Author Topic: What if there's no tax?  (Read 2592 times)

Islander973

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What if there's no tax?
« on: August 19, 2019, 07:30:15 AM »
Hey guys..

Perhaps it's a stretch, but I thought I'd present my situation. Care to offer your 2 cents?

Also - I'm based in the Middle East and we don't have tax here. I am completely tax illiterate. I also wont get pension since I'm on an international contract.



Scenario:

Me: Male 38, married. Wife is a homemaker with a small side business. 1 daughter 1.5 years old.

Job:
A. Employed with a semi government organization. Stable. Terrible.
B. I work as a consultant for my family's group company. I can do this remotely.
C. I wrote articles covering the startup ecosystem for a magazine. That stopped 2 years ago.

Annual Income: (USD net) = Just above $90,000
A. Net salary = $60,350
B. Net consulting = $32,000
C. = Nil
(Not counted) Wife's side business =  $4,700

Asset Portfolio:
1. Cash in account = $330,000

2. New Investment:
Apartment (ETD December 2019) valued at = $244,000.
My agents surmise a 7% annual return (net). That's about = $13,262 annually (net).
The last payment of = $217,500 is due in mid November

3. Vehicles (gas is dirt cheap here)
- My car = $24,000
- Wife car = $26,500
- Ducati Motorbike = $13,300

Debt: I took out a 7 year cash loan 3 months ago for various “I need to change my life” reasons. Long story.
Net loan amount received = $160,000
Interest rate = 4.99% (it’s ridiculously high here)
Total amount = $200,000
Monthly installment =  $2,400
Tenor = 7 years
(If you haven’t noticed, I intentionally matched my monthly installment with Income B.)

Monthly Expenses:
A. Life Expenses - As high as $2,650 or as low as $2,000.
We decided to simulate our “minimum spending” as a family this March.
Im sure this would change dramatically with life adjustments.

B. Monthly installment - $2,400

Saving: Currently save $2,650 per month.
I’m sure this would change dramatically with life adjustments.

Important Issues:
- Health insurance. I rack up crazy medical bills due to illnesses.
- Domestic market in terrible condition. Forget investing in anything or getting another job.
- I only want to make do until 60. I’m expecting liquidation of the family business.
- I plan to relocate oversees to somewhere way cheaper, way greener. Obvious impact on expenses.
- Big ticket purchase: I aim to buy a small property somewhere and call it home.

Questions to answer:
- Quitting. If I quit now and aim towards financial independence, am I being foolish? When should I quit, ideally?
- Residence. When should I buy a place of my own? How much should I budget for it, if I'm open to international markets? Where?
- Passive Income. What would you do right now if you were in my shoes?
- Life adjustments. What are quick adjustments that I can make right now? Is homeschooling an option you’d consider?
Do I really have to sell the Ducati? :D
- Immigration. Where should I (can I) immigrate to "FIRE"? Public education, health, tax, quality of life, cost of living all come to play.

Feel free to address whatever! If I've missed something, please let me know!






reeshau

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Re: What if there's no tax?
« Reply #1 on: August 19, 2019, 08:49:14 AM »
I think you are going to find actionable advice difficult to obtain, at least until you either find someone from your region / country of residence, or if you can spell out in more detail your expenses and what you think "average" is.  But let me start with a simple one: Why in the world did you take out a $200k loan at 5%, only to be sitting on $330k cash?  If you did not have a specific plan for it, then you are making a $10k per year mistake.  That's even worse than a Ducati.

Although, holding your annually salary in depreciating automotive assets, without any other assets gaining in value, is also not a smart financial move.  Gas may be cheap, but what about insurance, maintenance and taxes?  And the depreciation.  How much are you spending to impress other people, rather than getting just the safe transportation you need?

Islander973

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Re: What if there's no tax?
« Reply #2 on: August 19, 2019, 09:36:40 AM »
I think you are going to find actionable advice difficult to obtain, at least until you either find someone from your region / country of residence, or if you can spell out in more detail your expenses and what you think "average" is.  But let me start with a simple one: Why in the world did you take out a $200k loan at 5%, only to be sitting on $330k cash?  If you did not have a specific plan for it, then you are making a $10k per year mistake.  That's even worse than a Ducati.

Although, holding your annually salary in depreciating automotive assets, without any other assets gaining in value, is also not a smart financial move.  Gas may be cheap, but what about insurance, maintenance and taxes?  And the depreciation.  How much are you spending to impress other people, rather than getting just the safe transportation you need?

Many thanks for the tips and reality check. Nice to see a Dubliner here (I spent 3 years in Dublin for college). Lovely people.

Quick answers:
- I did a basic survey about my monthly expenses with my peers. It's on the low side (not that it can't go lower).
- I took out the loan to buy a small business and quit my job. Negotiations fell apart last minute. Also loans are next to impossible here unless you're employed.
- I consider the vehicles as liabilities and an enjoyable lifestyle choice, since I'd need superhuman powers to handle the heat here without a vehicle. I'm nowhere near frugal, and I have no ambitions to impress anyone (not even anyone here).

You're right about the benefits of finding someone from here, but I do imagine they'd need to be quite knowledgable about financial planning, life planning, and FIRE related concepts.

Keep them coming!

Watchmaker

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Re: What if there's no tax?
« Reply #3 on: August 19, 2019, 10:34:45 AM »
- I took out the loan to buy a small business and quit my job. Negotiations fell apart last minute. Also loans are next to impossible here unless you're employed.

This is still very confusing. So you didn't buy the business... what did you do with the money? Is that part of the 330k cash you have? Why don't you pay back the loan?

Islander973

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Re: What if there's no tax?
« Reply #4 on: August 19, 2019, 11:07:54 AM »
- I took out the loan to buy a small business and quit my job. Negotiations fell apart last minute. Also loans are next to impossible here unless you're employed.

This is still very confusing. So you didn't buy the business... what did you do with the money? Is that part of the 330k cash you have? Why don't you pay back the loan?

Thanks for taking the time to read. Personal loans are not easily issued here, so I figured I could use the liquidity to finance my transition. I will not be able to receive financing easily if I quit (which I wanted to do 2-3 months ago). I do not know what that transition is yet, but I figured it's a good lifeline. One option IS to pay back the loan. And yes, the loan amount is part of the 330k.

Watchmaker

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Re: What if there's no tax?
« Reply #5 on: August 19, 2019, 11:31:45 AM »
- I took out the loan to buy a small business and quit my job. Negotiations fell apart last minute. Also loans are next to impossible here unless you're employed.

This is still very confusing. So you didn't buy the business... what did you do with the money? Is that part of the 330k cash you have? Why don't you pay back the loan?

Thanks for taking the time to read. Personal loans are not easily issued here, so I figured I could use the liquidity to finance my transition. I will not be able to receive financing easily if I quit (which I wanted to do 2-3 months ago). I do not know what that transition is yet, but I figured it's a good lifeline. One option IS to pay back the loan. And yes, the loan amount is part of the 330k.

As Reeshau said, that's a fairly expensive way of maintaining liquidity. Particularly since you don't seem to actually have a plan on what you're using the money for (buying a business?).

If you want to leave your current job, why can't you look for another job?

And what's with this apartment you mentioned? It sounds like you have a balloon payment coming up in November on that, what was your plan for paying that?
« Last Edit: August 20, 2019, 11:14:50 AM by Watchmaker »

Islander973

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Re: What if there's no tax?
« Reply #6 on: August 19, 2019, 11:54:02 AM »
- I took out the loan to buy a small business and quit my job. Negotiations fell apart last minute. Also loans are next to impossible here unless you're employed.

This is still very confusing. So you didn't buy the business... what did you do with the money? Is that part of the 330k cash you have? Why don't you pay back the loan?

Thanks for taking the time to read. Personal loans are not easily issued here, so I figured I could use the liquidity to finance my transition. I will not be able to receive financing easily if I quit (which I wanted to do 2-3 months ago). I do not know what that transition is yet, but I figured it's a good lifeline. One option IS to pay back the loan. And yes, the loan amount is part of the 330k.

As Reeshau said, that's a fairly expensive way of maintaining liquidity. Particularly since you don't seem to actually have a plan on what you're using the money for (buying a business?).

If you want to leave your current job, why can't you look for another job?

And what's with this apartment you mentioned? IT sounds like you have a balloon payment coming up in November on that, what was your plan for paying that?

Loan: Very expensive indeed. I'd like to see this as an opportunity and see what I can do with it. Or just pay the loan back.
Job: Incredibly difficult to find. Economy's terrible. Current job took 7 years to get. Searching in nearby Dubai is an option, but that's also been 3 years and counting.
Apartment: Part of the loan taken will be to pay for the balloon payment. Once payment is done, I'll have a balance of $112,500 (which is a combination of loan balance and savings).

reeshau

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Re: What if there's no tax?
« Reply #7 on: August 19, 2019, 03:23:48 PM »
So, regarding the apartment:  is there not a mortgage available for it?  I would expect a secured mortgage to be a lower interest rate than an unsecured personal loan.  Using cash on hand to py the balloon seems lazy--It's just the solution at hand.  Don't settle for that, if you wouldn't finance your balloon by taking out the personal loan right now, if you didn't already have it.

I get that you won't go car-less (or AC-less) in the Middle East.  But the Ducati is a toy.  Think that you are, in effect, financing it because of this outstanding loan.  While life should have its pleasures, I did not see any deep description of your effort to open a motorcycle repair shop or aftermarket racing shop.  You don't mention dissatisfaction with your job specifically, but you were ready to spend six figures on a gamble to leave it, or move out of the country.  Neither option is highly compatible with maintaining  a luxury like the Ducati.

You can be more or less hardcore than MMM's example, or anyone else's.  What the successful people here have all done, though, is think really deeply (and talked extensively with their spouse, as applicable) about their priorities in life.  When you have that in line, then the spending decisions are fairly obvious, if not necessarily easy.  It sounds like you have a lot of possible solutions in mind, but you don't know what problem you are yet solving.

In any case though, I don't think many will take you seriously with the Ducati still in the picture.

Villanelle

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Re: What if there's no tax?
« Reply #8 on: August 19, 2019, 03:37:50 PM »
Given the lack of details, and the lack of a future plan, specific advice will be difficult.

You said that you matched the income from the family business consulting to your loan.  Does that mean you tailored to loan to fit that income stream, or does it mean you can scale up/down that income stream as needed. 

As for wear to immigrate, what passport(s) do you hold. Figuring out where you can even legally go will help narrow down to a manageable list, and then you can do some research. 

If you are convinced that the current apartment is a good investment, can you find more?  Perhaps you could quit work (or quit the job you hate most) and become primarily a landlord.  Not without risk, but if you are fortunate enough to live in a place that actually has rentals that make money, this may be worth considering. 

AMandM

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Re: What if there's no tax?
« Reply #9 on: August 19, 2019, 04:09:53 PM »
I'm sorry, but quitting your job looks to me like a pretty distant possibility.
You have a net worth of 330,000 - 200,000 + 244,000 - 217,500 = 156,500.
Once you make the balloon payment on the apartment, you'll have $112,500 in liquid assets. You'll still have the loan payment covered by your consulting and you'll still have living expenses that are only about half covered by the rental income. If that money can't be invested, then you need your job to keep from starving.


Islander973

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Re: What if there's no tax?
« Reply #10 on: August 21, 2019, 03:35:16 AM »
So, regarding the apartment:  is there not a mortgage available for it?  I would expect a secured mortgage to be a lower interest rate than an

Easy champ, every sane person would appreciate being taken seriously. We all have our learning curve right? You seem smart, so take a moment to absorb that this is literally my second post, and an awakening towards serious life-change. Through years of reflection. With spouse. She's even read my posts. We're in.

Can you rephrase what you said "Using cash on hand to py the balloon seems lazy--It's just the solution at hand.  Don't settle for that, if you wouldn't finance your balloon by taking out the personal loan right now, if you didn't already have it." I couldnt quite understand it.

Sell the Ducati. Noted. It was implied in my original post with the ":D" funny smile. I've been a sport bike rider and track hobbyist for over 15 years. Even considering teaching it professionally. The Ducati is a midlife-crisis dream-bike-gift from me to me. Let me grieve.

Moving on, I actually like what you've said about setting out priorities and really understanding what the next way forward is, and yes you're absolutely right that I (that means we) have a list of different options, but kind of stuck in a loop. Even discussed it with a life coach. I did assume I'd find people who've been in that "stuck" position.

I guess I did everyone here a disservice by not disclosing more details. I'm actually impressed you folk took the time to read my post and reply. Very much appreciated. Please look at my below post, and feel free to ask for whatever details I've missed

Hello everyone!

It's a great pleasure to see all you great souls in one place!  My name is Adam and I live and work in a tiny desert island in the Middle East.

Im 38 years old, married, with a beautiful 1 year old daughter. I aim to retire by 45 and quit as soon as possible. I work as a Startup Counselor and Marketing Expert for an IGO (employed). I previously ran my own business, and dabbled in writing (published writer).  Most of the Middle East is tax free (indirect taxes and VAT - thats it) so I am completely illiterate and lost when I read about financial planning here!

I spend my time reading, hanging out with family, playing with my Jack Russell, and offroading in my jeep. I ride my Ducati during the winter. Yes, I have much to learn.

This is what I'm seeking: (in no specific order)

1. Less work, stress, and pain. More priority to family, travel, reading, being. I suffer from long term depression, anxiety, and chronic migraines. I also had 2 bouts with skin cancer. It changes you. May God keep you all safe!

2. Inner reconciliation between my spirituality and wage/money/materialism slavery. Taking the time to address subjects of personal fulfillment, purpose, and explore methods of positive contribution to humanity.. and pursue them in a way that is productive and enjoyable. (Work in progress)

3. Methods of building financial autonomy. I accept advice and wire transfers.

4. Connect with nature and live a more meaningful, empathic, and responsible life. This part includes minimalism/frugality/eco-living/immigration.

5. A MENTOR. Someone (online) who can offer direction, inspiration, or anything at all that would help. It's a tiny island.

Quick questions!
- Is there somewhere (or someone) on this forum who I can present my case to? Financial, life direction, relocation? anything!
- Are there are any "group initiatives" that put us together and accommodate our similar goals? Partnerships, collaborations, residential solutions etc?

My best,
Adam



Here are scenarios and options we're considering:

Building Passive Income to Cover Spending:
50% from: New apartment was bought with an off-plan price, and we expect rent no later than Jan 20. That rent would cover at least half of my annual expenses.I purchased it with over $10k discount (it's not my first real estate buy) and got a waiver on government fees (another $10k discount). We can safely good rental demand due to location, and capital appreciation the day it gets delivered. 5 and 10 year projections seem promising for further appreciation.

20% from: Second step is to further build on my wife's small business to double profits. It shows promise and I can assist her as an Entrepreneur Counselor. It's already happening. It just needed time considering motherhood. (This does contradict with immigration, as it requires extensive local market knowledge)

30-50% from: It seems I'll need to formulate an equation that would suit my priorities, ideals, and goals. See below.

Formulating Life Direction:
We'd appreciate finding a sense of purpose, servitude, and a calling embedded in our lifestyle and naturally our professions/roles. I'm talking about servitude to humanity. Fortunately for us, my wife is a nursery teacher and certified in teaching English as a second language. The name escapes me. I am also a startup and communications counselor. I assume that it's best to offer some type of value online, considering that we wish to be mobile, slightly offgrid, in a nature setting. This is entirely new for us.

Ideas:
- Online App for improving communication /presentation skills (spoken/written). New territory.
- Wife teaching part time at a nursery in the vicinity
- Me considering being certified in teaching to do the same
- Find a network of business/communications trainers and join their seminars with profit sharing and very welcomed travel. Was in discussions with the Dale Carnegie institute of NY to join them as a trainer. They offered me the full agency for the country which required some money I wasnt willing to part with.
- Online professional writing (attempted partially - I'm in discussions with another writer in Dubai and a translation office in Bahrain to collaborate some kind of mutual partnership. Hmm.)
- Online translating of English/Urdu/French/Arabic/Persian. Did some online research and we simply cant compete with neither quality, quantity, price, nor speed. Perhaps this can be offered as an offline business, or in live communications dialogue. I'll brainstorm more ideas.
- Small (and suitable) business acquisition in a target country of residence (more below). Last serious attempt pursued after 1 year of research, scouting 4 suitable options, conducting negotiations with each, lawyer, accountants, diligence, the works. It just didnt pan out.) I might try this again.
- Become an adventure travel guide or entrepreneur, considering I visited over 25 countries and understand the concept quite well. So well I was highlighted in the Oman Times during their Tourism Expo. I was scouting for a small tourism business to buy there. Nowadays with the instagram informal business boom, I could easily offer my services with literally zero overhead. My health got in the way, and I realized that my energy is limited (and considerably so for the service sector).
- Invest in multi purpose property and finance both passive income and your residence: Explored options in Oman and Sharjah, Ajman in UAE. I can afford them with some squeezing. Ongoing. I didnt find anything I'd consider LIVING IN.. and I certainly dont have the money to finance 2 additional properties.
- Explore real estate investment as an industry, and see where I fit. I enjoy learning about this subject and undergoing a nice spike in the learning curve for both domestic and international property transactions particularly from Bahrain. I could expand on that and even offer it online.
(This list will expand and contract as we filter more deeply and do a swot with some guidance)

We already agree on our ultimate goal (our real real retirement) which is to finance buying a large courtyard house in a very beautiful yet impoverished area, connect with the locals and offer free food and classes to develop their language and business skills and empower them to take charge of their lives. God willing. Pakistan seems like an optimal choice considering my wife spent significant time there before Dubai. Her mother is also a real estate mogul. I'm currently trying to organize a trip (it's very cheap to go there) to guesstimate what kind of budget this dream would need and adjust.

Target Countries/Immigration:
They may seem random, but they are/have been a part of our upbringing. They are also quite low-cost in some form or another.
- Dubai. We both have family there. It's Dubai. Probably most promising city in the world. Only fools would say otherwise (sorry, much love).  Yes it's loud but most of the UAE is a ridiculously beautiful natural reserve.
- Bosnia. I havent found a better allrounder so far. Combination of low cost, developing economy, educated citizens, beautiful landscapes, and ultra low cost property and living expenses ($100k will get you a large house and acres, and you'd live like a king with $500 per person/per month). I was in discussions to buy a small motel in a great location there, but our due diligence brought up too much dirt. Ongoing.
- Switzerland/France. The family (extended family) have a house right on the border, in a beautiful hilltop in a rural area just outside the nearest town. Cost of living is equal or less than Bahrain.  Spent most of my childhood there. I consider it my second home and know all the ins and outs of running it. I also speak French. I enjoy studying real estate there, and have attempted to move there by means of employment, business acquisition, and study immigration. I always considered a freebie that I should capitalize on, but big tax numbers harsh visa laws discouraged me.  Please ask if you wish I expand.
- Oman. Strong network of friends there. Attempted to move by means of employment, business acquisition. After a lot of hard work (and pulling strings), I secured an awesome interview with the Head of Tourism Projects of the government of Oman (who actually was in charge of establishing the Ritz Carlton in Bahrain). It went awesome. He quit shortly after. Lots of stories.
- OTHER. Why so open? Because during my extensive travels, I realized that are ALWAYS beautiful spots with demographic niches, micro economies, and thriving businesses and professions ANYWHERE you go. Life finds a way. I do have a criteria though, but something tells me I’m going on too much here.

Monthly Expenses:
We are pretty happy where we are at. We get to enjoy small pleasures like fancy bottled drinks and a few dates and outings during the month. Since cars are a necessity here, we have 2 cars. We always imagined one would be in another location serving a more functional purpose. Cars are bought with full service packages here and insurance costs peanuts (about $200).

Building Mobility:
The Jeep I have is actually a full camper one, which can definitely accommodate my family, including Chai (that's my dog).  It has been fitted out over the last few years to use inside the car as well as an adjacent awning/tent for 4...  and offers us more versatility and lower residence costs as we make the transition. I'd rather not sell my other vehicles as they can be relocated to Bahrain, Dubai, France, or a new target country. It's not ideal, but we'll have a shade over our heads and fun stories to tell.

I'm sure you're seeing a pattern:
1. Rearrange finances
2. Build mobility and financial autonomy
3. Focus on target country
4. Start/shift efforts there

I feel like I'm all over the place. Help!
« Last Edit: August 21, 2019, 05:01:02 AM by Islander973 »

Islander973

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Re: What if there's no tax?
« Reply #11 on: August 21, 2019, 03:43:48 AM »
Given the lack of details, and the lack of a future plan, specific advice will be difficult.

You said that you matched the income from the family business consulting to your loan.  Does that mean you tailored to loan to fit that income stream, or does it mean you can scale up/down that income stream as needed. 

As for wear to immigrate, what passport(s) do you hold. Figuring out where you can even legally go will help narrow down to a manageable list, and then you can do some research. 

If you are convinced that the current apartment is a good investment, can you find more?  Perhaps you could quit work (or quit the job you hate most) and become primarily a landlord.  Not without risk, but if you are fortunate enough to live in a place that actually has rentals that make money, this may be worth considering.

I have posted a fair bit more of information just above :)
- It means I tailored the loan to fit that income stream. It's coming from the family business, and is a fairly reliable one.

- Me and wife hold Bahraini passports. We both come from mixed backgrounds but were born here. That means the GCC countries are all very welcoming and I dont need a permit to jump there. Long-term visas and residency countries are a bit tricky to identify. Having said that, I did apply for both Canadian and Australian immigration before. I got the Australian years ago, but life came in the way. We decided that we wont waste more time trying to jump hoops and see which application goes through. We'd rather use our wits and go where our money is welcomed.

- Landlord idea: I love it. I dont think I can afford it right now. I net with $112k once I settle the apartment in November. I'm trying to use that money to good use. Ideas?

Islander973

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Re: What if there's no tax?
« Reply #12 on: August 21, 2019, 03:47:19 AM »
I'm sorry, but quitting your job looks to me like a pretty distant possibility.
You have a net worth of 330,000 - 200,000 + 244,000 - 217,500 = 156,500.
Once you make the balloon payment on the apartment, you'll have $112,500 in liquid assets. You'll still have the loan payment covered by your consulting and you'll still have living expenses that are only about half covered by the rental income. If that money can't be invested, then you need your job to keep from starving.

Appreciate the feedback buddy. What would you do with the $112,500 if you were in my shoes? What's the best way to cover the other half of my living expenses? There's more info on my situation posted above. Thanks again

FYI If I were to live in Bosnia or rural areas of France - with ultra low cost property and living expenses ($100k will get you a 4 bedroom house with decent land, and you'd live like a king with $500 per person/per month) - my apartment rent would already cover my expenses, while my consulting income is ongoing. 20 years living there would cost me $240k.

I'd also need about $100K to get a place to live/let. I'm also pretty good at business concept development and the area is thriving with adventure and outdoor tourism (which so happens to be my thing :D). I'm sure I can put something together. That, or get some job to make-do.

My living expenses triple while I'm here.
« Last Edit: August 21, 2019, 04:50:09 AM by Islander973 »

Watchmaker

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Re: What if there's no tax?
« Reply #13 on: August 21, 2019, 08:40:52 AM »
I'm sorry, but quitting your job looks to me like a pretty distant possibility.
You have a net worth of 330,000 - 200,000 + 244,000 - 217,500 = 156,500.
Once you make the balloon payment on the apartment, you'll have $112,500 in liquid assets. You'll still have the loan payment covered by your consulting and you'll still have living expenses that are only about half covered by the rental income. If that money can't be invested, then you need your job to keep from starving.

Appreciate the feedback buddy. What would you do with the $112,500 if you were in my shoes? What's the best way to cover the other half of my living expenses? There's more info on my situation posted above. Thanks again


Islander, thanks for the additional information, I think that will help you get better advice.

I'd invest a large portion of the remaining $112k (an keep a portion as an emergency fund). I don't know what your investing options are like in Bahrain, but I'd look for a way of investing in a mutual fund or etf indexed to World or US Equities. A quick google makes it look like that is possible (through CitiBank, for example) though I don't know if fees or taxes would be onerous.

After I'd done that, I'd keep investing whatever I could monthly into those index funds, eventually adding some (~20%) fixed income investments as well. I'd do that until those investments were worth 25 times what I needed to cover my living expenses.

You have a ton of ideas of things to do with your life. I don't think we can help you narrow down that list much--each of those things could be done successfully, or could fail. But if your goal is to become FI, the safest option is probably sticking with your current work.

reeshau

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Re: What if there's no tax?
« Reply #14 on: August 21, 2019, 10:28:46 AM »
Can you rephrase what you said "Using cash on hand to py the balloon seems lazy--It's just the solution at hand.  Don't settle for that, if you wouldn't finance your balloon by taking out the personal loan right now, if you didn't already have it." I couldnt quite understand it.

What I meant was, you seemed to be set on using your cash to pay the balloon on the apartment, just because you have it to hand.  But, this would leave your personal loan outstanding.  So, in effect, you now have a 5.99% mortgage.  (Not exactly, unless the apartment is collateral for the personal loan)  So, did you mean to do this? Would you do it again today, if all you had was an idea to start with?  Or, would it be better to research mortgage options to roll over your current loan, and pay back your expensive personal loan.  It's more effort, but in most of the world I would expect you to come out better financially.

It really worries me that you are counting on price appreciation to make money on your rental.  Maybe that's normal in your local area.  But any landlord here wants rent to more than cover expenses, not merely cover half.  Real Estate isn't my thing, but there is a sizable group here whose discussions you can follow.

Finally, you have an interesting list of areas to look at.  I don't begrudge you that Dublin isn't on it--housing is ridiculous for anyone just landing.  I am surprised you call France / Switzerland low cost...I am on holiday in the Berner Overland now, and It's the most expensive week we have he in a decade.  Of course, I am paying "mountain prices" for everything, but even without that, Switzerland is expensive everywhere, it seems. If you know a cheap place where I can still get my Alpine sunshine, I'm all ears.

Watchmaker

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Re: What if there's no tax?
« Reply #15 on: August 21, 2019, 10:56:21 AM »
It really worries me that you are counting on price appreciation to make money on your rental.  Maybe that's normal in your local area.  But any landlord here wants rent to more than cover expenses, not merely cover half.  Real Estate isn't my thing, but there is a sizable group here whose discussions you can follow.

Reeshau, I think you may have slightly misunderstood his comment about the apartment. I think he was saying the net income ($13k) covers half his personal spending, not half of the apartment's cost.

But it does sound like he may be cash flow negative on the apartment (assuming that 13k net is after maintenance/management fees/etc but before the loan repayment). Islander, can you clarify whether you are cash flow positive or negative on the apartment? What is the gross rent?

Islander973

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Re: What if there's no tax?
« Reply #16 on: August 24, 2019, 11:00:06 AM »
Can you rephrase what you said "Using cash on hand to py the balloon seems lazy--It's just the solution at hand.  Don't settle for that, if you wouldn't finance your balloon by taking out the personal loan right now, if you didn't already have it." I couldnt quite understand it.

What I meant was, you seemed to be set on using your cash to pay the balloon on the apartment, just because you have it to hand.  But, this would leave your personal loan outstanding.  So, in effect, you now have a 5.99% mortgage.  (Not exactly, unless the apartment is collateral for the personal loan)  So, did you mean to do this? Would you do it again today, if all you had was an idea to start with?  Or, would it be better to research mortgage options to roll over your current loan, and pay back your expensive personal loan.  It's more effort, but in most of the world I would expect you to come out better financially.

It really worries me that you are counting on price appreciation to make money on your rental.  Maybe that's normal in your local area.  But any landlord here wants rent to more than cover expenses, not merely cover half.  Real Estate isn't my thing, but there is a sizable group here whose discussions you can follow.

Finally, you have an interesting list of areas to look at.  I don't begrudge you that Dublin isn't on it--housing is ridiculous for anyone just landing.  I am surprised you call France / Switzerland low cost...I am on holiday in the Berner Overland now, and It's the most expensive week we have he in a decade.  Of course, I am paying "mountain prices" for everything, but even without that, Switzerland is expensive everywhere, it seems. If you know a cheap place where I can still get my Alpine sunshine, I'm all ears.

Ok so I took out a loan in preparation for the balloon payment. It's a cash loan because I hate loans and I want to leave my job as soon as possible and be out of debt too. Mortgages are low interest because they lock you in for decades not years. Also, mortgage loans arent issued to overseas property. What am I missing?

I am not counting on price appreciation to make money from my rental. I am counting on receiving the rental (hopefully). I have purchased something I would also be happy to use and raise my daughter in.. and well i still think it's a good buy for both personal and investment reasons.

Finally, I would have loved to move to Dublin. It's your damn weather.
As for Switzerland/France... France is very cheap around the alps, or "rhone alpes" (They also refer to the as the Swiss Alps, hence the confusion. Or maybe I'm just confused). Try places like Megeve, Morzine, Avoriaz, Samoens. If you want to live close to Geneve, try Annemasse.


Islander973

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Re: What if there's no tax?
« Reply #17 on: August 24, 2019, 11:04:00 AM »
It really worries me that you are counting on price appreciation to make money on your rental.  Maybe that's normal in your local area.  But any landlord here wants rent to more than cover expenses, not merely cover half.  Real Estate isn't my thing, but there is a sizable group here whose discussions you can follow.

Reeshau, I think you may have slightly misunderstood his comment about the apartment. I think he was saying the net income ($13k) covers half his personal spending, not half of the apartment's cost.

But it does sound like he may be cash flow negative on the apartment (assuming that 13k net is after maintenance/management fees/etc but before the loan repayment). Islander, can you clarify whether you are cash flow positive or negative on the apartment? What is the gross rent?

Not sure I got you, but the apartment isnt even ready yet. Im just doing hypotheticals. It's expected to perform the way I mentioned. If that's the case, monthly rent would pay back half the monthly loan installment.

AMandM

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Re: What if there's no tax?
« Reply #18 on: August 24, 2019, 01:49:28 PM »
I'm sorry, but quitting your job looks to me like a pretty distant possibility.
You have a net worth of 330,000 - 200,000 + 244,000 - 217,500 = 156,500.
Once you make the balloon payment on the apartment, you'll have $112,500 in liquid assets. You'll still have the loan payment covered by your consulting and you'll still have living expenses that are only about half covered by the rental income. If that money can't be invested, then you need your job to keep from starving.

Appreciate the feedback buddy. What would you do with the $112,500 if you were in my shoes? What's the best way to cover the other half of my living expenses? There's more info on my situation posted above. Thanks again

I would invest it in an index fund, but I live in the US. You say you can't invest where you are. What are your options? Money markets, bonds, ...?
Quote
FYI If I were to live in Bosnia or rural areas of France - with ultra low cost property and living expenses ($100k will get you a 4 bedroom house with decent land, and you'd live like a king with $500 per person/per month) - my apartment rent would already cover my expenses, while my consulting income is ongoing. 20 years living there would cost me $240k.

I'd also need about $100K to get a place to live/let. I'm also pretty good at business concept development and the area is thriving with adventure and outdoor tourism (which so happens to be my thing :D). I'm sure I can put something together. That, or get some job to make-do.

My living expenses triple while I'm here.

I agree with those who said you and your wife need to think more about where/how you want to live, and in particular about where/how you want to bring up your daughter and any other children you may have in the future. Rural/urban? Near family? Any preferred language? Educational opportunities? Medical care? Then do some more fact-finding so you have a more solid estimate of what it will cost.

If the Bosnia/rural France scenario is what you want, and if your estimate of living expenses is correct, you're almost ready to pull the trigger.  Keep working (a) to build up an emergency fund, (b) till the rental is operating and (c) while you do research on the costs of living (including taxes!). Make the balloon payment in November. Then, assuming your projections are correct, your $112.5k will buy a house, your consulting will cover the loan payments, and your rental income will cover your living expenses.

The bolded part is important, which is why I would wait to move until you see whether the rental pans out as expected. I assume your calculations include allowances for vacancy, capex, management, etc. If you're a bit short it sounds like your wife's business or a new venture of yours could fill the gap.

Watchmaker

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Re: What if there's no tax?
« Reply #19 on: August 27, 2019, 01:46:56 PM »
It really worries me that you are counting on price appreciation to make money on your rental.  Maybe that's normal in your local area.  But any landlord here wants rent to more than cover expenses, not merely cover half.  Real Estate isn't my thing, but there is a sizable group here whose discussions you can follow.

Reeshau, I think you may have slightly misunderstood his comment about the apartment. I think he was saying the net income ($13k) covers half his personal spending, not half of the apartment's cost.

But it does sound like he may be cash flow negative on the apartment (assuming that 13k net is after maintenance/management fees/etc but before the loan repayment). Islander, can you clarify whether you are cash flow positive or negative on the apartment? What is the gross rent?

Not sure I got you, but the apartment isnt even ready yet. Im just doing hypotheticals. It's expected to perform the way I mentioned. If that's the case, monthly rent would pay back half the monthly loan installment.

If the monthly loan repayment is twice the size of the net rent, we say that apartment is "cash flow negative" which just means more money is going into it that is coming out. This doesn't necessarily mean it is a bad investment (principle pay down and appreciation might mean you are still making money), but it's not really a good sign. In the US, anyway, I think expert RE investors are normally only interested in cash flow positive deals. But I am no expert; you might want to ask over at the RE investing forum.