Hello from Tampa

[davdmrl]

Hello everyone,

My name is David, I'm a 24 year old recent grad that has just moved to Florida from Maine. I'm a pharmacist at Walgreens, started working in July.

Over the past 6 months, I've been through about 15 books (The Intelligent Investor, Boglehead's Guide to Investing, All About Asset Allocation, The Unofficial Guide to Real Estate Investing, a few Rich Dad books, etc.) a handful of blogs (Mr. Money Mustache, Real Estate in your Twenties, Bogleheads, Bigger Pockets) focused mostly on investing and real estate.

I'd like to think I've always been some what frugal and financially savvy, but once I graduated, I knew I needed to substantially further my knowledge on finance and investing. I've truly enjoyed reading and learning as much as I can, I find the material I've been through thus far practical, applicable and interesting.

Here are some numbers to help you see my financial picture as it stands:

- I have $50k in student loans, serviced by Sallie Mae, at 6.8%. Loans are deferred until January 2014, at which point my payments will be ~$550/mo
- No credit card debt, although I do put maybe $200-300 on my card monthly and pay it off in full to help build credit.
- I own a 2006 Honda Accord free and clear with ~93k miles on it, I plan on driving it into the ground.
- Current Gross income is ~$2200 a week, or $10k/month ($120k/yr)
- Take home has been about ~$2500 per pay period, after taxes and 15% to 401k.
- All told, current Expenses are about $3000/month (includes rent $530, food $400, gas/insurance $250, phone/internet/elec $200, all other line items and what I think is a generous amount of discretionary)
- Currently I'm sitting on about $24k in the bank (14k of which was gifted by my great aunt who I am very close with)
- I just increased my 401k contributions to 90%, which should allow me to come close to maxing by the end of the calendar year. I will then decrease my contribution back down to 15%, which will allow me to max out again in 2014.
- After 1 year with Walgreens I will have 4% matching, dollar for dollar.
- My current 401k AA is 50% S&P500, 25% International, 25% Small Cap, all with ER's around ~0.1%.
- Before April 15th I plan to open and max a Roth IRA with Vanguard, adding a Mid Cap and Emerging Markets fund. At which point I will adjust my overall AA to 30% LC, 15% MC, 15% SC, 15% US Bond, 15% Int'l (Dev.), 10% Int'l (Emerging).
- I think it is an aggressive portfolio, even for my age, and I have not yet experience a bear market with any amount of holdings, but I am going to give it a try (I plan to DCA, re-balance every 6 months, and not let my emotions dictate my holdings, I will not bail in a dip, just buy more).
- Also, within the next few years (I assume), I will most likely be inheriting between $100k-150k from my previously mentioned great aunt. I know it is bad form to count on windfalls, and I'm not (I obviously don't want my aunt to pass), but I am addressing the reality of the situation. She is 93, not getting any younger, and has a sizeable estate, to which I will be receiving 10%.
- All (okay, maybe I'll splurge with 5%) of this inheritance money will be poured into index funds and real estate.


As for outside of retirement accounts, I plan to invest about 25-30k/year in real estate. My current goal is to acquire my first property (~10 units, 200-300k) by this time next year. I will have it professionally managed. From there I hope to 'pyramid up' over the coming decade to subsequently larger properties. All profits derived from each property will go right back into real estate.

My long term goal over the next 10-11 years is to slowly transition from pharmacy to real estate, and then FIRE. I don't hate my job at all, at times I even enjoy it. With that said, it can be stressful, and I know I don't want to be doing it my whole life. I can think of about 20 things I'd rather be doing than working (golf, paintball, bodybuilding, tennis, swimming, reading, traveling, boating, beaching, learning, cooking, drawing/painting, visiting family, philanthropy/volunteering, to name a few).

At 35, I want to be able to live off of the cash flow from my real estate holdings, settle down and have a family (and spend my time involved in the aforementioned activities). I know that real estate will not be totally passive, even as an owner with property management in place, I assume I will still have to devote about 10-20hrs a week to it. I essentially want to do the opposite of many of my peers: work, retire, then start a family.

I apologize for the long-winded intro. As you can imagine, most of my peers are not terribly interested in these plans. It feels great to get a summary down on paper, and share it with like minded individuals.

I have only lurked here for a couple weeks now, but I have already learned a lot. I look forward to a nice long stay on these boards, and of course, FIRE!

P.S. I know I am in a very good situation, and I don't want this post to come off as boastful. I am extremely thankful for my upbringing, education and opportunities.

Sincerely, Dave

 

[omni550]

Welcome aboard, Dave! Sounds like you'll fit right in here.

omni

 

[InTheSticks]

Welcome,

That's quite a plan for a 24 year old.

Is the future Mrs. David on board with this? Or have you met her yet?

As far as real estate goes, I owe apartments. I work and my wife handles the rent. She doesn't spend nearing 10-20 hours per week working with them. They are a good solid investment. They provide us with a stable cash flow.

 

[davdmrl]

Thank you for the welcome,

It is good to hear that your wife doesn't spend that much time with real estate, the more free time the better. I hope to stream line my real estate business into an almost entirely passive source of income, I just like to be conservative with my estimates.

As for Mrs. David, I'm hoping she is out there somewhere

 

[Walt34]

You're way ahead of me when I was 24 and probably most others here too, for even thinking, planning, and most importantly, taking some action toward retirement.

Stay the course and you'll do great.

 

[BigDandLilD]

Wow wish I had a plan like that when I was 24. Congrats!

 

[Rena]

Welcome! You are so far ahead of where I was at 24. Congratulations on great work.

 

[Gatordoc50]

Congratulations on your education and financial preparedness. Maxing out your 401k and Roth IRAs is a great start to ER. Leveraging real estate could lead to an even earlier ER or bankruptcy. Big risk there. I like real estate and own some myself but I'm not leveraged. I am in the process of selling mine because I don't think the total return is sufficient for the risk going forward. Florida is in the midst of a insurance crisis due to wind and flood insurance. If you own the property outright then it's easy to find affordable fire and liability insurance and take the risk of flood/wind. My unsolicited advice would be for your first investment to be in a 3 bed town home in a non flood zone in which you live. And then get a roommate. Good luck!!

 

[davdmrl]

I appreciate the feed back. I do agree that leveraging does add some inherent risk with real estate, with a potential higher upside (like any other investment). However, on my first, I hope to be able to put 25-30% down. I will not settle for a property where the numbers don't work out, I plan on doing intensive analysis/due diligence of any prospective properties, financial and physical. I won't try to get fancy with my first acquisition. I'll be looking for something newer, with minimal repairs needed (mostly cosmetic), that cash flows from day one. I hope to learn a lot from that property, then if I desire, get a little more fancy with the financing, and perhaps a bit more risky with what I'll be looking for out of a second property. It's good to know about the insurance issues, for what it's worth I have been looking mostly inland, where I assume wind/flood insurance premiums will not be as high. Thanks again.

 

[Gatordoc50]

I think you are going to do really well. You may be inspiring this retired guy to buy more real estate! My formula was old single family waterfront homes. With the exception of one property bought at the peak, it's been a great formula. But going forward I need more income than price appreciation. And I need to simplify my asset holdings on case I'm not there to manage them. I loved my job but real estate has been a fun and rewarding hobby.

 

[Meadbh]

I appreciate the feed back. I do agree that leveraging does add some inherent risk with real estate, with a potential higher upside (like any other investment). However, on my first, I hope to be able to put 25-30% down. I will not settle for a property where the numbers don't work out, I plan on doing intensive analysis/due diligence of any prospective properties, financial and physical. I won't try to get fancy with my first acquisition. I'll be looking for something newer, with minimal repairs needed (mostly cosmetic), that cash flows from day one. I hope to learn a lot from that property, then if I desire, get a little more fancy with the financing, and perhaps a bit more risky with what I'll be looking for out of a second property. It's good to know about the insurance issues, for what it's worth I have been looking mostly inland, where I assume wind/flood insurance premiums will not be as high. Thanks again.

David, your approach is totally sound. Leveraging is fine when you use it to buy an asset that generates consistent cash flow that pays the mortgage and other expenses. As mortgages are paid down, the income stream builds, and then you have choices about whether to use it to buy more properties, invest elsewhere, or ER. You are not dependent on capital appreciation. Moderately priced, good quality housing, or commercial real estate, often fits that bill.

I started investing in real estate only 6 years ago with the goal of building an income stream for retirement. I have just paid off my first mortgage. If I had started earlier, I would be richer than I am today. I think you are well informed and will do very well provided you don't take on too much risk.