Author Topic: when will we hit 1 million?  (Read 6884 times)

clarkfan1979

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when will we hit 1 million?
« on: May 19, 2017, 01:45:05 PM »
I got my first job out of grad school in August 2011 at the age of 32. My wife and I moved in together and combined finances in 2011, she was 27. We got married in August 2012. Since 2011, our net worth has increased around 45% annually. I think this is mostly because of two rental properties that have appreciated faster than normal. I don't think we can count on 45% in the future.

When do you think we could expect to hit 1 million?

What is a realistic growth rate for the future based on our current situation?

2011: 50K
2012: 72K
2013: 105K
2014: 152K
2015: 221K
2016: 320K
2017: 465K

Networth

401k: 82K
Pension: 10k
Cash: 30K
Rental House Equity: 376K
Student Loans: 33K (4.75%)


Gross Income is around 100K/year.
Me: 65K (college instructor)
Wife: 13K (substitute teacher)
Rental Income: 22K (after repairs)

We have 8% of our paychecks go into a teacher pension. After that, we try to save all of the rental income and live on our job income. We probably only saved 50% of our rental income last year. However, this next year we should be able to save all of it. We just had a baby (2 weeks ago) and we have flexible schedules. My wife works 2-3 days/week and I work 4 days/week, during an 8 month academic year. We don't plan on paying for daycare until the kid is 3 years old. If we start paying for daycare, my wife will probably have a higher paying job to justify the cost. I have discounted daycare at my college.


Mmm_Donuts

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Re: when will we hit 1 million?
« Reply #1 on: May 21, 2017, 09:15:54 AM »
Have you tried playing around with various online calculators? You would need a compound interest calculator, debt repayment calculator, ammortization calculator. Presumably you can do this in Excel as well.

I usually use 7% annual growth rate in a compound interest calculator for investments. You can plug your mortgage rate and SL rate into the ammortization and debt calculators to figure out your yearly amounts for those.

HawkeyeNFO

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Re: when will we hit 1 million?
« Reply #2 on: May 21, 2017, 09:16:01 AM »
Well, your numbers doubled between 2015 and this year, so you are doing something right.  You would be very lucky to do that again by 2019.  Just keep on saving and keeping track of the numbers.  Don't worry about "when."

clarkfan1979

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Re: when will we hit 1 million?
« Reply #3 on: May 21, 2017, 11:17:41 AM »
Well, your numbers doubled between 2015 and this year, so you are doing something right.  You would be very lucky to do that again by 2019.  Just keep on saving and keeping track of the numbers.  Don't worry about "when."

This is the 3rd time it doubled in 2 years. I don't expect it to double again in 2019, but maybe it will? 


Mgmny

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Re: when will we hit 1 million?
« Reply #4 on: May 23, 2017, 06:57:55 AM »
I'm no expert, but you have a LOT of equity in your rentals. I would try to refinance, or sell them to get the equity out of them. With 400k in rental equity, you could buy another 15 rentals and leverage that money better.

ysette9

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Re: when will we hit 1 million?
« Reply #5 on: May 23, 2017, 08:32:31 AM »
Since so much of your net worth is tied up in the rentals, that is a real wild card. You are basically asking us to predict what real estate appreciation will be in your unknown location. Impossible.

In the first 5+ years of my career and early in our marriage our net worth progression was primarily driven by our savings. At at 50+% savings rate currently this is still an important part, but we have amassed enough that the real growth comes from the stock market performance, which can't be predicted on a fine scale.

If I were in your shoes I would use a simple online compound interest calculator and work out your annual savings and a WAG for an appreciation rate, perhaps 7% if you are primarily in stocks, and see what pops out. Can you look up what the historical real estate appreciation has been in your area over the past 20-30 years? We live in a HCOL coastal area where real estate appreciates much faster than inflation and has done so for the past 50 years. In most of the US though, real estate only appreciates at inflation. I agree with others that all the equity you have tied up there could be put to better work, either in other rentals or more diversified in the stock market.

surfhb

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Re: when will we hit 1 million?
« Reply #6 on: May 23, 2017, 09:00:08 AM »
Keep in mind that the last 6-7 years have been an unprecedented bubble/bust/bubble in real estate.   


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v8rx7guy

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Re: when will we hit 1 million?
« Reply #7 on: May 23, 2017, 09:38:58 AM »
I am going to guess 10 years

KungfuRabbit

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Re: when will we hit 1 million?
« Reply #8 on: May 23, 2017, 09:56:53 AM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Mr. Green

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Re: when will we hit 1 million?
« Reply #9 on: May 23, 2017, 10:12:19 AM »
"Magic 8 Ball, will I be a millionaire tomorrow?"

Outlook doubtful.

"Damn."

:P

chasesfish

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Re: when will we hit 1 million?
« Reply #10 on: May 23, 2017, 10:45:58 AM »
Its tough to tell, it depends on market returns and overall savings rate. 

Here's my real life example:

I tracked my net worth by month and it took 34 months from having a $470k net worth to $1mil.  This included great market years in 2013 and 2014 and a lousy market year in 2015 (it took 12 months to get that last 100k)

clarkfan1979

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Re: when will we hit 1 million?
« Reply #11 on: May 23, 2017, 11:36:38 PM »
Its tough to tell, it depends on market returns and overall savings rate. 

Here's my real life example:

I tracked my net worth by month and it took 34 months from having a $470k net worth to $1mil.  This included great market years in 2013 and 2014 and a lousy market year in 2015 (it took 12 months to get that last 100k)

That is helpful. It seems like 3 years on the low end and 10 years on the high end. I agree that I should use the rental equity to better use. I am trying to find undervalued property. It's been difficult, but I know it's out there. I'm getting closer.

chasesfish

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Re: when will we hit 1 million?
« Reply #12 on: May 24, 2017, 05:53:46 AM »
In thinking back to the dates/times, we saved hard in 2013 and had a jump of almost $250,000 (probably saved $80k and had a 20% year on the S&P 500), but then we struggled in 2014 because we moved twice in that year, lost $20,000 in a house we were renovating, wife stopped working, then moved again for a career opportunity.   

2015 was a good savings year, but June 2015 through January 2016 experienced a 20%+ market decline over 7 months but we still managed to crack $1mil in that time period.   It fully recovered plus some in the following two months.

My guess is you're looking at about 5 years.   

I had two question looking at your numbers:  Is your combined income below the threshold to keep your student loan interest tax deductible?  Do you have access to a 403b as teachers? 

Since you have a 30k cash cushion and rental income coming in, try to manage your taxable income down if you have a 403b you can contribute the maximum to.

makinbutter

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Re: when will we hit 1 million?
« Reply #13 on: May 24, 2017, 05:54:20 PM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Seriously, this is the only post here that makes any sense.  Anyone taking into account your gross growth rate year-on-year and extrapolating that to reaching 1MM simply doesn't understand the maths.  Wow.

From my patented wild-ass-guess calculator, you said you save 8% of your 100k salaries (call it 10k) and bank 22k of your rental income, for a net savings of 32k.  Say your 465k grows by 10% p.a. (which is generous).

2017: 465, gains 46, you add 32, total 543.
2018: 543, gains 54, you add 32, total 630.
2019: 630, gains 63, you add 32, total 725.
2020: 725, gains 72, you add 32, total 829.
2021: 829, gains 83, you add 32, total 944.

Congrats, according to my wild-ass-guess calculator (and generous 10% per year returns on your net worth), you'll cross the 1MM net worth barrier in 2022.

Now, if you want this to be more realistic... change that 10% to something more conservative (say... 5%,  6%?) and run your own numbers.  Without knowing what the future will hold, I'd ball-park you at about 7 years out.

...race ya! :)



BIG EDIT: I neglected to note that the majority of your net worth appears due to increases in RE holdings.  There is almost no chance that your holdings will continue to appreciate at 10% yearly, so please run your calculations with a MUCH smaller appreciation number.  Or run the holdings-outside-of-real-estate at 8% and then the RE equity at 2% or something.

I haven't re-run the calcs with your numbers, but I'd bet dollars to doughnuts you're about 10 years away based on my wild-ass-back-of-envelope-intuition.
« Last Edit: May 24, 2017, 05:57:47 PM by makinbutter »

clarkfan1979

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Re: when will we hit 1 million?
« Reply #14 on: May 25, 2017, 09:59:33 PM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Seriously, this is the only post here that makes any sense.  Anyone taking into account your gross growth rate year-on-year and extrapolating that to reaching 1MM simply doesn't understand the maths.  Wow.

From my patented wild-ass-guess calculator, you said you save 8% of your 100k salaries (call it 10k) and bank 22k of your rental income, for a net savings of 32k.  Say your 465k grows by 10% p.a. (which is generous).

2017: 465, gains 46, you add 32, total 543.
2018: 543, gains 54, you add 32, total 630.
2019: 630, gains 63, you add 32, total 725.
2020: 725, gains 72, you add 32, total 829.
2021: 829, gains 83, you add 32, total 944.

Congrats, according to my wild-ass-guess calculator (and generous 10% per year returns on your net worth), you'll cross the 1MM net worth barrier in 2022.

Now, if you want this to be more realistic... change that 10% to something more conservative (say... 5%,  6%?) and run your own numbers.  Without knowing what the future will hold, I'd ball-park you at about 7 years out.

...race ya! :)



BIG EDIT: I neglected to note that the majority of your net worth appears due to increases in RE holdings.  There is almost no chance that your holdings will continue to appreciate at 10% yearly, so please run your calculations with a MUCH smaller appreciation number.  Or run the holdings-outside-of-real-estate at 8% and then the RE equity at 2% or something.

I haven't re-run the calcs with your numbers, but I'd bet dollars to doughnuts you're about 10 years away based on my wild-ass-back-of-envelope-intuition.

If we don't buy any additional real estate, I think 10 years is a good estimate. However, if we buy more real estate, I think I could get it down to 5.

makinbutter

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Re: when will we hit 1 million?
« Reply #15 on: May 28, 2017, 10:28:40 PM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Seriously, this is the only post here that makes any sense.  Anyone taking into account your gross growth rate year-on-year and extrapolating that to reaching 1MM simply doesn't understand the maths.  Wow.

From my patented wild-ass-guess calculator, you said you save 8% of your 100k salaries (call it 10k) and bank 22k of your rental income, for a net savings of 32k.  Say your 465k grows by 10% p.a. (which is generous).

2017: 465, gains 46, you add 32, total 543.
2018: 543, gains 54, you add 32, total 630.
2019: 630, gains 63, you add 32, total 725.
2020: 725, gains 72, you add 32, total 829.
2021: 829, gains 83, you add 32, total 944.

Congrats, according to my wild-ass-guess calculator (and generous 10% per year returns on your net worth), you'll cross the 1MM net worth barrier in 2022.

Now, if you want this to be more realistic... change that 10% to something more conservative (say... 5%,  6%?) and run your own numbers.  Without knowing what the future will hold, I'd ball-park you at about 7 years out.

...race ya! :)



BIG EDIT: I neglected to note that the majority of your net worth appears due to increases in RE holdings.  There is almost no chance that your holdings will continue to appreciate at 10% yearly, so please run your calculations with a MUCH smaller appreciation number.  Or run the holdings-outside-of-real-estate at 8% and then the RE equity at 2% or something.

I haven't re-run the calcs with your numbers, but I'd bet dollars to doughnuts you're about 10 years away based on my wild-ass-back-of-envelope-intuition.

If we don't buy any additional real estate, I think 10 years is a good estimate. However, if we buy more real estate, I think I could get it down to 5.

Respectfully, I don't believe this is feasible, nor do I think what you have said above makes much sense.  If you buy real estate, your path to a million bucks will be quicker...?  Help me understand - please elaborate.  Please write down the expected returns for your RE purchases and I would bet a thousand dollars you will see that absent 10%+ returns on your real estate investments, you will realize that it is unlikely that you will hit 1MM in 5 years at your current income levels.

A few tidbits for consideration:
1) the back-of-the-envelope calculation that I showed above presupposes that your EQUITY in your current purchases is going to keep exploding upwards at 10% yearly.  This is, of course, likely nonsense.
2) If your RE continues to appreciate at 10% yearly... that means it will outstrip inflation to the tune of like 7% per year.  Who will be able to afford to live there...?

lemonde

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Re: when will we hit 1 million?
« Reply #16 on: May 28, 2017, 10:33:46 PM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Love it.

OP, I concur with the idea of just continuing to spend less than you earn without worrying about the big M.

clarkfan1979

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Re: when will we hit 1 million?
« Reply #17 on: June 10, 2017, 11:19:43 PM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Seriously, this is the only post here that makes any sense.  Anyone taking into account your gross growth rate year-on-year and extrapolating that to reaching 1MM simply doesn't understand the maths.  Wow.

From my patented wild-ass-guess calculator, you said you save 8% of your 100k salaries (call it 10k) and bank 22k of your rental income, for a net savings of 32k.  Say your 465k grows by 10% p.a. (which is generous).

2017: 465, gains 46, you add 32, total 543.
2018: 543, gains 54, you add 32, total 630.
2019: 630, gains 63, you add 32, total 725.
2020: 725, gains 72, you add 32, total 829.
2021: 829, gains 83, you add 32, total 944.

Congrats, according to my wild-ass-guess calculator (and generous 10% per year returns on your net worth), you'll cross the 1MM net worth barrier in 2022.

Now, if you want this to be more realistic... change that 10% to something more conservative (say... 5%,  6%?) and run your own numbers.  Without knowing what the future will hold, I'd ball-park you at about 7 years out.

...race ya! :)



BIG EDIT: I neglected to note that the majority of your net worth appears due to increases in RE holdings.  There is almost no chance that your holdings will continue to appreciate at 10% yearly, so please run your calculations with a MUCH smaller appreciation number.  Or run the holdings-outside-of-real-estate at 8% and then the RE equity at 2% or something.

I haven't re-run the calcs with your numbers, but I'd bet dollars to doughnuts you're about 10 years away based on my wild-ass-back-of-envelope-intuition.

If we don't buy any additional real estate, I think 10 years is a good estimate. However, if we buy more real estate, I think I could get it down to 5.

Respectfully, I don't believe this is feasible, nor do I think what you have said above makes much sense.  If you buy real estate, your path to a million bucks will be quicker...?  Help me understand - please elaborate.  Please write down the expected returns for your RE purchases and I would bet a thousand dollars you will see that absent 10%+ returns on your real estate investments, you will realize that it is unlikely that you will hit 1MM in 5 years at your current income levels.

A few tidbits for consideration:
1) the back-of-the-envelope calculation that I showed above presupposes that your EQUITY in your current purchases is going to keep exploding upwards at 10% yearly.  This is, of course, likely nonsense.
2) If your RE continues to appreciate at 10% yearly... that means it will outstrip inflation to the tune of like 7% per year.  Who will be able to afford to live there...?

I think my logic is sound. I have a better chance of getting to 1 million quicker with more real estate than less real estate. My net worth today is largely due to rental real estate appreciation. If I had less real estate, my net worth would be less.

I agree that I can't count on 10% appreciation for my current rentals going forward. I think 2% would be more reasonable over the next 5 years. As a result, I wouldn't be buying real estate in locations that I currently own rentals.

However, I could count on 10%+ appreciation going forward if I was able to buy in undervalued markets. I have my eye on a few locations. I'm also considering doing a 1031 exchange for one of my rentals and buying a 5-10 unit apartment complex.

I'm also considering buying another single family home as my primary residence. My timeline for buying a primary home is 6-18 months. The apartment complex or additional rentals is probably 24-36 months.


clarkfan1979

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Re: when will we hit 1 million?
« Reply #18 on: June 22, 2018, 10:55:24 AM »
Forget million.

At your current net worth and 45% a year growth you'll be a BILLIONAIRE in 21 years.

Seriously, this is the only post here that makes any sense.  Anyone taking into account your gross growth rate year-on-year and extrapolating that to reaching 1MM simply doesn't understand the maths.  Wow.

From my patented wild-ass-guess calculator, you said you save 8% of your 100k salaries (call it 10k) and bank 22k of your rental income, for a net savings of 32k.  Say your 465k grows by 10% p.a. (which is generous).

2017: 465, gains 46, you add 32, total 543.
2018: 543, gains 54, you add 32, total 630.
2019: 630, gains 63, you add 32, total 725.
2020: 725, gains 72, you add 32, total 829.
2021: 829, gains 83, you add 32, total 944.

Congrats, according to my wild-ass-guess calculator (and generous 10% per year returns on your net worth), you'll cross the 1MM net worth barrier in 2022.

Now, if you want this to be more realistic... change that 10% to something more conservative (say... 5%,  6%?) and run your own numbers.  Without knowing what the future will hold, I'd ball-park you at about 7 years out.

...race ya! :)



BIG EDIT: I neglected to note that the majority of your net worth appears due to increases in RE holdings.  There is almost no chance that your holdings will continue to appreciate at 10% yearly, so please run your calculations with a MUCH smaller appreciation number.  Or run the holdings-outside-of-real-estate at 8% and then the RE equity at 2% or something.

I haven't re-run the calcs with your numbers, but I'd bet dollars to doughnuts you're about 10 years away based on my wild-ass-back-of-envelope-intuition.

If we don't buy any additional real estate, I think 10 years is a good estimate. However, if we buy more real estate, I think I could get it down to 5.

Respectfully, I don't believe this is feasible, nor do I think what you have said above makes much sense.  If you buy real estate, your path to a million bucks will be quicker...?  Help me understand - please elaborate.  Please write down the expected returns for your RE purchases and I would bet a thousand dollars you will see that absent 10%+ returns on your real estate investments, you will realize that it is unlikely that you will hit 1MM in 5 years at your current income levels.

A few tidbits for consideration:
1) the back-of-the-envelope calculation that I showed above presupposes that your EQUITY in your current purchases is going to keep exploding upwards at 10% yearly.  This is, of course, likely nonsense.
2) If your RE continues to appreciate at 10% yearly... that means it will outstrip inflation to the tune of like 7% per year.  Who will be able to afford to live there...?

My original post was one year ago. My argument was that I could make more progress toward one million net worth by purchasing more real estate. I was asked to provide more detail. My executed plan is below.

I recently purchased a foreclosure with sweat equity, which should add about 100K to my net worth in about 6 months with no market changes. Purchase price was 603K. It appraised for 615K. Non-foreclosure comps are around 700K to 725K. I need to put in about 15K of material and 6 months of my time at 10 hours/week.

2011: 50K
2012: 72K
2013: 105K
2014: 152K
2015: 221K
2016: 320K
2017: 465K
2018: 565K + pension

With the primary home valued at 615K our net worth is currently at 565K. Next year in June 2019, we should be around a net worth of 675K to 700K. Current plan is to hit one million in June 2022.

If there is a real estate crash before 2022, I will most likely re-fi my Florida rental to purchase more real estate at a discount. For my Florida rental, I owe 75K and it's worth about 250K (70% equity). I agree that a real estate crash before 2022 would probably slow down my progress to one million. However, I think it would speed up my progress to two million.

Primary home has a basement rental unit that should fetch about $1500/month. Total mortgage is $2686/month.
« Last Edit: June 22, 2018, 10:57:56 AM by clarkfan1979 »

chasesfish

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Re: when will we hit 1 million?
« Reply #19 on: June 22, 2018, 02:02:03 PM »
Keep cranking.  I worked my net worth backwards, getting over the $500,000 mark was a huge turning point, its really a "wealth snowball" after that.   All will work out

Undecided

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Re: when will we hit 1 million?
« Reply #20 on: June 22, 2018, 07:01:43 PM »
Is the real estate “income” net of only repairs, or net of a mortgage, too? If you’re saying that you rent out $400k worth of real estate for about $25k, I’d say try to actually sell that property and find out what the real offers are.

clarkfan1979

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Re: when will we hit 1 million?
« Reply #21 on: June 23, 2018, 11:51:55 AM »
Is the real estate “income” net of only repairs, or net of a mortgage, too? If you’re saying that you rent out $400k worth of real estate for about $25k, I’d say try to actually sell that property and find out what the real offers are.

Rental One: Total Mortgage is $650/month, rents for $1850/month and is worth about 250K
Rental Two: Total Mortgage is $1600/month, rents for $2340/month and is worth about 375K

Total Rental Income after mortgage: $1940/month
Total Rental Income after repairs: $1500/month or 18K/year

My rental income went down from 25K/year to 18K/year because I did a cash out re-fi in Nov 2017 for rental two. My mortgage payment went up by $590/month. It was previously $1,010/month.

 




clarkfan1979

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Re: when will we hit 1 million?
« Reply #22 on: August 05, 2019, 10:49:50 AM »
2011: 50K
2012: 72K
2013: 105K
2014: 152K
2015: 221K
2016: 320K
2017: 465K
2018: 565K

update

2019: 825K

We bought a primary home in June 2018 for 603K and put 50K into it. It's now 14 months later. My realtor stopped by 3 days ago and said it's worth approximately 899K.

From 2017 to 2019, my net worth failed to double. However, I still feel pretty good about it. In an effort to answer my original question, it looks like it's going to be 4-5 years from 2017 to hit one million. Pretty excited.

v8rx7guy

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Re: when will we hit 1 million?
« Reply #23 on: August 05, 2019, 11:08:08 AM »
2011: 50K
2012: 72K
2013: 105K
2014: 152K
2015: 221K
2016: 320K
2017: 465K
2018: 565K

update

2019: 825K

We bought a primary home in June 2018 for 603K and put 50K into it. It's now 14 months later. My realtor stopped by 3 days ago and said it's worth approximately 899K.

From 2017 to 2019, my net worth failed to double. However, I still feel pretty good about it. In an effort to answer my original question, it looks like it's going to be 4-5 years from 2017 to hit one million. Pretty excited.

I hope that you do.  But I think you'll either do it in a year or it could take like 3 or 4 more if there's any sort of major market or real estate correction.