Topic Title: Case Study: Burning Out, Am I Ready for Partial FIRE?
Life Situation:
Mid 30’s, Single, No Dependents
California Resident
Gross Salary/Wages:
$85k/year at the regular job (private industry, not federal employment)
$10k/year National Guard (one weekend a month, two weeks a year)
Qualified Dividends & Long Term Capital Gains:
~$8k/year in Dividends
Rental Income, Actual Expenses, and Depreciation:
4 Rental Properties (7 total rental units)
~$10,400/month Rental Income (perfect month, all units rented)
~$7,750/month Actual Expenses (Mortgages, Insurance, Tax, HOA, utilities, etc), does not include non-scheduled costs (random maintenance/emergencies)
- I consistently get a $25k deduction on taxes from my Schedule E thanks to depreciation
- From the Actual Expenses portion, about $1,500/month from the mortgage payments goes towards loan principal (included as part of the $7,750/month total)
Expected ER expenses:
- I err on the high side
$1,000/month auto payment (yes, I know, facepunch, I plan to keep it, $56k left, Tesla)
$500/month for place to live (includes utilities/internet)
$500/month healthcare (ACA Silver from state exchange)
$250/month food
$100/month auto/rental insurance
$100/month hobby & entertainment
$50/month clothes
$50/month cell phone (I plan to find a better deal)
$50/month wear/tear on the vehicle
$100/month other (catch all/buffer)
Total: $2,700/month
Assets:
$1.06M - Equity in Rental Properties ($2.04M Value, $0.98M Loans)
$290k - Taxable Stock Account
$75k - Checking/Saving
$55k – TSP (retirement account)
$20k - Roth IRA (retirement account)
$12k - 401k (retirement account)
Liabilities:
Auto Loan – Tesla Model S - $56k @ 2.5%, $1,000/month
Property payments include mortgage, insurance, property tax, property management, HOA (if applicable)
Property #1 - $675k @ 4.375%, $4,650/month ($6,000/month in rents)
Property #2 - $128k @ 4.375%, $1,230/month ($1,610/month in rent)
Property #3 - $97k @ 5.375%, $811/month ($1,530/month in rent)
Property #4 - $82k @ 5.625%, $735/month ($1,290/month in rent)
Pensions:
$18k/year(?) @ 65 - Fully qualified for Social Security when I hit the 62+ starting age
$24k/year @ 60 - Military retirement (need 5 more years National Guard)
$15k/year @ 60 - FERS government retirement (need 3 more years in a Federal position to vest)
Some Financial Plans After Partial FIRE (in no particular order):
- Pick up 3-4 months of full-time military duty with National Guard so I qualify for 100% Post-9/11 GI Bill benefits (I am currently 80% or 90% of full benefits)
- Use Post-9/11 GI Bill for Master’s degree and maybe second Bachelors
-- Pays for tuition, plus ~$3.5k to $4.1k per month tax free for 36 months for living expenses ($126k-$148k tax free total)
- Try to add a unit to one of the multi-unit rental properties. Space is there, just need to fight it out with the city. Costs would be about $100k (if I used contractors for everything) and it would add ~$1.5k/month in rental income.
- Work at a Federal job for 3 years to vest for the FERS retirement (I already worked in a position for 2 years, the high FERS pension is due to buying back my military time for retirement credit)
- 1031 Exchange (sell existing property and roll profits tax-free into new investment property) at least one of the rental properties into a larger property with more cashflow
Specific Question(s):
I am burning out at my full-time job. Typical cubicle life, fairly easy work with random bouts of coworker/company stupidity and I am slowly going brain-dead. Work was interesting at first but after several years of doing the same thing and a recent change in the company dynamic (cut positions/cost, raise workload, implement changes without full study of the impact), I’m about ready to put in my two week notice.
I am applying here and there at jobs that look interesting but I feel that I am financially stable enough to go into partial FIRE if none of the applications pan out. To me, that means continue doing the part-time duty with the National Guard and start working towards the items in the “After Partial FIRE” section.
Is it financially viable for me? My estimated short-term Partial FIRE costs are $32,400/year until the car payment drops off in about 5 years, then it’s $20,400/year.
On the income side, I have the 1 weekend per month / 2 weeks per year with the National Guard (at least $10k/year in income), dividends ($8k/year) and around $15k/year in cashflow from rentals ($33k total). That roughly breaks even with my estimated Partial FIRE costs. I can also pay off the $83k balance mortgage for property #4 and free up about $6k/year in additional cashflow. The stuff in the “After Partial FIRE” section would all add additional income/funds to my finances.
Thoughts?