Author Topic: How far from FI am I? I can't tell.  (Read 4937 times)

purplish

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How far from FI am I? I can't tell.
« on: December 17, 2014, 09:24:10 PM »
I ran the numbers using the 4% rule but its saying I need a LOT to be FI.  Yet according to my calculations, I only need an extra $300 a month to get there.... bare with me, I'm awful at math!!  So someone who is good at it please let me know.

FYI: "C" means condo.  I am a landlord, as well as work a full time job.  I do NOT actually spend as much as it shows on some of these things, but instead of me trying to do out the math on the reduced numbers, let's just focus on these current, what is the FI date.

Monthly Bills #1
Car Ins:  150
Cat:          20
Gym:        21
Food:      250
Extra:      100
CIns1:      16
CIns2:      78
Total:      635
Work:  2288 
$1653 left   

Monthly Bills #2
Morg1:   1,173
CFee1:      175
CFee2:      546
Morg2:      400
CTax2:      200
Heat:         145
Elect:          88
Total:     2,727
Rent:     3,050
$323 left

I also currently have $150,000 equity in my properties, and I am counting this towards the numbers.  What I'm confused about is do I only count the amount I'm getting in pay/rent, or am I also counting the rent that is going into the mortgage?  I also have $10,000 all together in the bank and in the stock market, abysmal I know.

Also, the odd thing is that I actually already was FI before!  Prior to buying property I had $100,000 that I put into a high interest account (back when those existed), and I was able to live off the interest!  So how  could I be FI then, but now need 10 times that....

Gin1984

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Re: How far from FI am I? I can't tell.
« Reply #1 on: December 17, 2014, 09:29:14 PM »
So you lived on $5000/ year?  Cause 5% of $100,000 is only $5000.
So you have $1900/month over your normal expenses, is that right?  Do you rent out one condo and live in the other?  And it looks like you are missing some bills.

purplish

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Re: How far from FI am I? I can't tell.
« Reply #2 on: December 17, 2014, 09:33:15 PM »
So you lived on $5000/ year?  Cause 5% of $100,000 is only $5000.
So you have $1900/month over your normal expenses, is that right?  Do you rent out one condo and live in the other?  And it looks like you are missing some bills.

No I think I was getting close to $1,000 a month from it!  Super high interest I know.  Those days are long gone.  And no those are basically my only bills.  Some of my spending is lumped in with the "food" and "extra".  I know I didn't break it down a lot but I'm just curious about the length of time right now.

And yes you are correct, I rent out both, while also living in one. 
« Last Edit: December 17, 2014, 09:38:04 PM by purplish »

Dan_at_Home

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Re: How far from FI am I? I can't tell.
« Reply #3 on: December 17, 2014, 09:39:52 PM »
purplish your format in you present the information is confusion, why do you have to separate lists?  Why not just total all income into one category and all expenses into another.

If I reading this right for passive income right now you have is $3,050 (rent) and total expenses of $635 + $2,727 = $3362

Thus, you have to increase your passive income by $312/month.

If you assume the 4% withdraw rate the additional stash money you need is $312 * 12 months / 0.04 = $93,600

Right now by working you are making a surplus of $1653 + $323 = $1976/month.

Thus, if you put all this money towards building the stash it would take $93,600 / $1976 = 47 months or almost 4 years

Instead of waiting 4 years, you could alternatively cut your expenses more, i.e. if you ditch the gym membership and stop driving your car once you are in FI, you could save $170 per month, in this case your stash would only need to be $42,600, and would only take 22 months to reach FI
« Last Edit: December 17, 2014, 09:47:50 PM by Dan_at_Home »

Gin1984

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Re: How far from FI am I? I can't tell.
« Reply #4 on: December 17, 2014, 09:51:47 PM »
So you lived on $5000/ year?  Cause 5% of $100,000 is only $5000.
So you have $1900/month over your normal expenses, is that right?  Do you rent out one condo and live in the other?  And it looks like you are missing some bills.

No I think I was getting close to $1,000 a month from it!  Super high interest I know.  Those days are long gone.  And no those are basically my only bills.  Some of my spending is lumped in with the "food" and "extra".  I know I didn't break it down a lot but I'm just curious about the length of time right now.

And yes you are correct, I rent out both, while also living in one.
Unless you lived outside of US, there is no way you were getting $1000/month off of $100,000.  That would be a twelve percent return.  How do you rent out both and also live in one?  Roommate?

MDM

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Re: How far from FI am I? I can't tell.
« Reply #5 on: December 18, 2014, 12:40:34 AM »
purplish your format in you present the information is confusion, why do you have to separate lists?  Why not just total all income into one category and all expenses into another.
See also this post and this post for ways to format your information. 

The latter post will also link to a rough calculation of your title question.

Mazzinator

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Re: How far from FI am I? I can't tell.
« Reply #6 on: December 18, 2014, 01:33:24 AM »
To bring in ~$3,300 passive income from investments of "stocks and bonds" you'd need a stash of close to $1mil...yet another reason real estate rocks!! Buy another condo and fire away!

purplish

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Re: How far from FI am I? I can't tell.
« Reply #7 on: December 18, 2014, 08:17:02 AM »
Thanks guys!  Again, sorry its not broken down more, and I apologize for the weird format.  I just copy and pasted it from my budget, which is why its like that... I have it separated by bank account (I have several accounts to make the properties easier to keep track of). 

Dan_at_home-  So wow, I only need $93,600 to FI!!  I definitely want to stay with a gym, I'm rehab-ing my shoulder from an injury, but I may change it to the $10 option.  I lowered my heating bill by almost $60 last month, so I'm hoping I can do that each month of the winter.  Unfortunately as of now I cannot reduce my driving/get rid of my car, unlike most mustachians here I actually drive for my job.  However they also pay for all my gas which is good.  But in the future I can begin working for myself and not have to do that anymore (but I would still keep it).  But the food/extra I'm sure is way more then I actually spend, I need to actually start using Mint to keep track of that.  Hopefully that means I'm even closer!

Gin1984- Crap I'm sorry, I wrote the wrong amount- it was $250,000.  Makes much more sense I'm sure!  My living situation is I live with my SO and roommate, both pay me rent.  I then also rent out my other place which is payed in full.

Mazzinator- Wow really?  I actually always kinda wondered if I'm better off being a landlord or just investing the usual way.... didn't realize I would've needed that amount!!  Pretty sweet deal then!

sparky28

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Re: How far from FI am I? I can't tell.
« Reply #8 on: December 18, 2014, 08:29:01 AM »
@Mazzinator - I'm not following, I think you missed a zero. If you were to hypothetically invest in dividend stocks with, say, a 2% annual yield (totally feasible- the s&p itself is at a 1.88% yield currently). 2%/$3,300 = $165,000. Not 1 million.

wtjbatman

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Re: How far from FI am I? I can't tell.
« Reply #9 on: December 18, 2014, 08:56:46 AM »
@Mazzinator - I'm not following, I think you missed a zero. If you were to hypothetically invest in dividend stocks with, say, a 2% annual yield (totally feasible- the s&p itself is at a 1.88% yield currently). 2%/$3,300 = $165,000. Not 1 million.

He obviously meant $3300 a month

sparky28

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Re: How far from FI am I? I can't tell.
« Reply #10 on: December 18, 2014, 09:16:17 AM »
Ah, that'd do it. I was thinking he was talking about trying to fill the 'additional $300/month' gap.

Mazzinator

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Re: How far from FI am I? I can't tell.
« Reply #11 on: December 18, 2014, 10:58:41 AM »
Yes, i meant if the OP was to replace the $3300/month income. OP referenced needing 10 times the amount, which was $100k back then, so yes it's about that to switch out of RE.

Purplish- would you mind sharing your real estate numbers? Like what you bought them for, when, what you owe, break down of who pays what amount, etc...a lot of us are trying to learn about this. And also it could help us see if you could/should buy another condo (because i was half joking) or maybe pay off the mortgage with the $400/month payment??? Or other ideas...

Thanks!!

purplish

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Re: How far from FI am I? I can't tell.
« Reply #12 on: December 18, 2014, 12:38:10 PM »
Yes, i meant if the OP was to replace the $3300/month income. OP referenced needing 10 times the amount, which was $100k back then, so yes it's about that to switch out of RE.

Purplish- would you mind sharing your real estate numbers? Like what you bought them for, when, what you owe, break down of who pays what amount, etc...a lot of us are trying to learn about this. And also it could help us see if you could/should buy another condo (because i was half joking) or maybe pay off the mortgage with the $400/month payment??? Or other ideas...

Thanks!!
Sure no prob :)  Keep in mind that the way I do things is different then people here would suggest.  Also, I live in an area where housing prices/rent are higher, so YMMV.

My sister and I were left a house in a will.  We then sold it for $400k, and each got $250k.  I had mine in a high interest account like I mentioned before, but then bought a 3 bedroom condo with all the money (actually it was less but I also fixed it up), so no mortgage.  I lived there and rented a room, which payed for most of the bills.  Since I had 100% equity in the home, I then decided to buy a 2nd condo, using a Home Equity Line of Credit from my first place, as the downpayment, as well as get a mortgage.  Essentially, I have 2 mortgages on my 2nd place.  The HELOC is only 3.99%, and regular mortgage is 3.14%, so while I've gone back and forth about if I should pay them off more agressively or not, I've decided to just pay the HELOC as I would a mortgage, and then use the extra money to invest (which would make more money than me just paying the HELOC). 

Anyway!  So the new place was $280k, also a 3 bedroom, closer to the city.  My SO and roommate pay a combined $1350, and I rent out my 1st place for $1700.  I personally feel 3 bedrooms are a great way to go, as far as the expense/income ratio goes, as well as you can rent it out to a family which is easier and way less headache than say, renting out a 5 bedroom to 5 different college kids.  Also, part of the reason I go with condos is that I don't have to pay a separate management company to take care of it.  I pay the condo fee, and the 1st places takes care of the entire outside.  I do very little.

My advice: Read up a LOT.  And as much as here people are all about paying off a mortgage, for landlording its actually better not to- the more money you have available and not sunk into a property, the better (because then you can invest for more, or pay for downpayments, etc).  ALWAYS use rental agreement, and for rentals you don't also live at, always use a professional broker to find you tenants, don't attempt this yourself!  I'm fine having friends/whomever live with me, but when you're leaving your property in someone else's hands and you don't know what they'll do- go to a professional. 

Hope this is not too confusing.....
« Last Edit: December 18, 2014, 12:43:32 PM by purplish »

arebelspy

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Re: How far from FI am I? I can't tell.
« Reply #13 on: December 18, 2014, 04:48:12 PM »
My sister and I were left a house in a will.  We then sold it for $400k, and each got $250k.

Neat trick.  Who paid you the extra 100k?

It's all quite confusing, did you look at any of the how to format a case study threads?

Also you may want to post the rental information, to make sure you're accounting for all of those costs properly (deferred maintenance and other hidden costs).

Sounds like you're doing fairly well though?
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purplish

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Re: How far from FI am I? I can't tell.
« Reply #14 on: December 18, 2014, 09:24:20 PM »
My sister and I were left a house in a will.  We then sold it for $400k, and each got $250k.

Neat trick.  Who paid you the extra 100k?

It's all quite confusing, did you look at any of the how to format a case study threads?

Also you may want to post the rental information, to make sure you're accounting for all of those costs properly (deferred maintenance and other hidden costs).

Sounds like you're doing fairly well though?

Sorry again lol, it wasn't exact amounts so it was $400-something, I may have gotten a bit less then that, this was years ago so I apologize for my crappy memory.  Maybe it ended up being $230k each?