Author Topic: Case Study: Unmerciless Punches Please! Rental Real Estate/Car Purchase/Debt  (Read 6726 times)

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Me: 34 Wife 32 Baby Girl:3 months

Income:
Me: Gross 136K. Net:72K or 6k/month after maxing 401K/FSA
Wife: Gross 58K. Net:31K or 2400/month after maxing 401K
Monthly take home: $8400. So, if we did nothing but our 401K thats a 34% savings rate. Am I doing that right? Obviously that needs to be much higher.

Current Expenses
$4500/month 
We've cut down recently, we have a ways to go, but are newly focused since the birth of our daughter. A full $970 of this is student loan and a very un-mustachian car payment. These will of course go away, and get us to a little more manageable $3500/month.

Expected ER Expenses
Since we haven't proved we can live on less than $4500 to this point, I guess I'd keep expenses right at that level for the sake of discussion.

Assets
My 401K: 60K
Wife's 401K: 40k  I'll get into allocation in another post.
Vanguard Index Fund: 3k
Savings: 7k
Primary Residence: 60K equity

Rental Real Estate: I am 50/50 owner of a company that owns 6 small rental homes. No mortgages. These are worth a combined 500K and cashflow 48k/yr, or 24k per partner if we took a salary. We haven't so far, so I don't include this in income above. Currently all cash goes towards purchasing more homes. This has slowed down recently as prices have gone up. This is my hobby, however within the next 6 years we plan to have 12 or more, perhaps with the help of some financing. At some point we will take salaries, of course.

Cars:
Saturn Vue with 120k miles. Worth probably 4k. We have to replace in the next couple months, its the worst vehicle on snow I've ever driven, and we live in Michigan. I mean its dangerous.
Cadillac Cts Wagon with 95k miles (I know, I know, it was pre-MMM) worth 20k, I owe 10k. I punch myself everyday. Fun car though, for sure. But priorities have changed.

Total Assets: 420K. This does not include the cars. It does include the value of my half of the rental houses.

Liabilities
185K on primary home at 4.88%, 30 year. House payment with taxes/ins $1500
95K student loan (ouch!!) at 2.33% (phew)
10K HELOC at 6.5%
10K Car loan t 3.18%

Total liabilities: 300K

Discussion
Wow, writing it all down makes it seem worse than I really thought. I've long struggled with a need to keep up with the Jones's. I don't know if its a male ego thing, but I'll go for stretches where I do pretty good, but then inevitably end up wanting and buying some big ticket item that sets back our progress. I'm fortunate to have a wife that is comfortable living quite frugally, otherwise, we'd really be in a hole.
The birth of my daughter has really opened my eyes (along with MMM) as to whats really important in life. And surprise surprise, it isnt a Cadillac. I want to RE or at least cut down to 2-3 days/week working my profession (would be $800-1200/week) and then let rentals pay us. My current job provides zero schedule flexibility, and above all, thats what I really crave. So, like so many other people, what I really want to buy from now on is more of MY time.

Specific Questions
1. Plan of attack debt-wise. The car and the HELOC for me are a given. They have to go away asap. Car first? From there, how to treat the student loan? Its been suggested to treat that like a mortgage since we bought a little bit of a conservative house income-wise? I don't know I i can get with that or not, because to me, that $600/month payment is a lot of what makes me give up so much of my time.

2. How should I factor in rental income into the FIRE picture? Should I just treat this totally separate, as sort of icing-on-the-retirement-cake? Or is it more realistic to say that as of now, thats $2k/month of perpetual income?

3. How long to FIRE? One factor is that with our professions, we pretty easily could do a day or two per week and make $800/week gross.

4. After debt is handled, where should I invest outside of 401k? Roth? Do we qualify? Other IRAs? Or should I go non-sheltered into Vanguard, since I'll likely want that money pre-59.5?

5. Future car purchase: Here's a topic I despise. And here's why. We have to buy GM vehicles. I hate this, but its our reality. It would cause major waves in both our families to go outside GM. It just isn't worth it to have that argument at this point. SO, we live in Detroit, and make very frequent, 3 hour round trip visits to our parents. We have one child with a giant-ass baby seat, and one more likely soon, so enough backseat room is a must. Handling in snow is also a priority. One accident involving my pregnant wife was enough thank you. Suggestions?

THANK YOU THANK YOU THANK YOU, for reading and responding. Remember, let those fists of fury fly, my skin is thick, and more importantly, my eyes are now open.

PindyStache

  • Stubble
  • **
  • Posts: 241
  • Location: Minneapolis
Thanks for posting. I have just a couple minutes now to respond to two points:

4) I believe at your income level, you are just above the income cap that the IRS sets to get deductions from additional IRA (traditional or roth) contributions, so basically that negates the main argument for doing so. I am no tax expert, but was looking into this for my own situation yesterday. Obviously there are lots of exceptions/depends on how you file taxes/etc.

5) I recommend purchasing a Pontiac Vibe (this is a GM car, yes?). They haven't made them in several years, so would obviously be used. It is basically the same as a Toyota Matrix with decent gas mileage, good safety/handling in snow, and enough room for plenty of kids.

No huge facepunches as you've not detailed expenses, but that's not what you're asking about anyway.

Also curious about your profession, as the ability to scale your level of work sounds pretty ideal!

nereo

  • Senior Mustachian
  • ********
  • Posts: 10565
  • Location: Just south of Canada
    • Here's how you can support science today:
Quote
1. Plan of attack debt-wise. The car and the HELOC for me are a given. They have to go away asap. Car first? From there, how to treat the student loan? Its been suggested to treat that like a mortgage since we bought a little bit of a conservative house income-wise? I don't know I i can get with that or not, because to me, that $600/month payment is a lot of what makes me give up so much of my time.
The HELOC is costing you the most money by far at 6%+.  Get rid of it - now.  Your student loan is quite large but thankfully at a very low rate.  Is it fixed?  I'm guessing no. If it's variable I'd be quite worried that it'll go up over the next few years. 

Quote
2. How should I factor in rental income into the FIRE picture? Should I just treat this totally separate, as sort of icing-on-the-retirement-cake? Or is it more realistic to say that as of now, thats $2k/month of perpetual income?
If you plan on doing it during FIRE years, then it's $2k/month of perpetual income by your estimates.  You can reduce that from what you think you'll need ($4500/mo - $2000/mo = $2500/mo or $30k/year).  Of course have a backup plan if this doesn't work out.

Quote
3. How long to FIRE? One factor is that with our professions, we pretty easily could do a day or two per week and make $800/week gross.
Using the $2k/mo from your rental income I have your FI number at $750,000.  So however long it takes you to get there, which depends on savings and the markets.   Given your numbers, 7% growth and maxing out your 401(k)s annually (but nothing else) I'd put it at 11 years.  Save more and it could be less.
Quote
4. After debt is handled, where should I invest outside of 401k? Roth? Do we qualify? Other IRAs? Or should I go non-sheltered into Vanguard, since I'll likely want that money pre-59.5?
I'd recommend an IRA.  There are lots of ways of accessing the money before you are 59.5.  But tackle that HELOC first, and then maybe the SL if it's variable-rate.

Quote

5. Future car purchase: Here's a topic I despise. And here's why. We have to buy GM vehicles. I hate this, but its our reality. It would cause major waves in both our families to go outside GM. It just isn't worth it to have that argument at this point. SO, we live in Detroit, and make very frequent, 3 hour round trip visits to our parents. We have one child with a giant-ass baby seat, and one more likely soon, so enough backseat room is a must. Handling in snow is also a priority. One accident involving my pregnant wife was enough thank you. Suggestions?
Um - don't see why being required to buy a GM is such a bad thing.  GM has some good fuel-efficient cars.  Buy a used one with 50k+ miles on it that gets >30mpg and use it sparingly.  A good set of snow tires means any modern car can handle well in the snow.  Here in Canada many people drive compacts and sub-compacts with great results. You can get two car seats into most any car these days.  Are you looking for a specific model?
I don't really understand waht your question is.

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Thanks for posting. I have just a couple minutes now to respond to two points:

4) I believe at your income level, you are just above the income cap that the IRS sets to get deductions from additional IRA (traditional or roth) contributions, so basically that negates the main argument for doing so. I am no tax expert, but was looking into this for my own situation yesterday. Obviously there are lots of exceptions/depends on how you file taxes/etc.

5) I recommend purchasing a Pontiac Vibe (this is a GM car, yes?). They haven't made them in several years, so would obviously be used. It is basically the same as a Toyota Matrix with decent gas mileage, good safety/handling in snow, and enough room for plenty of kids.

No huge facepunches as you've not detailed expenses, but that's not what you're asking about anyway.

Also curious about your profession, as the ability to scale your level of work sounds pretty ideal!

Thank you
4) Thats what I kind of figured, the wife's income may drop if she goes to less than the 2.5 days she does now, so maybe the IRAs will become an option.
5) Good call on the vibe. I forgot about those, since they weren't making them anymore. I ll check into it.

I am an optometrist, she is a nurse practitioner. Fill-in and part time is fairly widely available, although not nearly as rewarding/fulfilling. I'm in the process of trying to figure out how much that matters to me :)

MDM

  • Walrus Stache
  • *******
  • Posts: 9489
Quote
Income:
Me: Gross 136K. Net:72K or 6k/month after maxing 401K/FSA
Wife: Gross 58K. Net:31K or 2400/month after maxing 401K
Monthly take home: $8400. So, if we did nothing but our 401K thats a 34% savings rate. Am I doing that right? Obviously that needs to be much higher.
Did a quick check on your income numbers, assuming your taxes are done married filing jointly.
See table below for what I got.  At least several of the numbers below are likely wrong, but $8400 is much different from $9265.  Can you clarify?

Salary/Wages$16,167
Pretax Health Ins.$300
Pretax Vision/Dental Ins.$100
Healthcase Flex Savings Acct. (FSA)$417
FICA base salary/wages$15,350
401(k) / 403(b) / 457(b) / etc.$2,917
Income subject to IRS tax$12,433
Other income (int., div., etc.)$0
Federal Adj. Gross Inc.$12,433
Federal tax$1,913
State/City tax$497
Soc. Sec.$952
Medicare$223
Total income taxes$3,585
Add Daycare reimb.$0
Add Health care reimb.$417
Income before other expenses  $9,265

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Quote
1. Plan of attack debt-wise. The car and the HELOC for me are a given. They have to go away asap. Car first? From there, how to treat the student loan? Its been suggested to treat that like a mortgage since we bought a little bit of a conservative house income-wise? I don't know I i can get with that or not, because to me, that $600/month payment is a lot of what makes me give up so much of my time.
The HELOC is costing you the most money by far at 6%+.  Get rid of it - now.  Your student loan is quite large but thankfully at a very low rate.  Is it fixed?  I'm guessing no. If it's variable I'd be quite worried that it'll go up over the next few years. 

Quote
2. How should I factor in rental income into the FIRE picture? Should I just treat this totally separate, as sort of icing-on-the-retirement-cake? Or is it more realistic to say that as of now, thats $2k/month of perpetual income?
If you plan on doing it during FIRE years, then it's $2k/month of perpetual income by your estimates.  You can reduce that from what you think you'll need ($4500/mo - $2000/mo = $2500/mo or $30k/year).  Of course have a backup plan if this doesn't work out.

Quote
3. How long to FIRE? One factor is that with our professions, we pretty easily could do a day or two per week and make $800/week gross.
Using the $2k/mo from your rental income I have your FI number at $750,000.  So however long it takes you to get there, which depends on savings and the markets.   Given your numbers, 7% growth and maxing out your 401(k)s annually (but nothing else) I'd put it at 11 years.  Save more and it could be less.
Quote
4. After debt is handled, where should I invest outside of 401k? Roth? Do we qualify? Other IRAs? Or should I go non-sheltered into Vanguard, since I'll likely want that money pre-59.5?
I'd recommend an IRA.  There are lots of ways of accessing the money before you are 59.5.  But tackle that HELOC first, and then maybe the SL if it's variable-rate.

Quote

5. Future car purchase: Here's a topic I despise. And here's why. We have to buy GM vehicles. I hate this, but its our reality. It would cause major waves in both our families to go outside GM. It just isn't worth it to have that argument at this point. SO, we live in Detroit, and make very frequent, 3 hour round trip visits to our parents. We have one child with a giant-ass baby seat, and one more likely soon, so enough backseat room is a must. Handling in snow is also a priority. One accident involving my pregnant wife was enough thank you. Suggestions?
Um - don't see why being required to buy a GM is such a bad thing.  GM has some good fuel-efficient cars.  Buy a used one with 50k+ miles on it that gets >30mpg and use it sparingly.  A good set of snow tires means any modern car can handle well in the snow.  Here in Canada many people drive compacts and sub-compacts with great results. You can get two car seats into most any car these days.  Are you looking for a specific model?
I don't really understand waht your question is.

Would you pay the HELOC before the car? Aren't there at least some tax benefits from the HELOC?

My SL is fixed. I was fortunate, went to school at the right time for a loan. Oxymoron maybe? Would you still pay off aggressively knowing that? Or should I get aggressive about the index funds?

Hmmm. Snow tires. I know how stupid it sounds that I didnt think about that, but I'm completely worthless when it comes to autos. They make that big of a difference I take it?

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Quote
Income:
Me: Gross 136K. Net:72K or 6k/month after maxing 401K/FSA
Wife: Gross 58K. Net:31K or 2400/month after maxing 401K
Monthly take home: $8400. So, if we did nothing but our 401K thats a 34% savings rate. Am I doing that right? Obviously that needs to be much higher.
Did a quick check on your income numbers, assuming your taxes are done married filing jointly.
See table below for what I got.  At least several of the numbers below are likely wrong, but $8400 is much different from $9265.  Can you clarify?

Salary/Wages$16,167
Pretax Health Ins.$300
Pretax Vision/Dental Ins.$100
Healthcase Flex Savings Acct. (FSA)$417
FICA base salary/wages$15,350
401(k) / 403(b) / 457(b) / etc.$2,917
Income subject to IRS tax$12,433
Other income (int., div., etc.)$0
Federal Adj. Gross Inc.$12,433
Federal tax$1,913
State/City tax$497
Soc. Sec.$952
Medicare$223
Total income taxes$3,585
Add Daycare reimb.$0
Add Health care reimb.$417
Income before other expenses  $9,265

MDM you are absolutely correct. Thank you for taking the time to do that. I'm not sure what I did there. I guess I was doing weekly pay based on 4 pay periods per month. Gotta remember those bonus months.

quilter

  • Stubble
  • **
  • Posts: 149
Even with SL debt, with two good professions and the ability to work per diem, you have it made.

Without seeing your numbers no suggestions to make.  Your student, car and house loans take up about $2000 per month. What are you spending the other $2500 on? 

Thegoblinchief

  • Guest
The HELOC and mortgage are the only things that are mathematically worth pre-paying.

Everything else should be invested.

Snow tires make a HUGE difference. In the fall, places like Tire Rack run specials with tire+rim pre-balanced. If you're willing to use a jack and a tire iron, it doesn't take long at all to swap tires. Long-term, having a set of rims and tires together are cheaper than paying a shop to swap tires every season.

MDM

  • Walrus Stache
  • *******
  • Posts: 9489
Good advice from all posts.  You have some of the biggest things correct already, e.g. maximum 401K for both of you. 

Take advantage of posted ideas, work on reducing/eliminating wasted spending, invest after-tax extra in various index funds, and enjoy family time.  Set the cruise control for 5 years or so, then recheck :).

Attached is a spreadsheet with a big ol' "miscellaneous" number to match your $4500/mo OP value.  Use, modify or ignore at your pleasure.

And again - enjoy that 3 month old! :)

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Even with SL debt, with two good professions and the ability to work per diem, you have it made.

Without seeing your numbers no suggestions to make.  Your student, car and house loans take up about $2000 per month. What are you spending the other $2500 on?

Mortgage/Ins/Taxes $1500
Car $370
SL $579
So more like 2450. We pay out of pocket for medical/dental and that's dangerously close to $700 post baby and ACA (yes, our went up. A lot). Our food budget needs tightening up, we eat out way too much. Cell is 150, should lower when contracts are up and we go to Ting or whatever. Cable/internet is $100. I'm trying to cut the cord, but college sports are a big hobby of mine. So I get a face punch for that I guess.

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
The HELOC and mortgage are the only things that are mathematically worth pre-paying.

Everything else should be invested.

Snow tires make a HUGE difference. In the fall, places like Tire Rack run specials with tire+rim pre-balanced. If you're willing to use a jack and a tire iron, it doesn't take long at all to swap tires. Long-term, having a set of rims and tires together are cheaper than paying a shop to swap tires every season.

So don't pay down the car loan early? Very interesting. I guess I just see that loan balance and its like looking a whole big pile of stupidity and wastefulness. Maybe its good to have that hanging over me as a reminder. :)

Good call on the snow tires. That sounds like a plan, because we actually like the Vue, it has a Honda engine. I've just never driven a vehicle that is that horrible in adverse conditions.

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Good advice from all posts.  You have some of the biggest things correct already, e.g. maximum 401K for both of you. 

Take advantage of posted ideas, work on reducing/eliminating wasted spending, invest after-tax extra in various index funds, and enjoy family time.  Set the cruise control for 5 years or so, then recheck :).

Attached is a spreadsheet with a big ol' "miscellaneous" number to match your $4500/mo OP value.  Use, modify or ignore at your pleasure.

And again - enjoy that 3 month old! :)

Many thanks MDM. I like the "cruise control" thing. A little well planned auto-pilot sounds good.

nereo

  • Senior Mustachian
  • ********
  • Posts: 10565
  • Location: Just south of Canada
    • Here's how you can support science today:
Would you pay the HELOC before the car? Aren't there at least some tax benefits from the HELOC?

My SL is fixed. I was fortunate, went to school at the right time for a loan. Oxymoron maybe? Would you still pay off aggressively knowing that? Or should I get aggressive about the index funds?

Hmmm. Snow tires. I know how stupid it sounds that I didnt think about that, but I'm completely worthless when it comes to autos. They make that big of a difference I take it?
You pay the HELOC off because it has a 6%+ interest rate.  No tax break will make up for that, and I believe that you will already max that out with the interest on your mortgage.
You pay the mortgage because it's at 4.88% and you gain equity with every payment.
Any loan under 4% fixed you can just pay the minimum payments on - the idea is that you will get better returns over time than 4%.  As an example, you have $95k in student loans at 2.33% - supposed you suddenly got a windfall of $95k, my suggestion would be to put it all into an index fund and then keep making monthly payments on the loan.  If you took the extended 20 years to pay it off you would have paid a total of $119k on the loan, but your $95k in savings would have grown to $368k (assuming 7%).  That's a net gain of almost a quarter million$. 
Plus, you get to deduct the interest paid on the loan every year, so your savings are even greater. Just make sure you are saving and not inflating your lifestyle.

Snow tires.  Yes.  As Goblinchief said, they make a HUGE difference.  Just make sure you get ones that are "Winter" tires and not Mud &  Snow (M+S).  Winter tires will have a snowflake and mountain logo on the sidewall. Ditto finding ones with rims that you can change yourself in your driveway (if you are comfortable with doing that.  not any harder than changing your own oil).  If you want maximum traction on ice go with studded snow tires.
I moved to Canada, and we get 6-8 feet of snow a year.  My friends drive mostly compacts like Matrix, Yarish, Versa, Golf, etc.  Every one of them has no trouble driving even when it's snowing an inch per hour.  By law everyone has to have snow tires on during the winter months here.


Thegoblinchief

  • Guest
Quote
By law everyone has to have snow tires on during the winter months here.

My area isn't all that bad as winters go, but quite a few states could use that law on the books.

FWIW, studded tires are illegal here (for cars at least).

nereo

  • Senior Mustachian
  • ********
  • Posts: 10565
  • Location: Just south of Canada
    • Here's how you can support science today:
Quote
By law everyone has to have snow tires on during the winter months here.

My area isn't all that bad as winters go, but quite a few states could use that law on the books.

FWIW, studded tires are illegal here (for cars at least).
Good point - ibleedirish, check the regulations about studded snow tires in your state before buying.  I know in New England they require you to take off studded-snow tires by a certain date (usualy around the end of March).  More southern states don't allow them at all because they tear up the roads.  But any winter tire will be night-and-day difference on cold snowy winter days.

daverobev

  • Magnum Stache
  • ******
  • Posts: 3337
  • Location: UK
Hey, I have a 5 month old daughter, it didn't open my eyes in terms of wanting a nicer car! :)

I also have a LOC at ~6%, but it's for a house returning me more than that. Debt vs investment is all about... well, making money.

You have a mind blowingly huge income. Good for you. Snow tires make a ginormous difference. Not expensive, either - though (I find it) much easier to get new tires on a set of 'steelies', rather than having to remount/rebalance.. I change them over for our cars myself.

You have some debt, but the rates are low, so don't worry about it. And.. yeah, the ginormous income.. I mean, $100k student loan but you make more in a year than I do by roughly that amount, so it's all good.

Here's one suggestion: instead of splurging on big ticket items, find a hobby where you can splurge on small ticket items. Instead of a $30k car, a nice used laptop or whatever makes you tick... find the value and enjoyment in something else.

Good luck, you're pretty well set!

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3039
  • Location: WDC
You didn't mention what your employer contributes to your 401K.  The max contribution limit to a 401K per year per person is 52K.  Of that 51K, you may contribute 17.5.  So if your employer is only contributing a small piece, consider setting up a 401K through your rental company.  You'd have to start paying yourself a small salary, but you could immediately loan the money back to the company for cash flow for new purposes.  Once you're paying yourself a salary, your company can then contribute 32K to your 401K.   Depending on the structure of your business, your wife may be able to do the same through your company.



feelingroovy

  • Bristles
  • ***
  • Posts: 264

So don't pay down the car loan early? Very interesting. I guess I just see that loan balance and its like looking a whole big pile of stupidity and wastefulness. Maybe its good to have that hanging over me as a reminder. :)


Oh, I thought you were already planning on selling the Cadillac, since you realized that wasn't worth it anymore.  Don't pay it off--sell it and get something reasonable for cash.

I think your rental business is the beans.  I suspect that nereo's 11 year estimate to FI is going to be the worst case scenario.  If you're reinvesting all the profits on the rental business, how long would it take you to double that $2k/month?  That's when you'll be FI.

And I agree--keep the student loan, but pay off the LOC and the mortgage, in that order.  Or have you looked into refinancing?  The rates on 15 yr mortgages are still below 4%.

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Good advice from all posts.  You have some of the biggest things correct already, e.g. maximum 401K for both of you. 

Take advantage of posted ideas, work on reducing/eliminating wasted spending, invest after-tax extra in various index funds, and enjoy family time.  Set the cruise control for 5 years or so, then recheck :).

Attached is a spreadsheet with a big ol' "miscellaneous" number to match your $4500/mo OP value.  Use, modify or ignore at your pleasure.

And again - enjoy that 3 month old! :)

MDM, I just now had a chance to look at that spreadsheet. Unreal! Thank you again! :)

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50
You didn't mention what your employer contributes to your 401K.  The max contribution limit to a 401K per year per person is 52K.  Of that 51K, you may contribute 17.5.  So if your employer is only contributing a small piece, consider setting up a 401K through your rental company.  You'd have to start paying yourself a small salary, but you could immediately loan the money back to the company for cash flow for new purposes.  Once you're paying yourself a salary, your company can then contribute 32K to your 401K.   Depending on the structure of your business, your wife may be able to do the same through your company.

Wow. That just blew my mind. I'm clearly not using this company to its max potential. Along those lines, I think I read somewhere on the site that an LLC such as mine can be used to pay health insurance costs for the parties involved. Does anyone know the in/outs of how/if that can be done?

btw, my employer contributes zero to my 401k.

feelingroovy

  • Bristles
  • ***
  • Posts: 264
I'm not a CPA and you should probably talk with one.

I do have both rentals, though, and a different LLC business.

I think there are specific rules about 401Ks on rental income.  Does that rental income go on Schedule E or Schedule C?  If it's C, then I think you'll be able to do it.  If it's on Schedule E, I believe it's considered passive, not earned, income.  So you can't have the 401K.  You're probably still better off having it on E if you already do, though, because then you don't have to pay self employment tax.

My LLC pays for my health insurance.  I was able to get a group plan only because I have an employee.  This lowered premiums for me by only about $25/month compared to a sole proprietorship plan.  I can deduct my LLC's contribution to my employee's health insurance as a business expense on schedule C, but not mine.  As the owner, my health insurance costs get deducted on the 1040 under "self employed health insurance."  The big difference is the deduction is after self-employment tax.

LLCs differ though, depending on whether they're taxed as a partnership, sole proprietor, or corporation.  So it depends on your setup.

ibleedirish

  • 5 O'Clock Shadow
  • *
  • Posts: 50

[/quote]

I think your rental business is the beans.  I suspect that nereo's 11 year estimate to FI is going to be the worst case scenario.  If you're reinvesting all the profits on the rental business, how long would it take you to double that $2k/month?  That's when you'll be FI.

[/quote]

Prices in the area have gone up dramatically, (great for the 6 I have, not as good for the next 6-10) but we still think that inside of 3 years we should be able to double what we have. And yes, the more I look at things, with reduced personal debt, that really would get us to a good place. Thank you all for your help.