Need a direction and plan of attack!

[jmr5x]

Hey  all!  New in town here and love what I see.   I'm going to give you a run down of a current situation and goals and see what you seasoned mustachians suggest!

Topic Title: Am I going in the right direction?

Life Situation: Married Filling Jointly, no dependants, 32 and 28 years old

Gross Salary/Wages: 140,000

Pre-tax deductions: 6,500 in my retirement plan, company pays 6% and I do 10% managed by NationWide (I would like to up this to the max for next year )

5,000 in wifes 401k, dont have any details on this account yet.


Rental Income, Actual Expenses, and Depreciation: 18,000 of this is positive cash flow after mortgage insurance fees are paid from rentals that we just started this year. This does not include paying ourselves to manage, I will be doing all moderate repairs myself unless I can make more money at work than it costs to do them. Planned on doing 1 a year but somehow went overboard!

Adjusted Gross Income: This is the first year for rentals so we are not sure on expenses yet.

Taxes: ??

Current expenses: Tracking as we speak,  New to this game and never tracked expenses before.
75,000 mortgage on a 15 year note with 14 years remaining 3% interest for our personal home 700 per month

110,000 in mortgages, 15 year notes for 5 units of rental property. have 20% equity before we did renovations 900 per month

40,000 in debt between credit cards and student loans
Vehicles paid for.  Maxing out payments on this to get rid of the high interest


Assets: 250,000 in real estate, 30,000 in vehicles and equipment

Liabilities: Description, original loan amount, rate, original length, and monthly payment (which should be consistent with a spreadsheet PMT calculation).  Add current balance and time remaining if close to final payment.

Specific Question(s):  Leave current job as soon as possible and maintain a positive cash flow from rental income to equal what is currently made.  This will be a long road I am sure. Planning on doing side work as remodeling on the side to supplement income.

Wife will retire in 25 years from her job, she likes it and it is great insurance.

Thought about possibly refinancing all properties into 1 mortgage and get some of the equity out to pay off the high interest credit cards and student loans. 

Is the right track to keep maxing out retirement at work for the next 5-10 years while also buying as many rental properties as we can until we can bring in 8,500-10,000 a month positive cash flow from them?  These homes would be bought with 20% down and usually cost 40,000 dollars with 2,000-5,000 worth of repairs needing to be done. Work is financing the out of pocket down payments and remodeling costs.

[arebelspy]

Wife will retire from her job, she likes it and it is great insurance.

Is that supposed to read "will not"?  Cause otherwise it reads confusingly (why would she leave if she likes it).

Post the numbers on your rentals--are you including all expenses, even ones you haven't incurred yet, like vacancy and CapEx? (And paying yourself for management?)

Seems like a pretty good start, and if you got to 18k positive cash flow (assuming it's calculated correctly and sustainable) in a year, no reason why you can't be FIRE'd in a year or two.

Probably should take a close look at your expenses, too.

Good luck!

[jmr5x]

We have yet to look at expenses. Well, actually I just started looking at mint last night for my past purchases and it made me sick.  I think I have an addiction to Amazon....   I edited some more details about rentals.  The positive 18k is what we have after just paying mortgage and insurance.  I will do most all repairs. We handle sourcing tenants with no cost advertising.

[jmr5x]

friday night bump

[BarkyardBQ]

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/

[jmr5x]

Thanks! Will update asap with proper organization.

[jmr5x]

updated

[csprof]

40,000 in debt between credit cards and student loans

Breakdown and interest rates would be useful.  But assuming it's like most CC's and that more than 6 months remains before you can pay it off -- jeepers, get that thing out of your face.  If you need to, go to someone like Upstart or Lending Club and get a quick loan to consolidate the CC's and bring the interest rate down to ~7%.

You didn't specify the fraction of income that you're trying to replace (i.e., your salary vs your wife's).  That seems important given that she's going to keep working.

But, to answer your question:  It's almost never a bad idea to maximize tax-deferred savings.  You've got a lot of headroom if you're only doing 11,500 per year between the two of you -- you could hit $36k of pre-tax between the two of you in 2016, saving in the range of ~$10k of taxes (handwave, handwave).  That said, it will, of course, slow down your property acquisition.  But given that you're looking at at least a 10 year horizon, that extra 10k per year will look something like $140k of extra cash in your retirement account after ten years (assuming 6.5%, ignoring inflation - $140k won't be worth as much then, of course.).

You also didn't specify what your vehicles are and/or what your commute is like for estimating transportation expenses, and what other places you might be able to optimize in order to achieve your target faster -- cell phone / cable / internet, for example?