Young and want to do it right

[underwatermoon1]

Hello Friends,

I am a fairly new reader of the MMM blog which has completely shifted my views on finances. I always dreamed of being financially independent, be able to retire early, so that I can pursue my passion: travel around the world to volunteer my skills/services to communities in developing countries. With the help of this blog, and hopefully anyone here who can offer me some sound advice I think it might be possible :)

Below I have included my financial stats, my question is how I should invest/how can I generate enough passive income/what path should I take to be able to retire comfortably within the next few (5-7) years?

Bank Account Balance: 70K
Annual Income: 76K (tax free since I work overseas)
Expenses: 1K/month for Food & Entertainment only (all other fees such as housing, transportation, internet etc covered by my job)
Debt: 0 (payed off all my school loans last year)
Retirement Account: None
Marital Status: Unmarried, no children
Age: 31

I am currently in the process of buying a condominium in the US which I will rent out as a form of passive income. I am putting 50K down on a 150K condo. Average rent in the neighborhood for this type of condo is: 1,400/1,500. Condo fee: 200/mo, taxes, 150/mo. I plan to pay off my mortgage completely in 2 years.

What do you guys think? Should I pay off my mortgage right away and begin to generate that passive income immediately? Should I invest my money in VTSX and leave it there for the next 5 years or more? Should I plan to purchase a second rental property after this one and thereby increase my passive income in the future? Anxiously awaiting your advice/opinions on how I should proceed in order achieve my goal of traveling/volunteering throughout the world in the very near future.

Many many thanks!

[Choices]

Some people are cut out to be landlords, but not everyone is.

Since you won't be nearby, you'll need help with property management (repairs, finding renters, etc.) and this will cut into your profits. Some tenants might trash your place, and others will be wonderful. Can you stomach having your place empty for a while between renters? Do you have a management company you like and trust? Do you truly understand that you'll be cash flow negative at times? Does your budget include replacing the roof, carpet, A/C, water heater, appliances, etc.?

Investing in index funds instead of a rental is much simpler and cleaner with sooo much less hassle.

Good luck whatever you choose.

[underwatermoon1]

Hi Julie,

Thanks so much for taking the time to reply. You do make a valid point and one I have taken into account.
I do in fact have someone there that I will pay to take care of everything in my absence and I can indeed stomach the ups and downs because I have zero debt and zero expenses, so it's not a big risk for me at the moment.

I would love to learn if you or anyone else have any other tips about where/how to invest my money in the next 5 years so that I can retire early enough to live off of 2k a month and pursue my goals freely.

Regarding index funds, I am a newbie and just learning, so I wonder...do I just pour my money into them as I get payed? As I said, I have no other expenses and I am willing to invest everything I make each year. I don't want my money to sit in a checking account that's for sure.

[csprof]

Hi Julie,

Thanks so much for taking the time to reply. You do make a valid point and one I have taken into account.
I do in fact have someone there that I will pay to take care of everything in my absence and I can indeed stomach the ups and downs because I have zero debt and zero expenses, so it's not a big risk for me at the moment.

I would love to learn if you or anyone else have any other tips about where/how to invest my money in the next 5 years so that I can retire early enough to live off of 2k a month and pursue my goals freely.

Regarding index funds, I am a newbie and just learning, so I wonder...do I just pour my money into them as I get payed? As I said, I have no other expenses and I am willing to invest everything I make each year. I don't want my money to sit in a checking account that's for sure.

You need advise from someone who's done the overseas thing specifically.  I don't know, for example, if you can throw into a Roth IRA when all of your income falls under the foreign earned income exclusion.

I'd probably suggest a new thread retitling to be specifically about savings/investing for foreign income.  Also check the taxes forum.

What you want to do is identify a savings strategy that will:
  - Let you have as much tax-free growth as possible;
  - Let you withdraw before age 65  (see the taxes stickies)
  - Ideally, let you withdraw principal paid in tax-free.

But this is all very situation-specific, and you need to research it in more depth.  See, for example, this bogleheads thread for *an example* of the questions you want to ask:  https://www.bogleheads.org/forum/viewtopic.php?t=140340

[underwatermoon1]

Thank you so much for your reply and advice!

[BlueHouse]

It sounds as if your plan will put your income over the top of the tax free foreign earned income. If that's true, I would think you want at lest that much rental expenses to count against rental income. The higher your rental expenses, the more you can offset against basis. If it understand correctly