Author Topic: hoping to fire at 55- sell or keep property  (Read 1088 times)

ca-rn

  • 5 O'Clock Shadow
  • *
  • Posts: 3
hoping to fire at 55- sell or keep property
« on: January 20, 2018, 09:18:00 PM »
hi! this is my first post but i've been a lbym kind of person all my life.  its great to see so many people who are able to achieve FIRE at such a young age!  wish i found this community earlier but better now than never.

Case Study - 47 hoping to fire by 55

Life Situation: 24% federal, 47, single, no children, southern california, take care of elderly parent.

Gross Salary/Wages: 132K

Individual amounts of each Pre-tax deductions: 18K 401k

Rental Income: 36K gross

Adjusted Gross Income: 150K

Taxes: 24% Federal, 11% (?) state/local

Current monthly expenses:

mortgage- 1995 P&I plus 500 extra P= 2495
home insurance- 110
property tax- 500
auto insurance- 60
utilities- 100
cell- 230 ( for 5)
internet- 50
gas-10?
food-350 ( for 2)
personal/shopping/household/misc- 250 (budget but don't always use)

Assets: 425K in 401, 30K ibonds, 10K e bonds(just started- not sure if needed), 60K rothIRA, 230K taxable. 130K savings/emergency fund. 
max fund 401, rothIRA, ibonds each year, plus challenging myself to put more into taxable.  total goal will be about 97K this year, 70/30 total index/total bonds.

car is paid for. keep for possible emergency and to transport elderly parent.  otherwise it sits parked and i bike or walk.  live in a HCOL city, amenities and work is close by.  cell plan pays for parent and siblings. no cc debt.


Liabilities: 4 plex, refi'd several times,  3% interest rate, 15 years, 11 remaining, 180K balance, paying additional principal 1995 + 500= 2495.   current value- 900K-1 mil.

i live in one unit, elderly parent lives in other, rent other 2 units.  no changes planned until parent passes.

Specific Question(s): looking to FIRE by 55.  if i continue to pay additional principle- will be paid off in 8 years which is when i turn 55.  at that point, i hope to be able to FIRE or choose to work part time to pay for health care insurance- biggest unknown cost.

rental income will cover property tax, insurance, maintenance and most of my personal monthly budget.  but i'll be older and not sure how i'll be able to maintain property when i'm much older. 

kicking around idea to hire a live in caregiver/property manager to live in one unit when i'm too old- there will be a lot of details to be worked out...

the building owner next door was recently widowed ( her spouse was 94!), no kids.  i'd love to ask her her plans but not sure how to even approach this subject...

or just sell and buy a small home in a 55 or older community and invest sale of property into index funds, bonds and c/d ladder.


freya

  • Stubble
  • **
  • Posts: 113
Re: hoping to fire at 55- sell or keep property
« Reply #1 on: January 21, 2018, 03:44:44 PM »
There's a lot of missing details in your post, but...if you are looking to FIRE, why are you still working?

Your monthly expenses total $4,155, with just $1,660 in non-mortgage spending.  Your savings (including the e-fund) total $885,000.  At a 4% withdrawal rate, this will provide you with $35,400/year, or $2950/month.  This is $1290/month more than your current non-mortgage spending - easily covering new retirement costs like health insurance.

If you quit your job now, you'd be left with the $36K rental income.  Let's assume taxes are $6K.  This income will more than cover the mortgage, though not the extra payments.

Two big giant caveats though.  First,  I don't see anything in your budget that provides for home repairs/improvements.  This is a big item on a million dollar 4-plex.  You should be stashing something like 10% of your rental income or $20,000/yr in a separate fund for this.

Second, what is your elderly parent's financial & medical situation.  Is there a possibility they will need prolonged nursing home care, and if so do they have enough savings to cover this cost?  Is any of their money protected, e.g. in a trust, that will eventually come to you?  Are you currently paying medical and other expenses as well as housing & food costs?

ca-rn

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: hoping to fire at 55- sell or keep property
« Reply #2 on: January 23, 2018, 12:52:52 PM »
freya, thank you for your response.

i'm being super conservative but wouldn't be comfortable to fire until mortgage is paid off.  i suspect when the principal gets about 50K i'll just pay it off. 

yup, my personal regular expenses are low, not into super material stuff but i usually choose quality when i do spend, also spend 1-2k/yr total for siblings on average that wasn't included.

addressing caveats-  home repairs/improvements come from my checking and savings/emergency/catchall acct.  i am able to perform minor repairs myself with youtube:)   the smaller expenses- supplies, parts, new tools etc also wasn't included because its not a regular expense.  major repairs/expenses were still less than 10K each event- plumbing, new roofing etc.

elderly parent- i provide food, housing, care and transport.  has a savings acct, cd and a tiny rothira, ss more than covers medical costs and minor incidentals/personal spending.  i work part time now to provide intermittent daily care/check ins.   i don't know if its the smartest ($$$) move, but i'm saving parent's money for if/when constant care is needed, then we will use up parent's savings/cd etc.

between this site and bogleheads- i constantly vacillate between thinking i have plenty to never enough!  my personal goal is 1.5 million and no mortgage.


Sun Hat

  • Bristles
  • ***
  • Posts: 289
  • Location: Canada
Re: hoping to fire at 55- sell or keep property
« Reply #3 on: January 23, 2018, 05:55:48 PM »
Your spending is certainly more MMM than Boggleheads. As mentioned above, you have enough to retire now. If you want to wildly increase your spending in retirement, you'll be able to do that on the $1.5 mil that you'll have saved by the time that you're 55. Having built the habit of frugality, you may find it hard to spend $60k a year without a mortgage!

I'd suggest staying the course that you're on for now, though keep the knowledge that you can afford to retire comfortably at any time in the back of your mind. At some point, you may find that you either want to spend more to hire in care for your elderly parent or stop working so that you have the time and energy to do so yourself. You can afford these options, which is a nice position to be in when dealing with the stress of elder care. 

Talking to the widow next door sounds like a good idea. If she's considering hiring a property manager, there may be an opportunity for one person to look after both properties. If that's not her plan, then you may find a side gig in doing her minor repairs!
"You need a little bit of insanity to do great things." ~ Henry Rollins

Clara Smith

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: hoping to fire at 55- sell or keep property
« Reply #4 on: February 03, 2018, 01:19:21 AM »
If you don't have serious financial issues then don't sell the property. you can put it on rent. :)