Pre-FIRE Prep / Check-In

[refi]

I've posted probably annually on this forum to get feedback. It's been helpful/cathartic to get some insights and next steps, so been super appreciative. This was my post last year and was hoping to get some more insights.

Every year, I talk about pulling the plug, but never do, so yet here I am again. Anyone on this One More Year syndrome? Anyway, I'm targeting anywhere between now and March 2024, my next bonus payout. Just trying to solicit anything I'm missing.

STATS
43/M/Single/VHCOL
Salary = $550k
Note: With new vest will be $615k next year

NW = $5.4m
Cash = $500k
Stocks = $1.2m
401k/IRA/HSA = $900k
Real Estate = 2.8m
Notes: Net worth hasn't moved much in the past 15 months as my equities have been hammered by pullbacks, tech. Offset by salary and real estate gains.

Spend: $2800/mo for food/utilities/travel/hobbies + $2,300/mo for mortgage/tax/HOA (2.5% on 15 year, 11 years left). In retirement I could probably bump up spend to $4-5k/mo, but I’m generally not super spendy.
Notes: Uptick in spending given inflation last year.

PROPERTIES
Prop 1 (Primary) - val - $575k (owe $180k)
Prop 2 - val - $600k, paid off, rent: $5400, net cash flow = $3,500/mo
Prop 3 - val - $750k (owe $300k), rent: $2575, HOA: $500; net cash flow = $150/mo
Prop 4 - val - $400k (owe $175k) rent: $3800, net cash flow = $1,400/mo
Prop 5 - val - $760k (owe $350k) rent: $6500, net cash flow = $2,500/mo
Prop 6 - val - $650k (owe $260k) rent: $7000 net cash flow = $3,500/mo
Prop 7 - val - $1.1m (owe $680k) rent: $10250 net cash flow = $3,000/mo

Notes: 1031'ed my underperforming property for Prop #2, was able to build 200k+ equity w/ value add renos. I was expecting 11,250/mo cash flow last year, but didn't happen. My repairs took way longer than expected and finally looking at stabilization in April of this year. With that said, $12k/mo seems super reasonable and conservative, but you never know with housing and vacancies.

REALIZATIONS
- I hate Corporate work life. I'm stressed out and I, honestly, don't think i'm too good at it. The job is not that hard, but I'm fed up with the grind and my Imposter Syndrome.

- Everyday, I'm getting older. I know many have read "Die With Zero", but it resonates more than ever given my mid-life/existential crisis. I can work and keep on making money but why? Maybe prestige? Padding this NW?

- I can't worry about if i'm going to marry or have a kid or might need to buy that big suburban house. Just let it be, I'll mostly career pivot or do something else, as generally, I'm not a person to sit still. Most likely will be in real estate.

FIRE TO DO LIST/PLAN
I see some checklists posted previously, but these are probably my key items.

- Get any long-term medical items addressed and checked out. Will be complete some dental work this year. Generally, very healthy and fit.

- Move equities into a 3-fund portfolio, this single stock picking has hammered me a big during this tech down turn, will offset the cap gain events w/ losses to limit tax impact. Currently about 60% of my portfolio is in ETFs and low-cost mutual funds. Will give me more peace of mind.

- Stabilize my current rental properties, address any long-term deferred maintenance. Must see three consecutive months with at least 12.5k+/mo cash flow

- Set up LLCs for properties, currently only have Umbrella insurance

- 1031 my property #3 as it's super low performing. It's in a VHCOL area with probably high long term growth, but my return on equity can be used much better elsewhere. Thinking more turnkey for this purchase.

- Set up Health Insurance plans post-FI

- Use HYSA as spend account, will have about 3-5years saved, but main goal is to use my RE income to support and not touch my equities.

- Thinking my target date will be March 2024, but thinking possibly sooner? Bonus will payout will be around $110k + $60k stock in March, so seems worthwhile to stay until then.

- I enjoy real estate, so I won't be liquidating any properties and I like the checks coming in monthly.

- I am very good at entertaining myself in the day. I love working out and have a network of friends to grab lunch with and have a varied hobbies and travels that will keep me busy for years. Had a 5 month sabbatical a few years back, barely scratched the surface of things to do. This is to address the question - what could you possibly do with your free time? A LOT

CLOSING
Anyway, any thoughts? feedback? anything I'm missing? Any holes in my plan? real estate risks? hyperinflation/recession? Call it a day? Keep this salary a bit longer? Thank You!

 

[MarieIG]

You are not overly spendy in light of your assets.

I would take a look at (reducing) real estate risk. Yes, property #3 jumped out at me. Can you do a 1031 for a good rental of the net value - and skip the mortgage?

Why only umbrella insurance? Have you read the policy. If not, please do.

Be prepared to handle market drops and vacancies simultaneously.

 

[COcheesehead]

Your assets are ready, but are they resilient? Only you can decide that. The old proverbial when the dodo hits the fan. I had two bear markets, a pandemic and rocket ship like rising of interest rates in my first three years of retirement. My strategy made my assets resilient. Can you withstand external threats? Just something to consider. You may be fine, but think about what would greatly disable your plan. Lawsuits? Severe real estate downturn?

 

[NgineER]

Nice investment nest egg and rental RE, well done!

Your investments alone support your ER, even at 3% SWR. Add in your rental RE, you are way under spent. Is your net cash flow also inclusive of capital projects on the properties?

You could afford to let up a bit to really take advantage of ER.

Keep posting!

 

[aaronc879]

With that much real estate investment I would say you are just retiring from one of your jobs. You will reduce stress by leaving the corporate world and "just" be a landlord/real estate investor as you job. I wouldn't really call that being retired unless you have property managers do all the work and you just collect the checks. Looks like you are good either way to leave your primary job anytime you wish.

 

[Montecfo]

First congratulations on your success to this point. Well done.

My observation is you really have a lot of real estate exposure. It provides powerful leverage and wealth building. However, as someone who has "won the game" you may want to reduce that sharply. If you had a REIT that held that percentage of your net worth, all would suggest you reduce, for example. or any other single sector for that matter. You may decide you do not need that level of asset concentration, though I fully get that it has served you well to date. And you have a long retirement horizon that will no doubt include some bad real estate markets (but that is certainly not in view right now). I would consider selling some after a great run.

It sounds like you have a pretty good handle on what you will do. That is important since you have a long horizon especially, but many people struggle with this. Having fun hobbies and a friends group becomes a lot more important when out of the workforce.

Well, you have done a fabulous job. Do you think you are ready in terms of mindset? Nice thing is you could take a year off and return to workforce if you wanted, so it seems pretty low risk.

All the best!

 

[OldShooter]

I agree with @Montecfo on the real estate, but for a slightly different reason. RE may be an OK sector for you but I'd guess that all of those properties are in the same area. Some areas, like Chicago, California, Illinois, etc. are in financial and demographic trouble, hence seriously hazardous to your property values. If you are in one of those poisonous areas (There are others.) I'd suggest an exit plan. If not, I'd still suggest a long-term geographic diversification plan, maybe into REITs where your management time goes to zero.

 

[pacergal]

"I hate Corporate work life."
Says it all right there. Based on your financial points, you look ready to go.
I, personally, would not want to be that heavy in RE. Could you handle a nose dive in property values such as happened 2008?

If it were me, I would sell #3, use any proceeds to pay off #4. Gives you a bit less in number, but one more paid off.

You have done very well. Why wait one more year? Get working on your To Do list and set your plan in motion.
Good Luck!

 

[38Chevy454]

I think you are good to go. Now, or next spring. Good that you like the real estate and rental work, as that is a job itself. Might be part time, but still effectively a job. Your rental income covers more than your spending. Your regular job income is just extra savings, which you already have plenty. Great job getting to your current savings and real estate portfolio. Get through one more year and then come over to the retirement life!

 

[refi]

Thanks for the feedback, everyone, I'd add a couple notes:

1. Current net cash flow on properties include property management fees. I added 10% gross rents to account for vacancies and repairs, so I may want to up that. With that said, I’m bumping up rents 10% starting April, so was thinking that would account for it, but will be mindful for larger CapEx items.

2. I don't self manage, though still involved, so not a second job, though I honestly would not mind it. I spend maybe 30minutes -1 hour a week now on it, but that’s more of me being a micromanager.

3. My properties are multifamily so there is some mitigation of risk there, I feel I could absorb a decent amount of vacancy; I have a 30 doors total. I have rehabbed 29/30 doors. A number of the properties are on 30 year, 3% mortgages, so the variance of property value downturn wouldn't be that impactful.

4. Properties are concentrated in one area, so I do hope to pickup my next property in another area. The current area has been pretty stable for years and has good population growth. Again, I don’t feel overleveraged, so I’m not too afraid to take on some debt and real estate exposure. My LTV is not that high. Maybe I’m just more bullish (foolish?) on RE? I feel this is more of a hedge against my equities.

5. I'll be probably FI vs. RE. I'll probably take on interesting work things if they do come up. I do have a realtor's license as a fun thing to do on the side or take other fun passion jobs.

6. Yup, probably need to get the plans into motion and enjoy life more. I’m targeting a hard stop at March 2024, unless something catastrophic happens in the economy. At my spend rate, I could really retire w/ my equities/cash position alone.

 

[Terhathum123]

You're in great shape!


Quit the corporate gig.

 

[refi]

Thinking about this more, I realize I need to set a date or I'll be giving my OMY update for the next ten years. FIRE Date: May 2024.

Again, there's a ton of What ifs?

Resiliency of my portfolio?
Leaving too much on the table?
Hyperinflation
Future family and kids
Recession 2024

As of now, given my portfolio and diversity, I should be super safe.

Yes, it's also me late night after a long holiday weekend contemplating life . Hope I stick to this.

 

[sirion]

What about finding a new job that you like better? Why spend even one more year making a salary higher than you need for work you hate?

 

[refi]

What about finding a new job that you like better? Why spend even one more year making a salary higher than you need for work you hate?

Yea, good question, I probably could, but the main reason is just to check off my pre-FIRE to-do list while still having a W-2 income at this pay rate. It's much easier to refinance and get a mortgage with my current role. I guess I weighed the added ROI for the year and it still makes sense to stay. This balance is the tough part. A little more security > short/mid-term pain.

Read your thread a year back, feels like you are/were in a similar situation, but you didn't mind your job, did you end up staying?