Hello from London

[londonbanker]

Hello,

I have been reading this forum's wealth of knowledge for about 6months now, and I thought I'd sign-up and introduce myself.

I am fairly new to the concerpt of LBYM and early retirement. The birth of my first child 2 years ago was an epiphany.I realized that savings & retirement weren't going to take care of themselves.

My partner and I were in our early 30s, we suddenly got shocked that despite having earned high income for years (both work for S&P500 companies), we never really saved up much. Up until 3 years ago, I owned a Porsche, a mahogany speedboat, harley etc... It horrifies me now, thinking about it - but hey, it was part of the process to realize we'd gone too far (mainly me with the toys). When we found out we were pregnant, it was a wake-up call and something clicked in our heads.

I started to do a lot of research and stumbled upon MMM and then this website, which was (still is) a true source of inspiration. I put up the toys for sales, scraped all our meager savings/investment and bought a house in central London (where we both live currently).

We now have a second kid on the way and are determined to FIRE within the next 10years - with a stretch plan for 2022.

Our situation:
I am 35 and DW 33, we have a 2y/o and another one due this august.
We went from a $280k networth early 2012 to $1.8m as of today. This dramatic increase was driven by a combination of significant increase of income, paying down debt, appreciation of our real estate investment and strong appreciation of our employers' stock grants.

NW broken down as follow:
- 70% real estate ($2.5m house - with a $1.3m equity)
- 10% pension account (tax deferred)
- 15% taxable investments
- 5% cash & equivalent

Our goal is to FIRE and move out of London, probably out of the UK altogether by 2025 - when our NW hits $5m or $4m of invested assets (we'd sell our London house and downsize to a max $1m house)

If our networth continues to increase by $300-$350k a year, we should be there by then.
At that stage the kids will be 12 and 10 respectively, and we should be able to live on $90-100k a year.

I realise the ratio of real estate as a % of our NW doesn't feel very prudent, but housing in central london is extravagantly expensive. The cost of owning the house is still much lower than renting, given that we locked in a mortgage rate of 1.8%, and local tax are very cheap. So all in all, I believe we are better off owning. Especially since we're planning to sell the house upon retirement.

[Meadbh]

Welcome to the forum. I presume you are in high priced London, England.

I am wondering how you have a net worth of 1.8 million (pounds?) with 70% of that (1.3 million) in real estate. What about real estate debt?

Or is it

Assets: 1.8 million (including 1.3 million home equity)
Liabilities: 1.2 million (2.5 million home value minus 1.3 million home equity)
Net Worth: 0.6 million (Assets minus Liabilities)

If I am reading this wrongly, I stand corrected.

[londonbanker]

Sorry for being unclear:

NW is USD1.8m - of which $1.3m is tied into my house equity

Assets $3.0m (inc. house of $2.5m)
Liabilities $1.2m (mortgage)

[haha]

Welcome Rico!

What sort of neighborhood and house does USD 2.5mm get you in Central London? Detached? Town home? Size? Commute time to The City?

I thought London was way more expensive housing than the US, but the kind of guy with family of four who would own a Porsche, Harley and mahogany runabout would pay more in much of SF, certain LA neighborhoods, Silicon Valley, Manhattan, maybe some Brooklyn neighborhoods.

Ha

[Meadbh]

Quote:

Originally Posted by londonbanker Sorry for being unclear: NW is USD1.8m - of which $1.3m is tied into my house equity Assets $3.0m (inc. house of $2.5m) Liabilities $1.2m (mortgage)

Thanks for the clarification. London must be an exciting place to live provided that you can afford a decent home. I recently read that it has the highest concentration of billionaires in the world.

[Katiek]

Welcome to the Forum!

[londonbanker]

Quote:

Originally Posted by haha Welcome Rico! What sort of neighborhood and house does USD 2.5mm get you in Central London? Detached? Town home? Size? Commute time to The City? I thought London was way more expensive housing than the US, but the kind of guy with family of four who would own a Porsche, Harley and mahogany runabout would pay more in much of SF, certain LA neighborhoods, Silicon Valley, Manhattan, maybe some Brooklyn neighborhoods. Ha

Terraced house 4 bed 2 baths 1600sqf - so count round $1.6k per sqf. This is in central London (limit between the tube zone 1 and 2). I am about 3 tube stops from Oxford circus.
Dont get me wrong - living around oxford circus would probably more than double that price...
Dont get me wrong London is not cheap, but I wouldn't say it is more expensive than any other major capital (NYC, SF, Oslo, Moscow, Tokyo etc... are pretty similar in terms of COL/Wages)

As per my original post all the toys were sold to buy the house and pay for its complete renovation... I am now left with a 7seater SUV

[haha]

Quote:

Originally Posted by londonbanker Terraced house 4 bed 2 baths 1600sqf - so count round $1.6k per sqf. This is in central London (limit between the tube zone 1 and 2). I am about 3 tube stops from Oxford circus. Dont get me wrong - living around oxford circus would probably more than double that price... Dont get me wrong London is not cheap, but I wouldn't say it is more expensive than any other major capital (NYC, SF, Oslo, Moscow, Tokyo etc... are pretty similar in terms of COL/Wages) As per my original post all the toys were sold to buy the house and pay for its complete renovation... I am now left with a 7seater SUV

Thanks Banker. I did understand that you sold your toys, but still it speaks to taste and expectations. Welcome to family life!

Ha

[Meadbh]

Quote:

Originally Posted by londonbanker Terraced house 4 bed 2 baths 1600sqf - so count round $1.6k per sqf. This is in central London (limit between the tube zone 1 and 2). I am about 3 tube stops from Oxford circus.

That house sounds like a bargain. Location, location, location!

[londonbanker]

Quote:

Originally Posted by Meadbh That house sounds like a bargain. Location, location, location!

Yeah - took us 9months of house hunting and seeing roughly 80-100 houses in the process.
We bled ourselves dry to buy and renovate it, knowing that it would fund a big part of our retirement...

[MRG]

Welcome to the forum londonbanker. Used to spend a lot of time in London. I was always glad Megacorp was picking up the tab. Loved the place including the food.

Of course my first day walking around central London I almost got ran over twice.

I appreciate you using a couple of zeds in your OP.

🐑

[londonbanker]

Quote:

Originally Posted by MRG I appreciate you using a couple of zeds in your OP. 🐑

Ha ha ha... Educated in the US; old habits die hard! Coworkers constantly give crap for those zeees instead of zeds

[Nodak]

Welcome aboard.

[Eileen]

Just curious as to why you wish to move out of London and out of the UK. Is it too expensive there, is that why?
The post title caught my eye b/c I have never traveled much and thought 'I wonder if I'd like to visit London someday as my colleague did recently' .... I am not yet retired so I am not really planning anything quite yet!
Best of luck! Welcome!

[haha]

Quote:

Originally Posted by londonbanker We bled ourselves dry to buy and renovate it, knowing that it would fund a big part of our retirement...

Thinking and hoping that it would fund a big part of your retirement.

Overall, it seems likely that if one wanted to go all-in on his residence, Central London ought to be one of the very top blue chip choices.

Still, not quite a mortal lock.

Ha

[Disappointed]

My British BIL was also in banking in London, he retired about a year and a half ago. I retired at about the same time. He and my sister live in St. John's Wood. My wife and I spent about a month with them last year. We like England and Scotland but prefer the convenience and the weather of California.


Sent from my iPad using Early Retirement Forum
Mp

[petershk]

Welcome aboard!
Something to think about is that if my math is right you have about 500k liquid and 1.3 in home equity and your target date/number assumes a 300k/year growth over a medium period of time.

That's pretty aggressive. If most of that is home value... That target 1m house might not be enough anymore . Unless you get lucky and London continues to get way more pricey while your target location dwindles.

Personally I wouldn't count on more than a 7% real wealth increase per year. Both real estate and market have been on a good run for 3-5 years but we know that can go the other way .

Something you could think about is adjusting your home cost downward now. I'm temporarily in Hong Kong and my family went from almost 3k sqrt house to a 1300 sqrt apartment (the apartment is also almost 50% more in cost ). You can't even imagine what a 3k sqrt house with yard is in Hong Kong... At least USD$20-30k/mo.

But honestly after a year we are adjusted to the space just fine. We're not city people but that's another matter.

Anyway... Just a few thoughts.

Your on a good track for sure!

Sent from my HTC One_M8 using Early Retirement Forum mobile app

[londonbanker]

Quote:

Originally Posted by Eileen Just curious as to why you wish to move out of London and out of the UK. Is it too expensive there, is that why? Best of luck! Welcome!

I just dont like the idea of retiring in a mega city. I need to live on the sea side, where i can go surfing / boating, and be in the greater outdoors than a local london park.
Also neither my wife and i are british citizens, hence no family ties to the UK.
Finally, the cost of real estate makes it unaffordable as a retiree... We poured such a high % of our NW in RE knowing that we would liquidate it the day we decided to retire

[londonbanker]

Petershk, you're correct abt your estimates... $1.3m tied up in RE and 0.5m liquid-ish (some of it is locked till we turn 57).
My RE estimates are assuming that our house only appreciates 2% in nominal terms, which over the next 5-7yrs should be conservative (but given our leverage still returns more than that)
Given that we would retire on the country side (france, spain or italy) our future $1m house should still be worth the same. Country side properties in continental europe have lost between 20-40% over the past 5 years...
We could also decided to rent instead ( nice budget for $1m at 3-4% return)...

I really think that a NW increase of $300k a year is achievable, as our combined annual comps have been oscillating between $500-600k over the past 3/4years, and we are pretty frugal. We manage to save over 50% of our net take home, despite our humongous mortgage... and I am assuming a net investment return of 4% in real terms. So with a bit of luck, promotions and pay increase, we should get there in 5-7 yrs.
At least we'd like to think so!