses. His boss is becoming one of his state's wealthier men.

It might take leaving The West for Texas.or one of The Southeastern states to find a city with big demand for welding shops.
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