Author Topic: Accredited Investors - Why A 4% SWR?  (Read 41312 times)

mr_orange

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Accredited Investors - Why A 4% SWR?
« on: June 06, 2015, 12:07:31 PM »
I have read some of the studies that form the basis for the 4% SWR.  The main one I read was the Trinity study and I have noticed others have cited several similar studies.  All of them seem to include some mix of stocks and bonds from Wall Street as the key investing vehicles and some blended rate combined with inflation assumptions yields something close to a 4% SWR to avoid the portfolio "failing" in the long run; or in a time period typical for retirees. 

Given that the securities laws have recently changed under The JOBS Act there are many equity-based crowdfunding portals offering fairly safe investments with yields of 10% or greater.  Hard money loans on real estate are common vehicles with double-digit yields and low risk if purchased correctly through reputable site. 

It seems to me that many folks on this forum would be better-served trying to figure out ways to increase their yields passively than slicing cents out of their budgets.  Both are obviously helpful for a FI goal, but to me getting an extra 2.5 or more percentage points of yield would increase the SWR to 6% or more (dare I say even 7%...gasp!), decrease the required stache for FI, and decrease the duration to get there.  Wouldn't this activity be a good use of energy and dare I say BETTER than clipping coupons or hyper-focus on cutting every last expense?  I realize we have to pay taxes on income, but past some point expense cutting seems to cut into real quality of living. 

Any thoughts?  I realize this may be a controversial topic on the forums, but I figured I'd ask anyway.  Do your worst!
« Last Edit: June 06, 2015, 12:57:13 PM by mr_orange »
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

sol

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Re: Accredited Investors - Why A 4% SWR?
« Reply #1 on: June 06, 2015, 12:43:54 PM »
Higher returns are certainly possible.  Even the stock market does better than 10% per year much of the time.

The problem is the sustainability of those returns.  If you read any of the SWR literature, you quickly figure out that the problem isn't your % investment return, it's broad spectrum economic collapse that delivers many consecutive years low returns coupled to high inflation. 

Getting 10% or more this year is easy. Getting it next year might also be easy.  Getting it in 30 years?  That's anyone's guess.

All of these calculations are based on many decades of historical return data.  If you're investing in new vehicles without that kind of track record, then maybe the current returns continue and maybe they don't.  Ten years ago I could get a 6% return on my bank's savings account.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #2 on: June 06, 2015, 01:03:08 PM »
The investments aren't new.  The securities exemptions allowing for public solicitation are new.  People have been borrowing hard money for decades and at a low LTC they're pretty safe investments; especially in primary markets with growth. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

libertarian4321

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Re: Accredited Investors - Why A 4% SWR?
« Reply #3 on: June 06, 2015, 03:55:13 PM »
Hard money loans on real estate are common vehicles with double-digit yields and low risk if purchased correctly through reputable site. 

Maybe you know something we don't, but my understanding is that hard money real estate loans offer higher rates because THEY ARE HIGHER RISK loans, (not "low risk").

If they were really a low-risk and low-hassle way to make great returns, don't you think a lot more people (to say nothing of banks and lending institutions) would be doing this?

There are a lot of investments that have salesmen who claim "low risk, low hassle, high return."  I have yet to see one that actually delivered on those promises.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #4 on: June 06, 2015, 04:34:09 PM »
Banks don't issue them because of how the regulations work.  Not all of them are high risk.  You need to know how to underwrite them and pick quality sponsors with good collateral.  It is a skill that can be learned like any other skill and it really isn't all that hard. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

kpd905

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Re: Accredited Investors - Why A 4% SWR?
« Reply #5 on: June 06, 2015, 04:46:11 PM »
Sounds a lot higher risk than an index fund invested across 1,000+ companies.
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mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #6 on: June 06, 2015, 04:49:21 PM »
Perhaps.  It depends on which project you pick.  There is also herd-like risk from the equities market and systemic risk in those assets you can't design out. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

kpd905

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Re: Accredited Investors - Why A 4% SWR?
« Reply #7 on: June 06, 2015, 04:52:55 PM »
How do you actually seek out and find these investments?  It does seem like something that wouldn't be bad to do with a small percentage of your portfolio to add a little high-risk, high potential reward.
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mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #8 on: June 06, 2015, 05:02:49 PM »
There are several new crowdfunding portals.  All you have to do is a Google search and you'll find many.  Some are much better than others.

From there you need to learn how to price risk of loans.  There is strong correlations between the LTC and the risk of the loan.  Finding quality sponsors with good liquidity and great track records is also a nice risk-hedging mechanism.  Of course, those borrowers also generally have lower pricing on their loans too.  Many developers are cash-starved in primary markets right now with the small regional lenders still tight on lending and the market booming. 

And agreed....the amount of your portfolio you devote to these projects should probably be low until you learn how to price them and make good decisions for investing project by project.  You also need to be an accredited investor for most projects right now, but there will probably be funds that non-accredited investors can invest in later this year with Regulation A+ becoming effective on June 19th of 2015.  Late in 2015 expect to see more of these projects available via funds to non-accredited investors.  It will be interesting to see what happens to the yields on the loans with more liquidity in the markets. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #9 on: June 06, 2015, 05:51:52 PM »
Are you funding any projects using this conduit?

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #10 on: June 06, 2015, 06:09:01 PM »
@Another Reader....no, because I operate funds of my own.  With my SoloK I plan to start doing some passive investing like this later this year though because investing in my own stuff is a prohibited transaction. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #11 on: June 06, 2015, 06:47:33 PM »
TANSTAAFL.

Everyone loves RE right now. I just sold all mine.

-W

nobodyspecial

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Re: Accredited Investors - Why A 4% SWR?
« Reply #12 on: June 06, 2015, 07:05:49 PM »
You need to know how to underwrite them and pick quality sponsors with good collateral.  It is a skill that can be learned like any other skill and it really isn't all that hard.
It's very easy you just pick the mortgage backed securities that sombody rated as AAA - how can it go wrong?

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #13 on: June 06, 2015, 07:12:10 PM »
You need to know how to underwrite them and pick quality sponsors with good collateral.  It is a skill that can be learned like any other skill and it really isn't all that hard.
It's very easy you just pick the mortgage backed securities that sombody rated as AAA - how can it go wrong?

This time is different! Prices only go up!

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #14 on: June 06, 2015, 08:39:31 PM »
I'm not sure what any of the latest comments have to do with LENDING money on solid property with 30%+ in equity to cushion downturns. 

Maybe I was wrong about this forum. 

Thanks for any rational comments.  Anyone lobbing ridiculous comments can feel free to post elsewhere.  I appreciate you leaving the garbage out of my thread.  Thanks. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #15 on: June 06, 2015, 09:15:45 PM »
Since you directed this post at accredited investors, most of what crosses my screen is stuff I would not touch.  I have stuck to my rental knitting, not wanting to put a large portion of my assets into projects I can't control.  Seen a lot of pie in the sky numbers as well.   Also seen some fairly sophisticated folks chase the yield and get wiped out.

Banks don't issue them because of how the regulations work.  Not all of them are high risk.  You need to know how to underwrite them and pick quality sponsors with good collateral.  It is a skill that can be learned like any other skill and it really isn't all that hard.

I think I disagree that it's a skill that isn't that hard to acquire.  I have seen banks fund a lot of stupid projects over the years.  Of course, who knows what parameters their underwriters were directed to use.  If you know the developer, know their history, and know if/how they survived the bad times and you are in the same business, then you have the skill needed.


RWD

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Re: Accredited Investors - Why A 4% SWR?
« Reply #16 on: June 06, 2015, 11:08:05 PM »
Hard money loans on real estate are common vehicles with double-digit yields and low risk if purchased correctly through reputable site.

I have done a couple hard money loans on real estate (first trust deed investments) and the interest rate was 11-12%. There were a few inherent problems in addition to the usual risks. One was that all the interest gained from the investment was taxed as regular income. So that takes a significant chunk out of your returns unless you're investing within an IRA. Two, most the loans available (at least through the company I was using) were for large sums which is an eggs-in-one-basket problem. Three, it is hard to keep all your money invested all the time. After a loan is complete there is naturally some delay (sometimes months) before you can reinvest the money again in another loan. In addition, there might not be one available for the amount you have available to invest, so some cash will have to sit idle.

I think REITs are a better way to go if you want real estate exposure because it's more diversified and you won't have cash sitting idle.

SnackDog

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Re: Accredited Investors - Why A 4% SWR?
« Reply #17 on: June 07, 2015, 02:54:31 AM »
Hard money loans are "harder" investment vehicles for most people.  They are hard because one has to understand both the current and future value and liquidity of the specific collateral real estate as well as the credentials of every borrower, a non-trivial vetting exercise which can require significant investment of time.  As others have pointed out, interest rates reflect higher risks (lots of banks lost their hard money loans in past real estate crashes).  There is a reason these people can not get a conventional loan from a bank at 4% interest and must turn to loan sharks.  Hard money lending is best left to the professionals who know best the local real estate market and the players seeking loans.

Lendingclub, which many of us have tried, is a lot less effort and risk for about the same return (10-11%).
« Last Edit: June 07, 2015, 02:58:09 AM by SnackDog »
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WerKater

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Re: Accredited Investors - Why A 4% SWR?
« Reply #18 on: June 07, 2015, 03:14:24 AM »

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #19 on: June 07, 2015, 03:45:15 AM »
Hard money loans on real estate are common vehicles with double-digit yields and low risk if purchased correctly through reputable site.

I have done a couple hard money loans on real estate (first trust deed investments) and the interest rate was 11-12%. There were a few inherent problems in addition to the usual risks. One was that all the interest gained from the investment was taxed as regular income. So that takes a significant chunk out of your returns unless you're investing within an IRA. Two, most the loans available (at least through the company I was using) were for large sums which is an eggs-in-one-basket problem. Three, it is hard to keep all your money invested all the time. After a loan is complete there is naturally some delay (sometimes months) before you can reinvest the money again in another loan. In addition, there might not be one available for the amount you have available to invest, so some cash will have to sit idle.

I think REITs are a better way to go if you want real estate exposure because it's more diversified and you won't have cash sitting idle.

This is a reasonable post as are recent others. 

1.  Yes, invest via a SDIRA if needed.  Tax issues are gone.  My plan is to invest some SoloK dollars passively in other people's projects
2.  Spread your investments out over loans.  This eliminates concentration risk.  You can also simply invest in funds that spread things out if you find good managers too.  This gives you the diversification needed and minimizes concentration risk
3.  This is by far your best point and I agree wholeheartedly.  Most investors simply extrapolate returns and call this their annual yield.  With even a small period of close to 0 yield finding another investment your actual returns go down.  Hence the reason why you should find a fund if you're so-inclined that has a favorable pref and waterfall structure

For the posts above addressing the difficulty in pricing risk I will agree that it is not for novices.  However, my point is that seeking the extra yield and learning things like this seem to be worth the focus.  I'm new to the forums so perhaps stuff like this is already bantered about frequently. 

While I agree that some REITs are worth looking at too they suffer from many of the same market risk issues that equities suffer from.  If you develop the skills needed hard money loans can be good vehicles for heightening the yield of your portfolio.  And yeah....I agree it isn't a free lunch.  I do think the time invested in this activity is a better than time invested clipping coupons for many people though.  That was one of the main points I was trying to make in this post.  Instead of focusing so much energy on reducing expenses in one's life which will eventually lead to some tradeoff in standard of living why not focus some energy on learning to invest better and increase your yield and thus your SWR?
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #20 on: June 07, 2015, 03:54:02 AM »
Lendingclub, which many of us have tried, is a lot less effort and risk for about the same return (10-11%).

Doesn't Lendingclub issue non-secured loans?  To me those may be easier, but they're also riskier if they're unsecured.  A nice FICO is great, but I trust the intrinsic value of a real asset with a low LTC and security more than I do a stellar borrower borrowing on an unsecured basis. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #21 on: June 07, 2015, 05:44:50 AM »
How many real estate loans gone bad have you unwound?  There are good reasons banks prefer work-outs to foreclosure.  Especially when the cycle enters a downturn.  Take the loss, but manage the loan and the asset until you can minimize it.  Now imagine 100 or 1,000 investors in a fund with no control doing the same.

Agree with you about the unsecured lending portals, but a larger portfolio and some vetting of the borrowers is supposed to diversify the risk and minimize losses.  Liquidity is better because of the short term nature of the loans and by staggering pay off dates.  No different than a bank managing a credit card portfolio.  We will see how this works out when the SHTF next time.


mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #22 on: June 07, 2015, 06:05:01 AM »
If we invest in loans locally we'd probably benefit if they go bad.  We have the crews to finish the projects and could take advantage of the upside in a default event and a seizure of collateral for product we control.  This, of course, assumes we control the projects. 

I do agree that non-payment is a risk.  I'd never invest in a loan in a place like California with ridiculous foreclosure laws.  Those loans should trade at rates FAR higher in price because of this risk IMO and thus given the market pricing of them I would pass. 

The pooled loans would still have a sponsor in control of them.  Buying into a structure where the site is trying to say they're not securities and "everyone is in control" is a bad idea for the reasons you cite.  You need to be able to pick loans well, price risk, and avoid states with buyer-friendly foreclosure statutes.  Bankruptcy is also a risk, but this still boils down to risk pricing and picking quality sponsors. 

Consumer debt scares me.  Perhaps the unsecured debt sites (LendingTree, Prosper, etc.) allow you to buy into pools or some such.  That would be a better way to invest IMO if it is offered.  I'm not very familiar with them.  I also think that if they're short-term this is really a negative for me.  You have reinvestment risk and may not be able to fetch the yield necessary on a risk-adjusted basis or you may simply be too busy to shop for loans every few months as they mature.  Real estate loans have longer durations and are subject to other risks, but I like the fact that they're secured loans.  If you offered me the same yields for secured and unsecured loans it would be hard to justify claiming that the unsecured loans dominate the secured loans; especially since the operators on the real estate sites generally have great FICO scores too.  Someone above made reference to the fact that they're using hard money because they "can't get bank debt" or some such.  This is true, but probably not for the reasons in the poster's head when they wrote the passage.  Fix and flip loans, development (interim construction) loans, land loans, etc. are all hard to get from local lenders.  Sometimes it is more of a function of that lender's concentration or inability to lend on certain product types based on how their regulators are governing them and not strictly on risk. 

Are there bad hard money loans?  Sure.  Are there bad consumer loans....you bet.  You just need to be able to price the risk appropriately.  It certainly isn't a free lunch, but the price of said lunch is worth the nutritional value if it decreases your FI date.  Simply getting a few extra points of yield out of your portfolio decreases your FI multiple from 25X to 20X or 17X.  That juice is worth the squeeze IMO. 

Further, insulating yourself from the behavior of the broader economy is a good diversification mechanism.  Yes, you also subject yourself to market risk in each locale you invest in, but this can be managed if you spread your bets among projects and markets. 
« Last Edit: June 07, 2015, 06:51:52 AM by mr_orange »
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #23 on: June 07, 2015, 06:37:39 AM »
Further, insulating yourself from the behavior of the broader economy is a good diversification mechanism. 

You are in no way insulating yourself from the behavior of the economy by investing in real estate loans.  Real estate is cyclical and is connected to the broader economy.  You are too young to remember much about the last horrific crash in the early 1990's and the RTC clean up.  Been a lot of other dips and problems sending various sectors of the economy into recession and accompanying real estate loan workouts since then, such as the hotel industry post 9/11.  And let's not forget how much money was lost in real estate investments from 2009-2013.

Banks like their credit card portfolios.  My guess is their overall yields are significantly higher than what an individual can derive from a Lending Club.  No matter who is in it, that business is all about portfolio management.  The money is not pooled, you loan your money to individuals.  It's not for me, but the owner of this site plays in that space, maybe read his posts for a sophisticated amateur's experience.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #24 on: June 07, 2015, 06:46:15 AM »
Losing money in real estate is one thing.  Losing 30% of value in markets where they have only dipped 15% historically (as in...during the mortgage crisis) is another.  At 70% LTC or lower I think it is a pretty good bet if the project fetches north of 10% yields and the sponsors have good credit, liquidity, and a proven track record.  Worst case the asset can be rehabilitated, foreclosed on, and leased for rents until the market recovers. 

The biggest risk in life is not taking any.  Holes could be poked in pretty much any investing strategy.  Nothing is foolproof. 

Pools are not the only way to get diversity.  Investing small amounts across several syndicated assets is another.  The latter requires more effort and certainly isn't a free lunch.  It is worth it though IMO. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Min

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Re: Accredited Investors - Why A 4% SWR?
« Reply #25 on: June 07, 2015, 06:57:04 AM »
mr_orange, my concern is what you want to do with this information. Given your returns, it seems like you are capable of getting substantial returns on your hard money real estate investments. Having said that, quitting your job with the expectation that you will be able to spend 7% of your portfolio's value every year, adjusting for inflation, leaves you with very little margin for error. After all, our beloved 4% SWR is better understood as a 4% real withdrawal rate; while getting a 4% nominal rate of return is one thing, a 4% real rate of return after volatility is another entirely. (You are spending down your principal in some cases, after all.)

Just as concerning is the lack of liquidity in hard money loans. Roofs have to be replaced. Out of pocket maximums are hit. In a genuine emergency, getting liquidity from hard money loans is difficult. You could compensate for this by having a really substantial cash buffer, but that's going to drag down your returns.

Moreover, you might even have a reasonable expectation that you could achieve substantial returns for the foreseeable future. That said, changes in the regulatory landscape could lead to a secular decline in real rates of return for hard money loans. There are always intelligent things to do, but basing your retirement strategy on the ability to achieve outsized returns for decades is really, really risky. Even if you are as good as you think you are, you aren't good enough to make a 7% withdrawal rate safe if new regulations make hard money loans substantially less profitable for individuals such as yourself.

That said, my biggest concern is that capital allocation is just really hard in general - and spending down your capital at an aggressive rate while you are allocating capital to illiquid projects scares the heck out of me. I have no idea how diversified you are, but are you in a position where any single default would wipe you out? You might be inclined to say no, but in a world with a 7% real withdrawal rate (which is really more like 10-11% nominal, after volatility), even losing 1/10 of your portfolio could be catastrophic. More money has been lost reaching for yield than at the point of a gun, and this strategy requires you to be good - consistently - for decades. I also used to live in the DFW area and I'm pretty familiar with real estate in the area. The area has had a decent run and for the most part avoided the worst of the real estate crunch. But a repeat of the S&L crisis would be tough to survive for a hard money investor if your risk is concentrated there.

If you genuinely believe that you can a 7% safe withdrawal going forward, then an additional year worked would result in a 5.6% safe withdrawal rate. One more year would give you a 4.48% safe withdrawal rate. One more year after that, just three additional years, would give you a 3.6% safe withdrawal rate. If you're as good as you think you are, then even a single additional year worked after when you think you would be ready would result in a substantially lower withdrawal rate. And here's the best part: a lower withdrawal rate means that you don't have to be as good.

Holding an index fund is eminently easy. I am really good at spending money that gets automatically deposited to my bank account. I'm good at some other stuff as well - some of which is supercharging my becoming FI. That said, I'm not going to count assets that require me to be good towards FI. I'm more than happy to reinvest capital from much more profitable assets over to index funds, but I will be FI once my dumb money is sufficient for financial independence. The same approach might make sense for you as well.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #26 on: June 07, 2015, 07:17:04 AM »
Fair enough.  Some valid points above.  I just find it hard to believe that folks with above average intelligence would have a hard time getting a few extra points from their portfolio even if they have to be quasi-active to do so.  I do get that market shocks are hard to predict and make fools of everyone from time to time though and that this is probably a great equalizer.  All of the discussion I see around this topic centers around equities markets which are super efficient and summarily discards less liquid assets. 

For the record....I don't really think I'm exceptional at picking these investments.  I just think it is pretty easy to do and many of the concerns highlighted are overblown if you invest in primary markets with good sponsors with good credit and liquidity. 

Another thing....one does NOT have to do this for 30+ years to increase their portfolio size.  They could invest for fewer years, increase their asset pool, and convert to a boring old 75/25 stock/bond portfolio that drives the 4% SWR.  Your SWR could then be 4% on a bigger portfolio that is achieved sooner. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #27 on: June 07, 2015, 07:53:08 AM »
You are a part time real estate developer with the optimism and enthusiasm of every real estate developer I have ever known.  You likely have had some successes and you are waiting to monetize the ramped up projects you are now building.  You have the experience and connections to evaluate deals as they show up.  The world is your oyster right now.

The trick with this type of investing is to recognize there is a large element of musical chairs involved.  With your experience and a tempering of your enthusiasm (the area where most developers fail), you should be able to see the down turn coming and plan appropriately.  The average person on this forum will not be able to do that.  They can't recognize the projects with accurately projected demand and reasonable capital structures.  They won't see the storm brewing on the horizon because they aren't active in the real estate world every day as you are.

I'm all for taking reasonable risks.  You can make double digit returns if you know the business. Generally, I can "sniff the dirt" and make a decently reasoned calculation about the outcome of a project in an area with which I am familiar.  But I have over 30 years of experience.  Most folks here have no experience.  And in my opinion, lack of experience makes these investments very risky.

Roland of Gilead

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Re: Accredited Investors - Why A 4% SWR?
« Reply #28 on: June 07, 2015, 08:12:03 AM »
I have bought 14% return bonds (12.5% par, bought below par) in a mining company I have tracked for a number of years.  I like the return but I cannot go "all in" on stuff like this and increase our SWR.

Min

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Re: Accredited Investors - Why A 4% SWR?
« Reply #29 on: June 07, 2015, 08:28:02 AM »
Another thing....one does NOT have to do this for 30+ years to increase their portfolio size.  They could invest for fewer years, increase their asset pool, and convert to a boring old 75/25 stock/bond portfolio that drives the 4% SWR.  Your SWR could then be 4% on a bigger portfolio that is achieved sooner.

That's pretty much my point. At least when I'm out of the accumulation phase, I would strongly prefer relying on passive dumb money for my living expenses. I've been very aggressive up to this point and I will continue being aggressive until I am FI. But once I'm ready to downshift into a more relaxed lifestyle, I'll likely go with a ~3% withdrawal rate and just live off of dividends. I'm agnostic about whether or not the 4% rule will have the same rate of success going forward, but I intend to build up a wall of permanent capital that will never be touched. After that I can regroup and reconsider my options in post-FI life. We can have an interesting conversation about dividends, capital appreciation, and share buybacks, but I am allergic to selling good assets. I don't want to have my plan for FI rely on selling assets to fund my lifestyle; it's just not my jam.

Another Reader

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Re: Accredited Investors - Why A 4% SWR?
« Reply #30 on: June 07, 2015, 08:38:49 AM »
Another thing....one does NOT have to do this for 30+ years to increase their portfolio size.  They could invest for fewer years, increase their asset pool, and convert to a boring old 75/25 stock/bond portfolio that drives the 4% SWR.  Your SWR could then be 4% on a bigger portfolio that is achieved sooner.

That's pretty much my point. At least when I'm out of the accumulation phase, I would strongly prefer relying on passive dumb money for my living expenses. I've been very aggressive up to this point and I will continue being aggressive until I am FI. But once I'm ready to downshift into a more relaxed lifestyle, I'll likely go with a ~3% withdrawal rate and just live off of dividends. I'm agnostic about whether or not the 4% rule will have the same rate of success going forward, but I intend to build up a wall of permanent capital that will never be touched. After that I can regroup and reconsider my options in post-FI life. We can have an interesting conversation about dividends, capital appreciation, and share buybacks, but I am allergic to selling good assets. I don't want to have my plan for FI rely on selling assets to fund my lifestyle; it's just not my jam.

+1, especially to the "wall of permanent capital' and "allergic to selling good assets."  I'm getting a decent return deleveraging and optimizing the rentals right now.  Rents are funding a lot of my retirement, along with a nice kick from a couple of pensions.  I don't pay a lot in taxes, which helps significantly.

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #31 on: June 07, 2015, 09:05:26 AM »
I'm not one to claim that "beating the market", especially in RE, is impossible. I've done so handily for the last decade (to be fair, that last decade was the easiest possible time to make money in RE as long as you stayed away from it/shorted it for the first few years).

The thing is, higher returns are always going to require either higher risk, considerable work on the part of the investor, or both. Both of those things sound pretty sucky to me given that my goal is not to spend my time evaluating RE deals. OP has a million plus in the bank and plenty of ability to quit now, but spends WAY too much money - and seems to only be interested in making more. I don't like to pigeonhole people, but this is the kind of mindset that is NEVER going to lead to a life free from worrying about/thinking about money, which is the goal of most people here.

So, OP - what are you going for? I think if you look at the situation honestly, your higher returns are only going to persist through a some combination of effort, risk, and luck. Is that how you want to be "retired"? I'm no IRP zealot but it's hard to see how that situation is "financial independence".

rmendpara

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Re: Accredited Investors - Why A 4% SWR?
« Reply #32 on: June 07, 2015, 09:51:32 AM »
Returns in RE (especially hard money loans secured by RE), must offer higher rates in order to compensate for additional risk.

Maybe you are able to get an overall higher return over time because you are a disciplined investor and always stick to your tried and true criteria. That's great! However, don't confuse active income with investment income. Investing in RE notes is active investing at best. I personally view it as a second part time job... though of course you don't work for anyone else.

With that, I DO think of it as a possible source of income during and throughout FI (or early retirement), but you need to segment it separately from the rest of your "traditional" portfolio. For example, 1mm @ 4% (traditional investments) will yield ~40k of income, plus your hard money loans of 150k @ 10% (RE notes) will get you an additional ~15k of income.

Note that even a blended return is ~4.7% in this case (55/1,150). It would not be prudent to allocate a large amount of capital to high yield notes, but that allocation is really up to you. This is the way I'd go about thinking about what a reasonable allocation to RE notes is for your situation.
Bulls make money. Bears make money. Pigs get slaughtered.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #33 on: June 07, 2015, 10:51:38 AM »
So, OP - what are you going for? I think if you look at the situation honestly, your higher returns are only going to persist through a some combination of effort, risk, and luck. Is that how you want to be "retired"? I'm no IRP zealot but it's hard to see how that situation is "financial independence".

This is a solid post....and yeah, I do plan to "work" in real estate and don't really plan to halve my monthly expenses to become "independent" earlier than I could if I simply worked a few more years and made more money.  Telling people that they spend way too much money is also rather condescending if it's their prerogative to maintain a certain standard of living and they're capable of achieving it through honest hard work.  Based on my current run rate I figure I can work another 5 or so years, structure my assets in some fashion similar to the 75/25 in the Trinity studies and keep my spend rate level.  Why is this somehow less noble than growing crops in the back, downsizing my house to half the size, and riding a bicycle in the 100-degree Texas heat several miles if I want to gather groceries?  The latter scenario would probably allow me to be independent now.  Why is one somehow more noble than the other? 

Balance in one's life is almost always the most fruitful path.  I have no issue with people being frugal or eliminating "waste," but overhauling one's whole life because you hate your working situation and are striving to FIRE early seems extreme to me.  Why not just find another job if you don't like it that much?  Find something more flexible where you can do a side hustle.  Take some courses to get some in-demand skillsets and find another line of work.  For god's sake do something instead of festering in a situation you dislike that much.  Life's too short to be unhappy even if it gets you to be FI sooner. 

Anyway....to each his own. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #34 on: June 07, 2015, 11:18:50 AM »
Some background reading on the forum could have saved you a lot of time. Most of us enjoy stuff that's free (ie, that bike ride). And if it's 100 degrees, we move somewhere we like better. Or suck it up!

If your goal is to maintain your lifestyle and you need more money to do that, by all means make more money. I'll toast your success when you get there.

-W

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #35 on: June 07, 2015, 11:45:54 AM »
Hah...I could probably use the exercise.  I got down to 167 (~12% BF) on my weight last year, but have since ballooned back up to around 200.  On a 5'11" frame 200 is too much for sure.  I enjoy the gym a lot more than the Texas heat.  This year has been pretty mild thus far though so a good bike ride wouldn't hurt much.

Moving from Texas would probably carry a state income tax; hardly Mustachian.  It would also require moving away from some of the best real estate markets in the country which would probably cut my income significantly and increase FI duration. 

This year I plan to try to cut some spending.  Getting one of my three kids out of Montessori School will help.  The other two will be in public school in about 3 years.  Hopefully that will be a good FI point if I can cut spending some.  I can't see cutting it to some of the crazy levels discussed on the forums, but maybe if I hang around long enough I'll get enough peer pressure to do so ;-)
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

sol

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Re: Accredited Investors - Why A 4% SWR?
« Reply #36 on: June 07, 2015, 11:57:22 AM »
I do plan to "work" in real estate and don't really plan to halve my monthly expenses to become "independent" earlier than I could if I simply worked a few more years and made more money.  Telling people that they spend way too much money is also rather condescending if it's their prerogative to maintain a certain standard of living

Have you even read the blog?  You keep rephrasing the comment to tell us again how you have missed the point.

I'll reiterate for you in plain language.  The MMM blog isn't about making the finances of retirement work out, it's about optimizing your life experiences by reducing your mindless spending.  It's not condescending to tell you that you're spending a bunch of money on things that don't really contribute to your happiness level, it's a favor and you should say thank you every time someone does it for you again.

Your spending level is extravagant.  You spend money on some things that add absolutely zero value to your life.  You spend money on other things that you think will add value, but really only make you miserable.  In both of these cases you would be better served by reevaluating your real priorities in life, figuring out what really makes you happy, and focusing on spending your money on those things and reclaiming your free time that you are otherwise trading away for money to spend on the things that don't do anything for you.

Your "standard of living" line is a complete pile of bullshit.  Steaming, smelly, disgusting, repugnant, and you're smearing it all over yourself like it was some kind of armor.  You could spend HALF of what you currently do without really noticing any difference in your standard of living.  Your quality of life is determined by good food, good sleep, a stable and secure financial situation, a sense of purpose and accomplishment, and a rich and rewarding social environment.  Not your fancy cable package and imported sports car and wine cellar and art collecting hobby.

Quote
Why is this somehow less noble than growing crops in the back, downsizing my house to half the size, and riding a bicycle in the 100-degree Texas heat several miles if I want to gather groceries?  The latter scenario would probably allow me to be independent now.  Why is one somehow more noble than the other? 

Not less noble, less optimal.  The difference is that the more frugal scenario will actually make you HAPPIER in addition to giving you FIVE EXTRA YEARS OF LIFE to enjoy at your new optimized happiness level.  You can certainly work the extra five years and then retire to a life wanton idleness.  That's the easy path, the default direction for most people.  This site is trying to offer you an alternative, but I don't think you've read enough of it to really understand what's on offer here. 

Growing (some of) your own food is a rewarding experience shared by thousands of years of your ancestors, but lost to most people in the past three generations.  Riding a bike, even in the heat, reconnects you with the natural world in a way your air conditioned motorized throne room cannot, and improves your physical fitness as a bonus.  That smaller house might actually fit your lifestyle better, or be more conveniently located to the people and places you want to visit, and be easier to maintain and clean.  These things are not sacrifices, they're upgrades.  Consumer drones can't see this perspective because they've spent a lifetime being inundated by advertisements for prepackaged crap food, ever-fancier ways to get less exercise, and enormous soulless McMansions.  Capitalism has degraded your life experiences by convincing you to crave things that suck.

sol

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Re: Accredited Investors - Why A 4% SWR?
« Reply #37 on: June 07, 2015, 12:00:03 PM »
Why not just find another job if you don't like it that much?

For many of us, that's the ideal plan.  In detail, their plan is to reduce their mindless spending on things that only detract from their quality of life, then quit the rat race to pursue a job that they DO like.  A job that may not pay very well, but that they find personally rewarding, that confers a sense of meaning on their lives and motivates them to rise every morning and work cheerfully towards a goal they believe in.

For some people here (the more unimaginative ones) the "job" they aspire to is just wanton idleness.  I think these people can't envision a purpose they would actually find motivating, can't understand why a person would WANT to get up and work at something, to accomplish something, to leave a mark on the world.  For these people, their bad experiences in the workforce thus far have cursed them with this notion that a "job" necessarily entails miserable slavery, that responsibility is a burden rather than a privilege, that coworkers are adversaries rather than teammates, that bosses are overlords and not facilitators, that being part of a larger mission means forsaking your personal life goals.  I think that's a large portion of this community.  You can see why those folks don't want to "just fine another job" because to them, any job is death sentence.

Quote
Anyway....to each his own.

If you really believe that, you probably wouldn't have joined a board full of aspiring early retirees and then argued so vociferously against early retirement.  Do you also join Honda forums and then make a bunch of posts about Toyotas?  Gardening forums and say we should all buy our food from grocery stores?  Guitar forums and then try to convince everyone to play drums?

Your behavior here is deliberately inflammatory.  Personally, I kind of like people who are deliberately inflammatory so you're okay in my book, but maybe you can see why most folks here aren't very thrilled with your contributions?  You're pissing in their soup, then getting all defensive when they complain.
« Last Edit: June 07, 2015, 12:03:53 PM by sol »

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #38 on: June 07, 2015, 12:12:36 PM »

Have you even read the blog?  You keep rephrasing the comment to tell us again how you have missed the point.

Yup....I have.  And it seems if you don't agree with it you're somehow wrong.


Quote
Not your fancy cable package and imported sports car and wine cellar and art collecting hobby.

Not really sure how this applies to me.  I do have cable, but I don't have a sports car or art collecting hobbies.  I do collect real estate though. 

Quote
Not less noble, less optimal.  The difference is that the more frugal scenario will actually make you HAPPIER in addition to giving you FIVE EXTRA YEARS OF LIFE to enjoy at your new optimized happiness level.  You can certainly work the extra five years and then retire to a life wanton idleness.  That's the easy path, the default direction for most people.  This site is trying to offer you an alternative, but I don't think you've read enough of it to really understand what's on offer here. 

Perhaps.  Or perhaps I have read it and have made a conscious decision that the "optimal" path described is sub-optimal for me.  I am sure there are plenty of others that probably feel the same way.  Much of what is advocated I find hard to believe will make me happier somehow.  I'm watching college baseball on cable as I type this and this is one of the things I love.  My dad and I used to go to UT games when I was very young and this brings out all sorts of great memories.  I am sure those ticket to the ballgame were somehow sub-optimal though as was the trip to Mount Playmore I had with my three young daughters yesterday.  I'm sure we would have been happier growing food in the back :-?

Quote
Growing (some of) your own food is a rewarding experience shared by thousands of years of your ancestors, but lost to most people in the past three generations.  Riding a bike, even in the heat, reconnects you with the natural world in a way your air conditioned motorized throne room cannot, and improves your physical fitness as a bonus.  That smaller house might actually fit your lifestyle better, or be more conveniently located to the people and places you want to visit, and be easier to maintain and clean.  These things are not sacrifices, they're upgrades.  Consumer drones can't see this perspective because they've spent a lifetime being inundated by advertisements for prepackaged crap food, ever-fancier ways to get less exercise, and enormous soulless McMansions.  Capitalism has degraded your life experiences by convincing you to crave things that suck.
I for one have zero desire to grow my own food.  There are plenty of others that are far better at doing it than I am.  Bike riding is fine, but I prefer the gym.  Cardio + weight training is better than cardio alone. 

A smaller house would certainly be easier to maintain and clean, but would likely be more cluttered with 3 small kids.  Smaller houses closer to town would also be more expensive be a long stretch. 

For a lot of your other points I think we'll have to agree to disagree.  It is nice that people can live the life of their choosing though.  Kudos to those that enjoy growing their own food, biking to work, and slashing all frills.  It just isn't for me.  I'm sure there are pretty easy ways for me to cut out waste though. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #39 on: June 07, 2015, 12:18:59 PM »
Your behavior here is deliberately inflammatory.  Personally, I kind of like people who are deliberately inflammatory so you're okay in my book, but maybe you can see why most folks here aren't very thrilled with your contributions?  You're pissing in their soup, then getting all defensive when they complain.

If challenging the idea that growing your own crops somehow makes you more noble is inflammatory than I am guilty as charged brother.  When people start getting upset about things it may signal that their beliefs aren't as closely held as they think they are. 

Making more money or learning to invest better are easier paths to FI to me if you're willing to work for them.  The problem is that most people aren't willing to put in the effort to achieve either of these items and thus they're stuck with slashing their expenses and their lifestyle.  Many of these people are then pretending that this somehow makes them happier.  I am sure that this is the case for some, but painting everyone with these broad strokes is dubious at best to me. 
« Last Edit: June 07, 2015, 12:24:59 PM by mr_orange »
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

Cpa Cat

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Re: Accredited Investors - Why A 4% SWR?
« Reply #40 on: June 07, 2015, 12:35:32 PM »
Why not just find another job if you don't like it that much?  Find something more flexible where you can do a side hustle.  Take some courses to get some in-demand skillsets and find another line of work.  For god's sake do something instead of festering in a situation you dislike that much.  Life's too short to be unhappy even if it gets you to be FI sooner. 

This is a similar question the one addressed in the Lottery vs Dream Job Debate of 2015:
http://forum.mrmoneymustache.com/share-your-badassity/would-you-rather-win-the-lottery-or-have-the-perfect-job/

For many of us, all jobs suck. Some suck more and some suck less, but all suck compared to not working.

You say, "Life's too short to be unhappy even if it gets you to be FI sooner." I agree with your "Life's too short" premise - but the conclusion to that sentence is: "Life's too short to continue working just so I can have a few more luxuries."

I don't hate my job. I never hated it. But I did hate being on someone else's schedule. I hated that I didn't have time to do the other things I enjoyed. I disliked office politics, commuting, eating lunch at my desk, working 60 hours a week, etc.

None of the things I hated would have magically disappeared if I had just taken a few classes or switched workplaces. FI was the cure for those things.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #41 on: June 07, 2015, 12:46:11 PM »
Fair enough....FI is always dominant and I think we can agree on that.  The question is what is more optimal:

1.  Slashing one's spending and somehow assuming that this is the optimal choice for everyone to get to FI sooner.  I think this is fairly myopic

OR

2.  Growing income and assets quicker while also learning to invest better while maintaining current spending and thus standard of living

Claiming that number 1 above is ALWAYS the optimal choice in all situations is ridiculous to me.  Some people have posh jobs and work 20 hours a week from home making six figures.  I have some programmer buddies doing this.  Is it reasonable to assume that they should slash their spending by a factor of 2 to achieve FI a few years sooner?  I will try asking one of them tonight when they come over to eat bbq and they'll probably find it amusing. 

Look, I understand one of the major goals of the forum is to encourage people to spend less.  I have no issue with that at all.  What I take issue with are the threads where people immediately tell you you're spending too much knowing NOTHING about your life situation, personal circumstances, how much you enjoy what you're doing, AND WHAT MAKES YOU HAPPY.  I also take issue with the idea that the 7.5%ish portfolio yield that gets us to a 4% SWR is somehow universal if you can do better.  I also think that people should learn to increase their income and in many cases this would be far more optimal than decreasing spending past some logical threshold. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #42 on: June 07, 2015, 01:34:49 PM »
I'll sum up:
Mr_Orange: 'Merica! TV! Big stuff! Lots of it! Need more money, gotta hustle.

That is a choice you're free to make. It will mostly inspire pity around here, though.

-W

sol

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Re: Accredited Investors - Why A 4% SWR?
« Reply #43 on: June 07, 2015, 02:30:14 PM »
What I take issue with are the threads where people immediately tell you you're spending too much knowing NOTHING about your life situation, personal circumstances, how much you enjoy what you're doing, AND WHAT MAKES YOU HAPPY.

I don't think we need to know anything else about your life situation, other than that you're spending $11,000 per month, to know that you're spending more than necessary to maintain your current level of happiness.

You seriously believe that there's no fat in your budget, nothing you could cut without adversely affecting your standard of living?  That's ridiculous.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #44 on: June 07, 2015, 02:34:49 PM »
Quote
You seriously believe that there's no fat in your budget, nothing you could cut without adversely affecting your standard of living?  That's ridiculous.

Please point to where I make this claim.  Thanks. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #45 on: June 07, 2015, 02:47:41 PM »
I assume Sol is referring to this hilarious quote.

Quote from: mr_orange on June 06, 2015, 09:57:39 AM
"3.  I figure a $10k/month budget is definitely something achievable without sacrificing much on our standard of living.  This would put our stache requirements at between $2M and $3M.  The right number is really a function of the answer to Question 2 above.  If we could bump it up to 7% the stache requirements drop to more like $1.7M.  Not all of our net worth is tied up in income-producing assets so there may need to be some conversion here to make this math worth right....feel free to lecture me on this if needed"

-W

Quote
You seriously believe that there's no fat in your budget, nothing you could cut without adversely affecting your standard of living?  That's ridiculous.

Please point to where I make this claim.  Thanks.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #46 on: June 07, 2015, 02:50:58 PM »
Yup....and nowhere in that quote does it say that there is no fat in my budget.  As one of the critical thinking skill posters above points out I even asked for help with this.  Somehow we got off on this witch hunt, which has been quite entertaining. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

waltworks

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Re: Accredited Investors - Why A 4% SWR?
« Reply #47 on: June 07, 2015, 02:59:14 PM »
Well, I read that as "$10k is our goal number/minimum happy budget". Is that not what you meant?

-W

Yup....and nowhere in that quote does it say that there is no fat in my budget.  As one of the critical thinking skill posters above points out I even asked for help with this.  Somehow we got off on this witch hunt, which has been quite entertaining.

mr_orange

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Re: Accredited Investors - Why A 4% SWR?
« Reply #48 on: June 07, 2015, 03:02:43 PM »
Read the passage again.  It means what it says.  $10k/month won't sacrifice our standard of living any.  Below that I think it probably will.  My budget is right there in the other thread for anyone to review. 
12/30/16                                       06/30/17
Fire Totals:                                   Fire Projections:
-$7k/month - 68.1% Funded             86.1% Funded
-$8k/month - 59.6% Funded             75.4% Funded
-$9k/month - 53.0% Funded             67.0% Funded
-$10k/month - 47.7% Funded           60.3% Funded

-Calculus gives speculation the deceptive guise of investment ~Benjamin Graham
-The future ainít what it used to be ~Yogi Berra

sol

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Re: Accredited Investors - Why A 4% SWR?
« Reply #49 on: June 07, 2015, 04:59:50 PM »
Please point to where I make this claim.  Thanks.

I was inferring that claim every time you said something like "reducing our expenses would cut into our standard of living".  Like in the post immediately preceding this one, where you just did it again.  If it wasn't intended, then it's been pretty misleading.

My budget is right there in the other thread for anyone to review. 

Challenge accepted.