Hey, everybody.
For some background, there's this thread:
http://forum.mrmoneymustache.com/ask-a-mustachian/advice-for-weird-financial-situation-mid-20s-with-$1mm-of-real-estate/I am 29 with a net worth of roughly $750-800k. Since that post, my Internet business collapsed (it's ok, I saved all the money). It only generates $500-1000 a month now. I've added quite a bit more rental property to my portfolio, so I now collect gross rents of $11,200 with expenses of about $5,000 including PITI, evictions, vacancy, repairs. I have had basically every horrible situation imaginable happen (comes with the territory when you have 30ish units) and am confident that I can continue to weather any storms thanks to great property management, insurance, and a badass legal team.
I also decided that having over 60% of my expenses attributed to housing was stupid. I rented out my residence and moved into an RV (volkswagen rialta) financed at 4% over 12 years for a total housing cost of $100/mo no matter where in the country I am. I have goals of international travel later, and this will allow me to park it in RV storage at $15/mo instead of paying for an empty apartment back home or breaking a lease. It has really given me tons of freedom.
My personal expenses for everything including housing are now $500/mo, $400 of which is food and toiletries. I would spend more on concerts, going out etc except...
I quit my old job, took 8 months off, and got another. I'm still working for the man, which sucks, but it pays much better than the old $50k job....$120k at minimum to be exact. I plan on doing this for 2-3 years (if the oil and gas industry does not collapse) and then finally realizing my dream of backpacking around the world for probably 2 years. At that point, I will probably move to an awesome location and get another less stressful job that offers a lot of free time. Although I am not sure if that exists in the US. This current job has me working 12 hour night shifts every day...weekends, holidays, every day...in freezing weather. However, it is the only way I can see to generate that kind of income for someone as young as I am, even with my fancy degrees.
I am basically going to endure 720-1080 days of misery to reach the pot of gold at the end of the rainbow.
I am wondering how to allocate funds to set myself up for secure financial independence at that point. I should have roughly $15,000 a month of investable assets while I am at this job and have no life and thus am not spending money.
I would like to max out my residential mortgages at get 5 more at 30% down, 30yr fixed 4%. This should boost my income an additional $2,000 a month. Leveraged, I get 25-75% cash on cash returns.
At that point, I will be using commercial or portfolio loans to acquire more property. They usually have 5 year adjustable rates, so I will probably do a fatter down payment for these. Do you think this is wise or at this point should I buy in cash or buy another asset class?
I have 10% of income (max) going into an ESPP that discounts at 15% and it's good timing due to the state of the oil industry.
I have another 15% (10% of that is match) going into a traditional 401k. My allocation is 35% US small cap value, 35% us large cap, 15% foreign (incl emerging) large cap, 15% foreign (incl emerging) small cap. I am not interested in bond returns and if I was going to buy an REIT I would just buy a rental property.
For whatever is left over, what is the best investment vehicle? I have thought about a taxable stock account with an allocation matching my 401k, notes purchased through a broker in states with good foreclosure laws like Texas or Georgia, even oil and gas leases.
From what I can tell, most RTW travel budgets are about $2000 a month for backpackers. I will obviously exceeding that but I would like to have a big safety margin and also do remote investing and saving while I travel.
As an additional safety net, I found a way to make $10k per month working only one month a year. Or more if you can stand it, but I would only want to do it for a month. I would probably do this the first couple years of FI to cover living expenses, so whatever else I make is saved.
Am I exposing myself to too much risk? I am about 50% leveraged and will be more like 60% if I continue buying property. 30 year terms, 4% rates. My expenses are $6k a year, probably double that if I didn't have a job and had free time. I am healthy, single, no kids and no interest in ever having them. When I see landlords go under, most of the ones I see have families, kids, new cars and live a nonmustachian lifestyle, have more leverage at worse terms than I do, etc so I would LIKE to think I'm ok, but what is the consensus?
Do I even really need to be putting myself through this?
I am posting this here because you are the only people crazy enough to understand what I am doing and why I do it. Is this a solid plan or unrealistic?
[Mod Edit: Fixed URL.]
