New to Board- How am I doing

[Trs1984]

HI,

I’ve been reading this blog for a while and wanted to post as the discussion of a potential second career/less stressful work situation keeps coming up and something I’m striving for. I’ve recently married and we are planning on starting a family over the next year or so. One of the key points I want in life is the ability to be present with my family so the idea of transitioning into something that although lower in pay provides a work/life balance.
The plan will be to work the next 7 years (33 today) and transition to something more low stress cutting salary to 50-70K annually.

Details below
Age: 33

Salary: $125K base with cash bonus roughly $75K-$125K and another $25-50K private company stock—deferred comp. Wife is looking for a new job which should add $40-60K annually. Bringing cash salary to roughly $300K annually

I’m currently saving my entire cash bonus each year

Stock Investments & Cash: $1.5MM

XOM Stock- $475K (w drip)
Various stocks and index funds taxable and 401k- $575K
Cash- $380K
Private Company Stock- $80K

Real Estate: $500K Net
Currently renting but looking to purchase a home in the $350-400K range in the next 2-4 months. Will put 20% down

5 Rental properties valued at roughly $900K with $400K in debt. Two of the houses are rented out to my wife’s family members at discounted rates. The Goal will be to continue to paydown debt over the next 7 years with rental income.

Raw Land: $3.1MM

Tract of Land- value roughly $600K (200 acre tract) which is my inflation hedge. Iwill 1031 this into a more income producing property in the future but for now it is my portfolio hedge. Currently has a small amount of cattle.

Working Ranch- Land Value at roughly $2.5MM with a working ranch with 100 head of cattle. Produces $50K in revenue but profit covers maintenance, truck, and upkeep. If I focused on directly could likely draw $1500/mth salary.

Expenses are roughly $7K per month which will likely grow to $8K per month fully loaded with kids.

How does my timeline look?

 

[savory]

One thought since I have been having this discussion with DD about your age. They are about to buy a house and will take a 30 year mortgage and given she qualifies for VA, no down payment. They feel that limiting their down payment and investing the cash is a better return. Some of the practical information on-line suggests to eliminate debt ASAP. Here is one article that discusses maximizing your debt to be able to invest more. After fairly long discussions and looking at their math, I am feeling comfortable that their decision makes sense. https://www.dailyworth.com/posts/should-you-invest-money-or-put-it-toward-your-mortgage

 

[DrRoy]

Your situation looks great, especially for your age. I would diversify the XOM, and invest the cash for higher return.

 

[flintnational]

It looks like your assets are $5.1M and your higher expense number is $8K per per month. Many on this forum follow a 4% WR (or less). Meaning a portfolio of stocks and bonds will survive a 4% WR for 30 years about 95% of the historical 30 year periods. So, yes you can reduce your income at a future date and be fine. In fact, you could bail now and be fine. The item I see is the asset values tied up in rentals and land/ranch. It appears these may be illiquid and not produce adequate income compared to more liquid assets like stocks and bonds. Congrats on your wealth accumulation and welcome to the forum!

 

[Golden sunsets]

Impressive net worth. But with $4M of your $5M net worth in RE and a little less than 10% of your net worth invested in company stock I would diversify away from those asset classes in order to reduce risk.


Sent from my iPad using Early Retirement Forum

 

[exnavynuke]

Let's round up your expenses to $120k/year ($10k/month).

According to FIRECalc, "A starting portfolio of $3,578,009 provided a success rate of 100.0% (87 total cycles, of which 0 failed)." using the standard 75/25 asset allocation.

Personally, I'd sell the land and ranch, then rebalance your investments/cash into a basic 3-fund portfolio and then do whatever you want to do, with your family, for the rest of your life. The resulting $4.6M portfolio could support you spending $150k/year if you wanted (with a 100% historic success rate for 60+ years).

With your current assets, you could retire comfortably today. As such, I'd only work a job if it's something you would do for free moving forward (well, after you sell the illiquid assets).

 

[Cassius King]

Congrats, very impressive assets at the age of 33.

 

[Trs1984]

Thanks.

I've thought about trimming two of the rental properties and the plan will be to use the raw land sale to further divessify.

The large ranch is not somthing that can be divested as it is essentially family legacy etc. all. The key to that land will be to optimize profitability of the ranch to where it covers a one of two cars and various other expenses while providing $15-20K a year in revenue.

The goal is to shirnk the real estate portion by roughly ~30% over time, however, as long as career stays firm I should be able to grow the investment side of the equation.

The key note that is my wife is an only child so should accumulate an additional $1MM in liquid assets.

I could see creep to $10K when accounting for health expenses but we generally are fairly conservative with expenses.

 

[ab620]

I wish I was in your shoes. However, with 2.5 mil invested in a cattle ranch making 50k a year that ROI is not great and you could make a lot more in almost any other investment. What is that 2% return? I understand if it has been in the family for a while.

 

[Milton]

5 Rental properties valued at roughly $900K with $400K in debt. Two of the houses are rented out to my wife’s family members at discounted rates. The Goal will be to continue to paydown debt over the next 7 years with rental income.

I would suggest eliminating the debt immediately, by selling the two properties that are currently rated at below-market rates. Subsidizing your brother-in-law or whomever is not really your responsibility, IMO.

Expenses are roughly $7K per month which will likely grow to $8K per month fully loaded with kids.

Are you sure about that? I suspect that adding two or more children to the mix will result in added monthly expenses greater than the $1,000 you predict.

 

[Trs1984]

I agree with the cost and updated to $10k after reviewing.

The ranch is just going to have to be a drag on overall returns. I think we could get the monthly salary to $3K max if we operate smoothly (some years better than others due to cattle pricing etc. weather)

I agree with the rentals as optimizing that portion will be a key goal in the near term. The return on these properties are not where they need to be and it is a drag on overall returns.

I would like to always keep roughly $200-$300K in cash and will move to something like Marcus from Goldman to get a 1.5% return. A drag but piece of mind.

My wife will get the second leg of the XOM stock which we will immediatly use to diversify and not part of current asset calculations.

The goal at my FIRE date is as follows:

$2.5MM in stock (diversifed with dividend income)
$300K cash
$750K in rental properties (no debt just cash flow)
$750K in raw land (appreciation over next few years)
$2.5MM in ranch kicking off a salary for wife at $36K per year
Second income of $40-60K per year (homebuilding)

This would cover $120K in annual expenses.