Giskard's Journal - slingin code to reach FI

[giskard]

I just recently stumbled upon the BRRRR method of real estate investing... It seems to be a good way of quickly accumulating rental properties and it would be also inherently meet your higher-end tenant criteria since you are essentially flipping the properties. Have you thought about this, and if so, what are your thoughts?

Last year I went through all the (free) bigger pockets books and podcasts. I did like this method a lot. I actually think that going through the BRRRR method gives you a lot real world skills as well, which to me is quite appealing.

The thing that concerns me a lot right now is this: flippers are everywhere and buying up every cheap property, I think the low-interest rates and TV shows have helped propel this. Recently lots of friends and family have talked to me about flipping and they clearly have no idea what they are talking about when I probed them about numbers and finances, which seems indicative of broader trends and is worrying. I actually don't think I could find a property in bad shape cheap enough to make this work very easily.

I think this year I am going to ease into a small duplex purchase where I can live, or like you did get a SFH and rent out rooms to friends / coworkers. I'm not going to try to do anything other than shoot for at least a 1% of purchase price monthly rent.

I'll continue to save up some cash and then see if increasing interest rates push real estate prices down. Have you had any luck on looking for properties that look like BRRRR candidates?

[jbc]

Yeah, there definitely seems to be a flip fetish going on right now, which certainly doesn't help.

While I haven't specifically been looking at properties with the BRRRR method in mind, I do remember that while looking for a live-in duplex a few months back there were several multifamily properties whose total monthly rent (per the seller) were greater than 1% of of listing price and all were in decent areas. I didn't consider many of them since I wasn't looking to do a flip at the time even though the issues were mostly cosmetic/cheap materials. Now that I think about it, they were probably decent BRRRR candidates... I plan to do some homework over the next few weeks and I'll shoot you a PM if I find anything.

[giskard]

Yeah, there definitely seems to be a flip fetish going on right now, which certainly doesn't help.
...
I plan to do some homework over the next few weeks and I'll shoot you a PM if I find anything.

Awesome, I'm very interested to see what you come up with.

[giskard]

August 5, 2017 Update

So far the new job is going pretty well. I like the work, the company, the team, ect. It is refreshing as hell to be able to walk / bike to work everyday! My finances have changed a lot, however. Some good, some bad. Overall though, I think my quality of life here has risen by 5x or so. This is just such a nice place to live and the job is so much better.

Once again due to soaring stock prices and all of that my net worth has increased. I measure it to be 318k in total now. So on the plus side my new job pays better: 120k a year. On the negative side taxes are more expensive in this state, AND my apartment is quite expensive but I wanted to be safe since I was renting it sight-unseen in a city I don't know. Next year I will be able to find something for half of what I am paying, a bit farther away, in a less-nice neighborhood, but for now I am just going to deal with it.

My monthly expenses and earnings now look something like this:

- Rent: $1300
- Electric: $30
- Internet: $35
- Other utils: $30
- Phone: $25
- Gas: $20
- Food: $250 (ish ?)
- Other misc: $200
- Insurance: $70

Approximate Total Spending Base: $2000 a month.
Approximate Post tax job Income: About $6000 a month.

So my savings rate is something like 60 to 70% now, which is fine for this year. Next year my savings rate will be higher because I think I can find a place to live / find a roommate to end up with a place around $700 or $800 a month. Also, I will probably be making more money if I do well at work and get a raise / the company does well and good bonuses are paid out.

I also feel pretty OK about the increased spending now just because I know this is only temporary. In a couple of years I'll probably end up doing the digital nomad thing, or moving again to another city and another job that will probably pay even more. And really, at this point I feel like I basically have reached my goal for base FI, and the last 180k will come pretty quickly. I would even be fine with a 50% savings rate and then be able to spend a bit more freely on hobbies and social outing type things.

[wolf]

Thank you for sharing your update. Your SR is really great, compared to consumer standards. If you can even increase it in the next few years, it would be perfect for ERE. Your journey looks quite good so far. The last "180k" will come for sure. I like it always to read journals, like yours, with great progress. It makes me confident, that ERE and maybe FIRE is also achievable for me. It is motivating for others, especially for those who have started ERE recently and newcomers. Unluckily not many others from our society find and follow ERE principles. It could be so much better for personal finances, freedom, ecologoy, society, .... Well, I guess, we ERE'es are a special kind of group (sometimes looking weird to others also)

What kind of "hobbies and social outing type things" do you have in mind?

[giskard]

... Well, I guess, we ERE'es are a special kind of group (sometimes looking weird to others also)

What kind of "hobbies and social outing type things" do you have in mind?

Yeah I think we probably often look weird to others!

So I have a couple of hobbies that could easily get more expensive - one is road biking. It is very easy to spend lots of money on nice road biking bikes, gear, upgrades, ect. The speed gets addicting. At least it is probably good in terms of health, and cheaper than sports cars! The other expensive things I have been getting into is FPV quadcopter flying / racing. This is another thing where there are endless upgrades and equipment that can be bought (along with replacements from crashes), and also you get a nice andrenaline rush from it. I'm a software developer and general bad with hardware, but actually I have learned a lot about hardware from this hobby! I am at least getting a bit better a soldering components.

[giskard]

9/4/2017 - Closing out Aug 2017

Well another month, another few steps on the journey. Net worth was 324k, and that big gain is due to a signing bonus being paid out to me by my employer as well as some decent stock market performance. As I have said before - I basically feel content at this point, and as long as I can slowly grow that number I think that is great.

I actually spent a (relatively) lot of money this month thanks to getting new car insurance for the new state I live in, and also, I bought a toy: an FPV racing quadcopter. Which has honestly been one of the best things I have done in the past few years in terms of sheer enjoyment.

Flying FPV is fantastically fun. It is also an expensive hobby. I mean like it can get expensive if you crash a lot and don’t have much luck with the repairs, but once you have most of the stuff it is not terrible. So far I have replaced a lot of parts I broke crashing due to learning how to fly in “acro” mode (this means there is no auto-level software turned on). Overall though, I’m very happy I spent the money to get into this hobby, even if it may not be very ERE compatible.

I’m pretty tempted to take the FAA section 107 test and try to do some commercial drone photography stuff for fun on the side. I have also heard you can do various kinds scans for construction companies and make good money that way too, but a lot of people are doing photography for realtors or inspection work. I think that would at least bring the hobby up to a break even level but actually it would be fun too. I started reading the study guide the FAA published for the exam and there is a lot of stuff in there. It is pretty dense but I’m finding it interesting, I might try to take that test in a month and buy a Phantom.

Anyway I’ll follow up here with how that stuff goes.

[giskard]

10/21/2017 - October 2017

Net worth is now 341k by my count. The majority of it is due to stock market appreciation, and how sustainable can that really be at this point? I know the numbers are essentially theoretical but I could be FI if I had cheaper housing. It makes me feel good and simultaneously stupid for not acting on the opportunity. Those numbers break down like this:

• 164.7k in taxable accounts

• 136.1k in retirement accounts

• 12.5k in crypto currencies

• 27k in cash

• 2k in misc other things like HSA

I'm starting to try to think very seriously what I would like to do in a year or two. I can see myself starting a business of some type I'm not sure If I'm ready yet. I'm good at building software but I don't know to sell, and I know that selling is perhaps the key ingredient from past experience. Simple consulting and freelancing is another possible route to take before doing anything more aggressive than that. My last side project is currently ending in disaster: probably it will get shut down due to a patent issue that I don't want to fight.

The other thing is housing. I can continue to move around a lot from apartment to apartment and state to state, or I could try to build up a home base. I think the issue here is finding a place I could tolerate fulltime that is not incredibly expensive. Either way, this year is going to be over before I know it and I need to figure out what to do. I could stay in Minnesota or I could head to Texas, which is what I have been thinking of doing for a while now.

None of these things are problems, they are all just options. It is great to have many options, but also I feel like I am navigating a hedge maze. I think about the Seneca quote a lot "It is a misfortune to live under constraint, but there is no constraint to live under constraint". Living under constraint is simple (it may not be easy), it gets complicated at the forks.

[giskard]

12/16/2017 - December 2017 update - boring crap first

Net worth accumulation is going frighteningly well. I just tallied my NW and I am at 392k now?? This is mostly due to last month being a 3 paycheck month, and having a little bit of cryptocurrency, which I am now selling off and converting into stock. I still have the bulk of the cryptocurrency but I am waiting until January to sell some of it in order to try to ease the tax burden over 2 year tax years.

I'm tempted now to purchase a cheaper house where I am living now. I moved to this new city about 6 months ago and I am finally starting to build up some groups of friends. I could see myself living here for a while, the city overall is much nicer than where I grew up. Yes taxes are high, and yes it is very cold here in the winter but I can deal with it I suppose.

I figure I am FI at 500k with my lifestyle here, and If I get a house and get a roommate or two, that number will be very comfortable. I could work a couple of more years and finish off that balance, of which I am about 110k shy now.

Hobbies that induce FEAR

I'll be honest - I don't like heights. That is part of why I rock climb, and especially do bouldering. I like bouldering because there is a lot of problem solving that you have to do on some projects. I also like it because it scares me but not excessively. It only scares me a lot on sketchy top-outs. Though here is thing - I think the fear is good. Here is my theory I want to test: the more acute fear you experiences the lower overall anxiety you will have. So I think regularly experiencing being terrified will make you happier overall.

My job is pretty damn boring so I think I need this more. I build trivial software, and people I work with make it out like its hard. It's not, we just make it hard with all the political bullshit, its trivial crap that has been solved thousands of times before. There is little risk to my job with anything I do and I'm not senior enough to make any decisions that carry any risk.

I'm not a thrill seeker. I'm a little bit too sensitive to be a true thrill seeker, but I think I need to inject more extreme fear into my life. Maybe just more extreme situations. I'll probably start to do more top-roping, and I will start to highline when I can get the gear and the balls to do it. I like slack lining because it takes a lot of focus and is almost like forced meditation. But add in highlining and now you have some serious fear.

Socializing in general

I sit behind a desk and write instructions to computers all day. That is what I do. It's fun in a lot of ways in small doses but in others it is alienating. I think being a software engineer diminishes social skills. Which is a major problem if you are going to become FI soon, because WTF are you going to do all day?

I'm 28 now, and everyone on my team at work but me has kids. I fucking hate it I feel like these people are dead to the world. I have never hung out with any of them outside of work because kids. But I never want kids. I never want reproduction to be what my life revolves around. But when that is what the majority is doing and now you have all of the time in the world, what do you do? I think the answer is to find lots of friends and have lots of hobbies to do things with these friends. People seem to have kids to give their lives meaning, which I think is bullshit (maybe that is harsh, but I think meaning should be from some internal mission in life, not biological programming).

So I think a really important part of being FI is develop a lot of very social hobbies that can keep you busy and help you connect with new people. If I don't start doing this now I will just end up going back to work so I'm not bored and isolated all day.

Anyway, this is what I'm thinking and this is what I'm working on. I feel like at any point I could quit now and get a part-time job as a bartender while I work up some software ideas and my life would be infinitely more fun but I'm holding out for that damn FI number.

[sky]

What kind of social hobbies would help reduce lonliness? I am FI but feel somewhat isolated. It may be the winter season. I may get a job just to be part of a team, even though I will probably end up being disappointed.

[giskard]

What kind of social hobbies would help reduce lonliness? I am FI but feel somewhat isolated. It may be the winter season. I may get a job just to be part of a team, even though I will probably end up being disappointed.

@sky I'm looking for more of these myself. Right now bouldering is my favorite one because it is very easy to hang out at the gym and meet people when you are working on a problem. It's a very social activity. I also have heard that volunteering is just about the ultimate hobby for meeting people. I want to get more involved in volunteering work when I am FI because it sounds great - like a job where everyone is working together and actually wants to be there. Anyway hope you find some things to do. Winter is pretty hard for me too sometimes.

[giskard]

Volunteering is a great way to get in some social interaction without having to deal with office politics where nobody wants to be there but keeps showing up for the paycheck. I've really enjoyed reading your journal, Giskard.

Thanks! And yes, I hope to try some volunteering soon!

[giskard]

Update 1/6/2018 - Asset bubbles

My net worth crossed 400k on Thursday, it doesn't feel real. The US stock market is in an incredible rally. Cryptocurrency continues to be bubbly. Housing is getting much more expensive. Bond yields are still low. There is a sub-prime auto loan crisis developing. Student loan debt is at record levels. A massive corporate tax cut will juice corporate earnings over the next several quarters.

Does this all feel unsustainable? It does to me. I figured I would be FI @ 500k, and now that I am 4/5ths there, how much will I have to give back when things go back to normal? What do you do when you feel like everything is upside down? Sell everything?

Conventional wisdom is "don't time the market", but is this a conventional time? Circumstances seem rather exceptional.

What do you think?

[TopHatFox]

I mean, they've probably always felt exceptional to the person at that time. It is an interesting idea - just sell the 400K worth of stuff and then reinvest it when the markets collapse. Of course, you could also be wrong and the market could rally for the next few years. Then, when it does fall, it falls to a number greater than you originally sold at.

Maybe you could consider bumping up the amount in your Savings and Checking accounts? That way you have more reserves when the market tanks, and you can buy lots of assets when they're down too. Good news is, if the capital markets do tank, all are not affected equally. You could always sell some bonds, which tend to do better than equity in recessions, for some cash flow during bear times.

In any case, congratulations on the 400K network and even more importantly, on being able to work a high-powered job for a few years. It ain't easy.

[Lucky C]

Based on the popular CAPE valuation metric, the only other time we have been at this valuation level in the US market was in the late 90's. Early '99 to early '09 (bottom of the Great Recession crash when CAPE returned to "normal" levels) saw a real total return (inflation adjusted price + dividends reinvested) of -5.9% per year over that ten year period (https://www.advisorperspectives.com/dsh ... er-coaster). So you have to realize that those kinds of returns are what you might expect based on a historical sample size of 1. The reality could end up being much better or even worse (after all the '09 minimum was far from all time low valuations).

Some options are:
- Stick to your current allocation knowing that you'll probably have to work longer or work part time after "FI" to be safe
- Adopt a more diversified portfolio with a lower US allocation since international equities are cheaper
- Go even more extreme with no US stocks, US bonds, or European low yield bonds (further reduce risks of low expected return but be less diversified)
- Become a trend-follower to limit drawdown but still be exposed to short term volatility, whipsaws, etc.
- Buy slightly out of the money SPY put options, which are relatively cheap since VIX is at historical lows, but are really only insurance and will most likely end up being worth $0

I am not advising for or against any of these options. These are just a list of the options I have considered over the past year or so as I have been faced with the same risk of hitting a major setback while being so close to FI. I plan on quitting later this year, so of course I don't want to blow it now, but I also have to be invested in something and not just wait for low valuations indefinitely. I believe I have now settled on assets/strategies that I will be comfortable with for the foreseeable future, but it took a lot of research over a long period of time to find what suits me.

If you have your projected net worth and FI date in your spreadsheet / tracking software (if not I recommend adding that), see what would happen under various scenarios: if the stock market drops 50% over the next two years, if you put more money in something conservative, etc. You might find that with a more conservative investment style you can just work an extra month to eliminate the risk of having to work an extra year if the stock market crashes. On the other hand, maybe you're fine with trying to maximize returns for now, and are OK with working for however long you have to work - after all, when you limit your downside risk with a more conservative portfolio, you're limiting your upside as well!

[giskard]

Some options are:
- Stick to your current allocation knowing that you'll probably have to work longer or work part time after "FI" to be safe
- Adopt a more diversified portfolio with a lower US allocation since international equities are cheaper
- Go even more extreme with no US stocks, US bonds, or European low yield bonds (further reduce risks of low expected return but be less diversified)
- Become a trend-follower to limit drawdown but still be exposed to short term volatility, whipsaws, etc.
- Buy slightly out of the money SPY put options, which are relatively cheap since VIX is at historical lows, but are really only insurance and will most likely end up being worth $0

I am not advising for or against any of these options. These are just a list of the options I have considered over the past year or so as I have been faced with the same risk of hitting a major setback while being so close to FI. ....

So what option did you end up doing? I am already pretty internationally diversified. I have large positions in BABA, NVO, and Tencent for example, and I also have large positions in emerging markets and Ex-us ETFs. My largest positions are still in US tech stocks, which worries me, but earnings growth on GOOGL and FB seems insane to not take part in.

[giskard]

Maybe you could consider bumping up the amount in your Savings and Checking accounts?

I have started this actually, but damn it feels like such a waste to have a hunk of money just sitting around in a checking account that doesn't even yield 1% !! Anyway, thanks, yeah the job can be stressful. And I saw you were talking about switching careers in your journal. I think there can be a very big difference between companies in a given industry, at my current job the culture is pretty laid back. It actually feels sustainable, there are tech jobs that are.

[giskard]

Update 4/6/2018 - just a stupid rant about life

Kinda crazy but my net worth is actually lower than it was last update (currently at 390K). The reason of course being the recent stock market volatility due to Trump's tarifs and whatnot. But as we all know this is a long journey and setbacks happen; the future is not certain.

I usually try to keep these positive but I just want to let out some negativity (rant begins here). I hate Minnesota, I fucking hate the cold, and I fucking hate the midwestern passive-aggressive bullshit. I wish I hadn't moved here and taken this stupid job. It's hard to admit but there it is. I have to stay a bit longer too, or I need to pay back my sign-on bonus and it will cause all kinds of stupid tax complications if I have to do that.

I literally started to count down the days to when I can leave. I made a webpage and it ticks down the seconds.

Also I'm in my late twenties now and everything is different. People my age are getting married and having kids. Now dating is weird. I haven't gotten laid in a while because I guess I need to re-learn how to date properly at my age. Everyone is super flakey and ghosts each other all of the time. Was it always like that? Fuck, I don't know. I think I have to learn how to properly meet women now, I can't just go to a house party, get drunk and meet randoms like I used to do.

Ok what are some positives? Well I have been going to the gym religiously and now I don't look twiggy 16 year old anymore. I actually put on some weight and some muscle, that is a new thing for me (still a long a way to go, but I have a start). I used this time in the winter to learn how to do machine learning so potentially my next job could be WAY better. I am so happy I moved away from my home town, it forced me to grow a lot as a human. But I made a mistake in where precisely I moved to.

I guess in general I stopped focusing on getting FI and I started focusing on fixing things in my life directly. I stopped caring about my savings rate as long it is above 50%. I stopped caring about that asshole I went to school with that works at Google now and makes 350k a year. I stopped caring that I am somehow content with being single and get bored of relationships after a month and fuck them up when normal people get married and stay together for years. I stopped caring about that shit. I mean, I am trying to.

/rant

Edit: I was just in a bad mood, it is not that bad. Things are fine. I wrote this in the middle of a blizzard in April when I just wanted to be outside.

[giskard]

5/18/2018 - money updates

Update: 415k networth. Job is going fine (boring-ish). Bought a small condo (goal is to live there a year or two, fix it up, rent it out, move on).

It is summer now and the weather is great. I am very frustrated with the pace things are going at work because I am doing a lot of interesting things but there is no hope of being promoted or given more responsibility. Once I get the condo and expenses settle and build up cash savings again I will consider quitting to consult or freelance full time.

I know, I have been saying that for a while now. But, I will have my expenses very low and basically be living a car-free lifestyle in this neighborhood. I really think I will be in an excellent position to consult full time. Even if I still work for big employers I may double my take-home if I bill by the hour and do short contracts. I keep raising my FI targets but I think with my expenses at about $1500 a month, I will be set soon.

Ideally I would like to be able to spend $2000 a month, which equates to 600k, but I am sure I can make up the remainder adjunct teaching or just doing short consulting gigs. Realistically I will need to add $300 dollars a month at least for health insurance.

Fitness
In other news, I know I posted about this in the health forum, but I have gained about 10 to 15 lbs over the past 6 months or so and built up some strength. I started doing 5x5, and increasing calorie intake. At first I was not eating enough but slowly I have learned you really need to pack on the calories and protein to see results.

I took progress pics and I am honestly disturbed by how thin and weak I looked just a few months ago. Which is crazy because I was still rock climbing very often at decently hard grades, and biking very regularly. Maybe just too much cardio and not enough food? Interestingly I can't climb much harder now. And I wonder what will happen in another 6 months?

[Bro]

What composed the bulk of your diet for your weight gain over the past 6 months? Any lessons learned with regards to food preparation and consumption?

As a single man, I am always looking to glean insights as to how others shop and prepare food. I tend to eat the same things over and over for an extended period of time and then shift to something different for another period.