Author Topic: Asset juggling for hopefully 60 years of FIRE  (Read 653 times)

FIREflyer

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Asset juggling for hopefully 60 years of FIRE
« on: October 01, 2017, 11:02:12 AM »
Longtime reader, MMM doctrine agree-er, not a perfect follower, but always tracking and adding to the stache.  Looking for suggestions to live of passive to semi passive(landlord) investments from 40 to 100 years of age.  Trying to reduce day job to part time, or month on/month off type schedule, plus first baby on the way, but would still like to confidently quit the good paying, fun day job in hopes of more time for travel, hobbies, and family time. 

trying to decide if I should start selling off rental houses to reduce time commitments (but also reduce ROI) or hold onto rental houses for alternate income stream once FIRE'd.

Situation details:

Life situation: Married filing jointly, mid 30s parents, 1 kid, HCOL state (CT), live near family, considering move to no income tax state for 6 months a year.

W2 salary 150k rental income 30k

liquid savings = 401k at $500k

Expenses at $3k a month plus mortgage at 1500 a month with PITI for 15 yr, then 400 a month T/I

Expected ER expenses trying to reach $2M Net worth, 80k/yr spending, $6666 a month.

Assets:  $1.5M real property, mortgage $750K = Net real property of $750K.  Stocks/Bonds $500K total, $460K in tax advantaged 401k/trad IRA accounts, 40K in Roth IRA. 

Liabilities - $750k mortgages as stated in assets, car loan under $20K at 1% int

First rental monthly rents $4K.  Market value $350k, mortgage $190k.  Can sell within next 2 years and receive IRS CAP gain exclusion since I lived in for 2 of 5 years..  Should I sell and take tax-free gains?  or continue to rent at 15% ROE (15% on 150k equity)

2nd rental property - single family rents $1500 a month, but could sell for >$300k.  $225k invested. 

Primary residence - have $500k tied up in it, would like to sell off some land to liquidate and simplify.

Suggestions how to structure assets to live long FIRE life?




BeardedMustache

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Re: Asset juggling for hopefully 60 years of FIRE
« Reply #1 on: October 05, 2017, 03:25:43 PM »
Nitpick here, but relevant. I'm not sure that ROE is the best way to measure the real estate asset. Someone correct me if I'm thinking about this wrong.

The reason I say that is that equity (via mortgage paydown or market appreciation) should increase, while monthly rent may or may not. If equity increases but rent does not, ROE will tell you it's performing worse than it actually is.

 Rent     Equity    ROE
1,000    10,000    10%
1,000    15,000    6%

Overall, I think you're doing well although your spending is high. If I were in your position, I'd keep the rentals as long as you're comfortable that no giant repairs are imminent.