neemap journal on the path to FI. Here are my numbers.
Posted: Sun Dec 03, 2017 10:01 pm
Hi guys, I just finished reading Early Retirement Extreme and I also read some of madfientist and I've decided that FI is definitely for me. Little did I know that I kinda was already doing some of it anyway and I've always been a frugal person living well below my means. Hopefully, I'm not overdoing my first post and providing too many numbers to crunch but I wanted to be as complete as possible.
Anyway, here are my numbers and my goals.
Age:35
Annual Salary: 138k/year (Bonus ranges from 0-20% Assume 7.5% on average). No state income tax.
Profession: Software Engineer
401k: $216,360.00 (Employer matches 50% so I contribute the max).
HSA: $5,584 (I contribute the IRS limit per year starting about 2 years ago).
Cash: $4,000 (roughly)
Debt: I owe my dad $25k for property (see below).
Current Expenditures Total: $2,150/month. I doubt I can lower this much further.
Family: Not married, no kids
Home: Renting
Passive Income Stream: See below
Medical: Yes, I have a medical condition, see below.
Goal: Retire at 45 at the latest. 42 would be ideal.
Property #1 (Commercial):
Loan Remaining: $586,286
Loan type: 10/yr @ 4.91% amortized over 20 years. $4,153.75 per payment (P = $1,743.87, I = $2,409.63 currently)
Cash Flow: $1,468 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 75%
Property #2 (Commercial):
Loan Remaining: $603,314
Loan type: 10/yr @ 4.65% amortized over 25 years. $3,622.83 per payment (P = $1,284.57, I = $2,337.28 currently)
Cash Flow: $2,350 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 40%
Property #3 (Commercial):
Loan Remaining: $688,256
Loan type: 7/yr @ 4.8% amortized over 20 years. $4,503.87 per payment (P = $1,743.87, I = $2,760 currently)
Cash Flow: $1,694.30 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 75%
Medical issue: I suffer from chronic pain from spinal issues. I'm still functional but this does limit me physically in some ways (and limits me mentally). My pain also interferes with my work and every aspect of my life. Happiness for me is no longer possible. Nothing further to say here because I don't want to depress myself describing my life. I'm not taking any meds and doctors have not been able to help me so there will be no further medical costs (that I'm aware of). Otherwise, I'm healthy and of a healthy weight (could lose 10 lbs though).
So my ticket to FI is mostly in the property I bought recently. It is hard to give you all the numbers in a post so I shared an excel spreadsheet I made here: https://ombx.io/foQYtqFX (You can download the spreadsheet, bottom right corner).
Essentially, all properties are cash flow positive (after mortgage, tax, condo fee, insurance). If I use 85-90% of the extra cash made and add $750 of my own money per month ($250 for my dad since he is 25% owner), I calculated I can have the entire loan paid off in about 8-10 years for all properties. Note, this implies things go perfectly! No gaps in rent, rent increase of about 2.5% year, condo/property taxes increasing by 2% per year and there is no major repair needed. Obviously, this is probably not going to happen since one of the properties needed $20k for a new ceiling because too much noise was being generated by one of the tenants.
If rent increases as planned, taxes/condo fees increase as planned and the ownership remains the same, I predict my monthly cash flow from the rentals will be $12.5 - 15k once the entire loan is paid off. This is when I plan to retire.
BONUS POINTS: My dad manages all the properties for me! I live on the other side of the country from my properties so essentially it takes no work on my end outside of my money. He is retired and lives near the properties so it is all good. Managing it is pretty easy actually. Our leases are for multiple years and since it is commercial there is no kitchen/sink/shower to fix or garden/garage to worry about.
Things I plan to do:
1.) Continue to work (I may take a year off somewhere) for at least 6 years
2.) Pay down the mortgage on my properties ($750 for the ones I'm 75% owner, $400 for the one I'm 40% owner)
3.) Save my money either for a house OR dump it in an index fund
4.) Pay my dad off (12-18 month time frame here)
5.) I *could* use the money I save up for a house or index fund and increase ownership of the properties. My dad has offered me a chance to buy his part of the ownership of the properties anytime I want. I may do this in liu of step #3.
Question:
1.) Am I missing something? I know 10k+/month seems like a lot according to ERE but I want to have a very comfortable margin of error. I was thinking that I could refinance the loan to some 30 year loan in about 6 years and just retire then even with some mortgage left over.
2.) What other variables am I missing? Wife? Kids? I don't know how to plan for that.
3.) I can't expect my dad to manage this forever. After a few years I'll probably need to start managing it myself.
Anyway, here are my numbers and my goals.
Age:35
Annual Salary: 138k/year (Bonus ranges from 0-20% Assume 7.5% on average). No state income tax.
Profession: Software Engineer
401k: $216,360.00 (Employer matches 50% so I contribute the max).
HSA: $5,584 (I contribute the IRS limit per year starting about 2 years ago).
Cash: $4,000 (roughly)
Debt: I owe my dad $25k for property (see below).
Current Expenditures Total: $2,150/month. I doubt I can lower this much further.
Family: Not married, no kids
Home: Renting
Passive Income Stream: See below
Medical: Yes, I have a medical condition, see below.
Goal: Retire at 45 at the latest. 42 would be ideal.
Property #1 (Commercial):
Loan Remaining: $586,286
Loan type: 10/yr @ 4.91% amortized over 20 years. $4,153.75 per payment (P = $1,743.87, I = $2,409.63 currently)
Cash Flow: $1,468 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 75%
Property #2 (Commercial):
Loan Remaining: $603,314
Loan type: 10/yr @ 4.65% amortized over 25 years. $3,622.83 per payment (P = $1,284.57, I = $2,337.28 currently)
Cash Flow: $2,350 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 40%
Property #3 (Commercial):
Loan Remaining: $688,256
Loan type: 7/yr @ 4.8% amortized over 20 years. $4,503.87 per payment (P = $1,743.87, I = $2,760 currently)
Cash Flow: $1,694.30 positive (after mortgage, condo fee, property tax, insurance).
Ownership: 75%
Medical issue: I suffer from chronic pain from spinal issues. I'm still functional but this does limit me physically in some ways (and limits me mentally). My pain also interferes with my work and every aspect of my life. Happiness for me is no longer possible. Nothing further to say here because I don't want to depress myself describing my life. I'm not taking any meds and doctors have not been able to help me so there will be no further medical costs (that I'm aware of). Otherwise, I'm healthy and of a healthy weight (could lose 10 lbs though).
So my ticket to FI is mostly in the property I bought recently. It is hard to give you all the numbers in a post so I shared an excel spreadsheet I made here: https://ombx.io/foQYtqFX (You can download the spreadsheet, bottom right corner).
Essentially, all properties are cash flow positive (after mortgage, tax, condo fee, insurance). If I use 85-90% of the extra cash made and add $750 of my own money per month ($250 for my dad since he is 25% owner), I calculated I can have the entire loan paid off in about 8-10 years for all properties. Note, this implies things go perfectly! No gaps in rent, rent increase of about 2.5% year, condo/property taxes increasing by 2% per year and there is no major repair needed. Obviously, this is probably not going to happen since one of the properties needed $20k for a new ceiling because too much noise was being generated by one of the tenants.
If rent increases as planned, taxes/condo fees increase as planned and the ownership remains the same, I predict my monthly cash flow from the rentals will be $12.5 - 15k once the entire loan is paid off. This is when I plan to retire.
BONUS POINTS: My dad manages all the properties for me! I live on the other side of the country from my properties so essentially it takes no work on my end outside of my money. He is retired and lives near the properties so it is all good. Managing it is pretty easy actually. Our leases are for multiple years and since it is commercial there is no kitchen/sink/shower to fix or garden/garage to worry about.
Things I plan to do:
1.) Continue to work (I may take a year off somewhere) for at least 6 years
2.) Pay down the mortgage on my properties ($750 for the ones I'm 75% owner, $400 for the one I'm 40% owner)
3.) Save my money either for a house OR dump it in an index fund
4.) Pay my dad off (12-18 month time frame here)
5.) I *could* use the money I save up for a house or index fund and increase ownership of the properties. My dad has offered me a chance to buy his part of the ownership of the properties anytime I want. I may do this in liu of step #3.
Question:
1.) Am I missing something? I know 10k+/month seems like a lot according to ERE but I want to have a very comfortable margin of error. I was thinking that I could refinance the loan to some 30 year loan in about 6 years and just retire then even with some mortgage left over.
2.) What other variables am I missing? Wife? Kids? I don't know how to plan for that.
3.) I can't expect my dad to manage this forever. After a few years I'll probably need to start managing it myself.