Financial Independence or Bust

[engprodigy]

I've lurked about for some time and I finally decided to register.

I am 28 and have been working and saving for 5 years. I would not consider myself frugal (I don't reuse dryer sheets) but i do live beneath my means. I don't look forward to "retirement" as much as I look forward to being financially able to start my own business, work on projects when I want, or re-invent myself and have a totally new career. My personality wouldn't allow me to be idle for too long a period of time anyway (even my leisurely activities usually involve sweat - sports and outdoor stuff).

I hope by age 40 - 45 to be able to make the decision to stop working for someone else (although my current employer is great) and either start part time consulting or pick a project I'm passionate about and turn it into my own business. Obviously this would require me to have ample assets to invest in a business or to live off of while I don't have regular income.

Anyway, I'd say for my age I am pretty savvy when it comes to investing/saving but second opinions never hurt.

My accomplishments thus far:

Liquid Assets

401k: 80k
Roth: 8k
Mutual Fund Acct: 34k
Bonds: 7k
Money Market: 30k
Checking: 15k

Debt

Mortgage + car = 22% monthly income

I have "alot" in cash (checking + money market) right now because I am saving for down payment for 2nd house as I am considering trying land lording.

I feel I'm off to a good start, but considering I have a lofty goal of being financially independent by 40-45 instead of 55 I have a long (well short and steep) road ahead!

 

[zinger1457]

Sounds like you're heading in the right direction and have thought things out. Just remember though that retiring early doesn't equate to an 'idle' lifestyle, it just allows you to spend more time doing what you want to do.

 

[79protons]

What do you see as the big benefits to landlording vs just buying REITs or some other type of investment? Just curious as I also have a good chunk of taxable money to invest and considered buying houses to rent, but am unsure if the risk/reward for the effort is any better than just buying a moderately high risk real estate investment on the stock market.

 

[engprodigy]

Protons,

Mostly the rental property would give me something to do. While I'm young and energetic I can find out if land lording is something that I like, if not I guess I haven't lost much and at least then I'll know!

--

Zinger,

Yeah, retirement doesn't necessarily mean idle. I'd love to spend time fishing but I doubt I could just fish and not do something constructive along with the fishing. Even when I was in college, between semesters after a few days or week of just "hanging out" I felt like I needed to do something constructive and feel I was accomplishing something... I'm definitely a "type-A" personality hehe



On paper it all seems simple and easy to get from where I am to where I want to be by 40-45, but things change, kids would definitely put a damper on savings. I guess my goal is too build enough as early as possible that the "momentum" will be too great even if I suddenly stop contributing very much due to kids, or whatever.

 

[jayc]

Welcome. With your savings rate, max out the Roth and as much of the 401K that you can. You have time on your side so let some of that money compound for a few decades. Are you happy where you live now? If not use your savings to purchase the next house you want to live in and rent the one you are in now. I did this and always thought of it as my 2nd part-time job.

 

[Nords]

Protons,

Mostly the rental property would give me something to do. While I'm young and energetic I can find out if land lording is something that I like, if not I guess I haven't lost much and at least then I'll know!

--

As much as I'm a fan of experiential learning, you might want to read library copies of:
(1) Investing in Real Estate, 4th edition or later, by Andrew McLean & Gary W. Eldred (who's taken over the new editions) and
(2) Landlording by Leigh Robinson (7th edition or later).

Next, just for fun, watch the movies "Money Pit" and "Pacific Heights". For extra bonus points watch HGTV's "Flip This House" (especially the end where they tell you how much money they made-- or not), "Property Ladder", and "Income Property".

Then you'll know if "landlord" is etched into your DNA...

 

[engprodigy]

Are you happy where you live now? If not use your savings to purchase the next house you want to live in and rent the one you are in now. I did this and always thought of it as my 2nd part-time job.

That is something I've thought about. I like the house I am in but I would like being in a neighborhood with larger yards and thus more separation from neighbors. If I went the route of buying a house for me to live in and renting my current house, it wouldn't require much maintenance so long as I had good renters, which from all the people I've talked too about land lording the key is being selective about your renters and doing thorough credit checks etc.

I also think the rent I would have to charge would be high enough to eliminate some of the problems you would run into as a "slum lord". Anyway, I've tossed the land lording idea around for a few years and need to decide! I like landscaping, and I'm pretty handy so little things wouldn't be a problem.

I've heard some horror stories from co-workers that have rented properties, and I guess either way if I buy a rental or buy myself a new home and rent my current one, I want to at least be renting a place for $1200+ a month...I know that probably hurts the amount of people in that market for the place but I think that would help with some of the issues you could run into with lower end rentals.