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Old 07-20-2015, 03:50 PM   #21
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Not sure what kind of feedback you are looking for? Do you fear your total expenses are too high to ER? Do you think you need more assets to ER? Are you concerned about asset allocation? Surely you don't want feedback on where you spend your money? Although you will probably get plenty of that.
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Old 07-20-2015, 04:31 PM   #22
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I had a friend that was immensely successful as the CEO of a medium size corporation. He told me the other day that the common thread between very successful businessmen was that they were all landlords. He said why not let others pay for your assets? But over the years, my friend was unable to keep up his rental houses and he sold them.

I have hard enough time keeping up my house, my daughter's house and our lake house. Owning 22 rental houses is a full time job for a number of people--just in collecting the rents and doing basic maintenance.
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Old 07-20-2015, 04:46 PM   #23
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Critique

Per month:
$300.00 2 cell phones, internet, & tv - You can do better then $300.00 for this.
$100.00 wine - Seems excessive.
$500.00 gas - Wow, for gas in one month?
$300.00 clothing - Cut this to $10 for underwear.
$533.33 pet care - Seriously in one month?
$100.38 2 dog insurance - Maybe consider going pet free.
$500.00 entertainment - No.
$1,000.00 misc. supplies & hobby's - Absurd.

Frugal types will have a field day with your budget.
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Old 07-20-2015, 05:08 PM   #24
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My opinion... You are a long way off. Maybe I missed something.

$9,166.67 $110,000.00 total net cash wanted
Your expenses you say are $110K. If you spend that much when you are working, what will it be like when you stop working? My guess is you spend more, not less. Healthcare will be higher as you get older or if you have a medical issue.

Any college expenses coming due? Weddings? Other kid expenses?

$926.48 $11,117.76 401k loan payment (approx. 38k balance)
You had to take a 401K loan out, that is a large red flag. That is a sacrilegious thing for ER. It shows you cannot live within your means. If you quit, it becomes due and payable. Pay it off now.

$401.52 $4,818.18 my h.s.a. account ($53,000 / 11 years)
$75.76 $909.09 dw's h.s.a. account ($10,000 / 11 years)

How are you going to get that much return in 11 years?? If you plan on contributing to it for the next 10 years, it should be in your spending budget.

$41.67 $500.00 10k @ 5% brokerage account
Are you really getting 5%? That is a hard number to get.

$500.00 $6,000.00 note payment income for 24 months
What happens when this stops?


$163,455.34 gross income (rental income)
I have 24 rentals myself, self managed. I have a 45% expense ratio, which includes 10% for maintenance, 7% for management and 5% for vacancy. Then I pay my mortgages. I think you have far estimated the net income. Do not mistake deferred maintenance for profit. Most RE investors assume 50% for expenses.

This is the best rental time in the past 25+ years. You may be surprised when rents go down, or you get the tenant from hell.

My rental income, before mortgages is $305K gross, $166K net. I manage them myself, and do my own maintenance, so I can actually get slightly better. Mortgages run another $40K. My budget is less than half of yours.

In the end it's your call. To me, it's very risky with a $100K+ expense budget and lots of toys and free time.

Get to the point where you can save 100% of your gross income from your regular job(s). Then you should have it.
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Old 07-20-2015, 07:07 PM   #25
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Quote:
Originally Posted by jim584672 View Post
Critique

Per month:
$300.00 2 cell phones, internet, & tv - You can do better then $300.00 for this.
$100.00 wine - Seems excessive.
$500.00 gas - Wow, for gas in one month?
$300.00 clothing - Cut this to $10 for underwear.
$533.33 pet care - Seriously in one month?
$100.38 2 dog insurance - Maybe consider going pet free.
$500.00 entertainment - No.
$1,000.00 misc. supplies & hobby's - Absurd.

Frugal types will have a field day with your budget.
I wouldn't know how to critique someone's spending, other than that it has to fit his income.

For example, the OP's $100 for wine only buys him 4 or 5 mid-priced bottles a month, if that's what he drinks. I drink inexpensive wine (<$10) so I can drink a lot more bottles than that for less money, but then my palate may be defective. His $500/month for gas may look high, but that's $6K/year and he has an RV and a boat. As a fellow RV'er, I have burned several $K of gas on long cross-country trips, so I know it can be that much although I put it under travel expenses.

I don't have some of his expense categories, but if I post mine here, people will say "ridiculous" when they see what I or my wife spend money on. And yet, I consider myself frugal.
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Old 07-21-2015, 08:40 AM   #26
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Originally Posted by NW-Bound View Post
I wouldn't know how to critique someone's spending, other than that it has to fit his income.

For example, the OP's $100 for wine only buys him 4 or 5 mid-priced bottles a month, if that's what he drinks. I drink inexpensive wine (<$10) so I can drink a lot more bottles than that for less money, but then my palate may be defective. His $500/month for gas may look high, but that's $6K/year and he has an RV and a boat. As a fellow RV'er, I have burned several $K of gas on long cross-country trips, so I know it can be that much although I put it under travel expenses.

I don't have some of his expense categories, but if I post mine here, people will say "ridiculous" when they see what I or my wife spend money on. And yet, I consider myself frugal.
i quit drinking when i was 23. the wine is my wife. i keep trying to get her to buy cheaper brands. looks like i need to step up my efforts.
fuel: when we roll the motorhome it gets 8.5 mpg & we use it a lot. also with the jeeps, trucks, boat, bikes, rzr, & heavy equipment i thought $500 / mo in fuel seemed reasonable. we like to travel around the state quite a bit.
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Old 07-21-2015, 08:51 AM   #27
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Quote:
Originally Posted by Senator View Post
My opinion... You are a long way off. Maybe I missed something.

$9,166.67 $110,000.00 total net cash wanted
Your expenses you say are $110K. If you spend that much when you are working, what will it be like when you stop working? My guess is you spend more, not less. Healthcare will be higher as you get older or if you have a medical issue.

Any college expenses coming due? Weddings? Other kid expenses?

$926.48 $11,117.76 401k loan payment (approx. 38k balance)
You had to take a 401K loan out, that is a large red flag. That is a sacrilegious thing for ER. It shows you cannot live within your means. If you quit, it becomes due and payable. Pay it off now.

$401.52 $4,818.18 my h.s.a. account ($53,000 / 11 years)
$75.76 $909.09 dw's h.s.a. account ($10,000 / 11 years)

How are you going to get that much return in 11 years?? If you plan on contributing to it for the next 10 years, it should be in your spending budget.

$41.67 $500.00 10k @ 5% brokerage account
Are you really getting 5%? That is a hard number to get.

$500.00 $6,000.00 note payment income for 24 months
What happens when this stops?


$163,455.34 gross income (rental income)
I have 24 rentals myself, self managed. I have a 45% expense ratio, which includes 10% for maintenance, 7% for management and 5% for vacancy. Then I pay my mortgages. I think you have far estimated the net income. Do not mistake deferred maintenance for profit. Most RE investors assume 50% for expenses.

This is the best rental time in the past 25+ years. You may be surprised when rents go down, or you get the tenant from hell.

My rental income, before mortgages is $305K gross, $166K net. I manage them myself, and do my own maintenance, so I can actually get slightly better. Mortgages run another $40K. My budget is less than half of yours.

In the end it's your call. To me, it's very risky with a $100K+ expense budget and lots of toys and free time.

Get to the point where you can save 100% of your gross income from your regular job(s). Then you should have it.
i spend way less than 110k now as my business pays for all healthcare premiums as well as company trucks for me & dw.
no college expenses, no kids, no weddings.
the 401k loan costs 4% paid to my account. i took the money out last year to buy a house that is getting me about a 12% cash on cash return. (paid cash for the house) so it seemed like a no brainer.
the HSA & brokerage accounts show current balances. i am planning on using them up over the next 11 years to a zero balance.
when $6,000 note payments stop i also get a balloon payment of approx. 39k
that i can invest in a lump sum. perhaps paying off most of one of the small mortgages, which will increase cashflow.
i pay 5% for property management & have been a landlord for 19 years now.
vacancy has averaged about 5%.
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Old 07-21-2015, 01:48 PM   #28
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If it were me I would look at simplifying. Get rid of the job you hate, consider pruning some of the toys and lower expenses to the point you are not just close and scared but have a wide margin of safety and no financial worries whatsoever. Have you had any friends your age pass away yet? We sure have had a number of people pass away before they got to enjoy day one of retirement. Life can be short. Why wait if you have the funds for a nice life now?

Lowering expenses doesn't necessarily mean lowering the quality of your life. Look for expenses where you are being overcharged, things you don't really use or enjoy or can substitute something lower cost and maybe even improve your lifestyle.
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Old 07-21-2015, 07:45 PM   #29
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If it were me I would look at simplifying. Get rid of the job you hate, consider pruning some of the toys and lower expenses to the point you are not just close and scared but have a wide margin of safety and no financial worries whatsoever. Have you had any friends your age pass away yet? We sure have had a number of people pass away before they got to enjoy day one of retirement. Life can be short. Why wait if you have the funds for a nice life now?

Lowering expenses doesn't necessarily mean lowering the quality of your life. Look for expenses where you are being overcharged, things you don't really use or enjoy or can substitute something lower cost and maybe even improve your lifestyle.
i like your thinking!
i feel like i am just wasting time right now at my job, waiting as our assets build. i know there are a lot of extras in my budget. i haven't ridden any of my bikes in about 5 years but would like to in the future. at some point in the future we would like to stop renting out our beach cottage & use it for ourselves which will be fun, but will add expenses & lose a rental income stream. also in the future 3 other properties that i own with 2 partners will sell & i can reinvest the proceeds. (current value of my share is approx. 1m, no mortgages, but no current income from them either).
my wife is older than me by a fair margin & i want to retire young enough so that we can enjoy our time together before she can't get out & hike, bike, kayak, etc.
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Old 07-21-2015, 07:59 PM   #30
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Originally Posted by NanoSour View Post
Hello KH61,

I'd be curious to see a net worth figure given all your rental properties. You certainly have chosen a real estate heavy asset allocation. Some think managing a 3-Fund portfolio is a lot of work, but managing 20+ properties surely looks like too much work to me in addition to the stress of keeping a high occupancy rate and managing maintenance.

You certainly don't live a frugal lifestyle so there appears to be plenty of room to scale back if you needed to. The question is are/will you be able to if needed. People are creatures of habit and you could find yourself in a regrettable situation if you are not able to cut back if/when required. After 2 years of ER with 3 kids still at home, I firmly believe it's all about managing expenses.

Good Luck with your decision.
nw is somewhere around 4.5-4.75m depending on appraisals.
actually, i am really frugal, my workmates tease me cause i get the cheap food at lunch & only drink water, drive a work truck, don't own a nice car, i play softball, but bought used bats, gloves, cleats, & carry bag on craigslist & ebay, although i finally broke down & bought new pants. i spend the vast majority of my $ on buying & fixing up houses & renting them out. i paid cash for 13 of them. all our furniture is antiques. high quality, but low cost.
all my tools are snap on or other name brands. most bought used & i can sell them for what i paid typically & they are a hobby of mine.
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Old 07-21-2015, 09:00 PM   #31
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nw is somewhere around 4.5-4.75m depending on appraisals.
Your real estate investments are probably more lucrative than conservative liquid asset investments like TIPS, annuities or I-bonds, but some food for thought is that $4.5 million, even invested at a zero real return, would provide a 2.5% draw down for 40 years, or $112K per year, plus I assume you would have Social Security benefits for two.
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