Author Topic: Help! I donít know where to start  (Read 2014 times)

Stillwater702

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Help! I donít know where to start
« on: December 13, 2019, 02:16:08 PM »
Hello everyone,

Im new to the forum. Iím 38yo and would like to retire before age 50, ideally at around 45 years old.
I make 100k annually from my dayjob  and about 30k/year in RE rental income.  My total RE assets is about $1M with about 100k of debt. I paid cash for most  of my properties during the last recession thatís why I have very little debt.  Iím also expecting to receive pension from my government job, the amount will be determined depending on  the age I start withdrawing - Iím still debating if 50 (around 2k/mo) or 60 (around 4K/mo) with their pros and cons.

My passive income from RE is around 2k/mo conservatively.  I am aiming for around 5-6k/mo passive income before my planned midlife retirement with the possibility of returning  to the workforce at 50s depending if I have a family by then. I would like to travel and live an expat life in Southeast AsŪa or LatŪn America my 40s while Iím still single and with no big responsibilities. I travel 3-5 times per year but I would like to experience living in a different country with a low cost of living and have time to pursue my hobbies or other enjoyment in life.

One way to achieve my plan is by liquidating a couple of rental properties these next few months (i will sell 2 out of my 5 properties) which will net me around 300k in cash. I plan to reinvest the cash if a housing price correction happens in the near future. Otherwise I will just put the cash in a savings account because Iím always on the look out for a good real estate deal.

One thing Iím lacking and regret not doing is investing in stocks.  Considering that the stock market is at an all time high, and my current financial situation and goals. What advice would you give me on how to start investing in stocks and when to start?  I donít have a 401k or any other type of investments other than my real estate properties and expected pension.  I did some research and read that I should start by opening a Vanguard account.  Which investing option should I choose? Should I wait until next year or in two years and see what will happen with the stock market? I lost a house in 2008 and made money in 2012, thatís why Iím being extra careful this time.

« Last Edit: December 13, 2019, 02:30:54 PM by Stillwater702 »

fell-like-rain

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Re: Help! I donít know where to start
« Reply #1 on: December 14, 2019, 07:19:38 AM »
You're making 30k a year net from $1 million worth of real estate? I'm not an RE investor, but those sound like hugely underperforming assets. Why would you accept 3% returns? Heck, earlier this year you could have bought US treasury bonds paying almost 3%. If I was in this situation, I would seriously consider liquidating all or most of the RE holdings and investing in mutual funds that a. require no time or effort to maintain and b. would typically give you much better earnings.

In terms of how to get started, I'd definitely recommend setting up a 401k if your work offers it, plus a Roth IRA (you make too much for a regular IRA). Dump in the max you can. Any more cash you want to invest goes in a taxable account. If you don't know much about fund selection, just pick a Vanguard target date or lifestrategy fund that has a stock/bond allocation that looks right for you.

the stock market is at an all time high

The stock market was at an all-time high on March 5, 2013. New all-time highs have been hit regularly over the past 6 1/2 years, during which time the Dow has literally doubled. Which is not to say that the bull market will continue forever, just that "the market is at an all-time high" is a meaningless statement when deciding how to invest.

RWD

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Re: Help! I donít know where to start
« Reply #2 on: December 14, 2019, 08:38:59 AM »
the stock market is at an all time high

New all-time highs have been hit regularly over the past 6 1/2 years, during which time the Dow has literally doubled. Which is not to say that the bull market will continue forever, just that "the market is at an all-time high" is a meaningless statement when deciding how to invest.

Yup.


1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/

life_travel

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Re: Help! I donít know where to start
« Reply #3 on: December 14, 2019, 03:22:43 PM »
Dear OP. From someone who is 45 now and wanting a slow travel in low cost countries , I'd say do it earlier than later.
Of course I'm not an expert or anything so this is just my humble opinion..
We invested in RE( not as successfully as you) without knowing about index funds. Then GFC happened and it took us 9 years before we could offload properties for less what we bought them in 2007.

If you sell all RE, you have 900K. So at4% SWR you are closer to your number than now!
Do you have to wait for pension till 50?
Can you take a reduced number at 40 or 45?

You do know that living in South america or SE Asia can be done on $1000 per month for a single person?
So if you quit soon, say at 40, invest your 900k, live off dividends from your index portfolio in low cost countries for couple of years , allowing the rest to grow into bigger stache..
Another thought. If you quit at 40, try expat life for 2-3 years and DON'T like it, it might be easier to find a new job at 42-45 than 52-55.

Just something to think about.

Ready2Save27

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Re: Help! I donít know where to start
« Reply #4 on: December 14, 2019, 05:06:01 PM »
I think the first step is determining how much money you want to live on- do you need $40k/year? $50k? $100k? This will greatly affect your goals. If you only want $40k, you may even have enough now to retire, or within a couple of years with a high income like yours. Try looking at the pinned investment order as well.

Lady Stash

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Re: Help! I donít know where to start
« Reply #5 on: December 16, 2019, 01:30:05 PM »
I make 100k annually from my dayjob  and about 30k/year in RE rental income.  My total RE assets is about $1M with about 100k of debt.

Nice Assets!  How much of your yearly income are you able to save/invest? 

My personal preference would be to diversify your assets a bit, so you are less exposed in a real estate down-turn.  Do you have enough cash available to max out your 401K/Roth IRA for 2019 and again for 2020?  That will get you some tax-free-growth investments. 

I agree with everyone else, Vanguard index funds are a great way to get into the stock market.   Personally, I would slowly buy stocks over time rather than buy a bunch on a single day, just in case the market tanks.   

Stillwater702

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Re: Help! I donít know where to start
« Reply #6 on: December 18, 2019, 05:09:09 AM »
@fell-like-rain
The $1M includes my primary residence.  But you're still right.  My rent is a bit under market value because I decided to not raise rent on one of my two long-term tenants.  My work does not offer 401K.  Our employer contribute to a public employee pension fund for us.  I will look into the Vanguard lifestrategy or target date that you recommended.  Thank you.

@RWD
Thanks for the links.

@life_travel
Thank you.

I'm sorry about what you've been through during the GFC.  I'm glad you were able to offload them, unfortunately with the long wait and other expenses. 

Your advice resonates well with me.  I don't want to wait until 50s to start traveling or "living the life".  The last couple of decades of my life has been a struggle and sacrifice, although worth it.  I might decide that this next decade (40-50) would be the last chance for me to truly enjoy what I've worked hard for.  At age 50, I may have a different priority.  At late 40s or early 50s, maybe I will have a family or wife / life partner by then. 

During my recent travels, I have met many new friends.  Some of them are doing well in online business.  Some are more budget-oriented, like $1000/mo as you mentioned.  I have lived in SE Asia, and have experienced weeks of living in many other places.  I think a comfortable (with lots of cushion) number for me would be around $5k/mo.  I don't plan to spend $5k/mo, but that is the number that I could probably give up and risk not being able to return to my well-paying job.  It is very hard to return to my job because many employers now prefer lower paid, less experienced, newly-graduate employees.  So, when I leave I have to be ready.

I enjoy RE.  I never thought about selling it all.  But your idea is interesting.  If I sell everything now except one condo where I will be staying, I will have around $800k net.  I've heard about this 4% withdrawal rule that will never let you run out of money.  Where exactly do I invest this?  Sorry for such a newbie question.

@Ready2Save27
Thanks.
I would like to have at least $60k/year from 40-50. 
From 50 onwards, I will start withdrawing from my pension, probably 30k/year.  That will provide me about $90k/year. 
But the first step is to make $60k/year.  I thought I could achieve that with RE.  But active RE investing and landlording also comes with its many pros and cons. I am open to other ideas. 

@Lady Stash
Thank you.
Yes, I believe there might be a RE market correction that's why I am selling at least one property with a good chunk of equity.  I have very mininal debt in RE debt so a market correction will not significantly affect me unless I sell at that time which I will not do. You are correct, I have all my eggs in one basket (or two).  I definitely need to diversify.

Yes, Vanguard seems to be a safe choice as I've seen it mentioned many times in this forum.

Yes, I have around $40k cash right now.

I save a significant portion of my dayjob income because my house is paid for, and i have a little extra coming from the RE rental income.  It also helped that I downsized my primary residence.  I plan to downsize further as I've seen the impact it made in helping me reach my goals faster.

I appreciate all the advice.










Car Jack

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Re: Help! I donít know where to start
« Reply #7 on: December 18, 2019, 06:59:55 AM »
Just to throw it out there......I don't believe your real estate income is "Passive" at all.  Passive, in my mind is money in brokerage accounts invested in mutual funds and ETFs where I literally don't have to do a thing and they continue to produce.  My dad had a number of rental houses and I know from watching him that they are far from passive.  I helped him more than once to replace light bulbs in halls and apartments when a dead beat renter flew the coup leaving 6 months of unpaid rent for my dad to eat.

Stillwater702

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Re: Help! I donít know where to start
« Reply #8 on: December 18, 2019, 12:47:14 PM »
@Car Jack
Yes, it is not passive. If I retire early and keep a couple or so rental properties, I will  have to hire a property manager.  Although having a property manager still doesnít make it passive.  Thanks for the reply.

Linea_Norway

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Re: Help! I don’t know where to start
« Reply #9 on: December 19, 2019, 12:17:21 AM »
I think you should start tracking your expenses. Why don't ypu take your bank transactions from 2019 and see how much you spent.

That 90K you mention after your pension sounds like a very high number. Maybe you could live on much less and retire much earlier if you got a better view of your expenses.
« Last Edit: December 19, 2019, 11:18:58 AM by Linea_Norway »

Stillwater702

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Re: Help! I donít know where to start
« Reply #10 on: December 19, 2019, 03:36:45 AM »
90k May sound high.  But with inflation, i donít know if itís still that  high in 10-20 years. 
I am on pace to make 80k per year, just with pensiůn alone, if I stay working for my current employer until around 55-58. However, that is not my goal. 

My current goal is a minimum of 60k to retire in my 3-5 years.  I believe that is achievable if I make the right moves.  I appreciate the input, @Linea_Norway.
« Last Edit: December 19, 2019, 03:47:20 AM by Stillwater702 »