Postponing RE - Golden Handcuffs & Unexpected Roadblocks

[Enigma]

So originally I had planned to RE in July 2019.  On March 20th, I requested to be removed from the "2019 Fire Cohort" citing that I do not believe that I will be RE-ing.

I completed a computer IT contract in Oct-2018 and moved back to my hometown area from being overseas.  Real-estate being my hobby the past 10+ years and most of my residual income, I became a licensed Realtor thinking that would be a better part time job and somewhat RE (it wasn't).  It was stressful working for free based on commission which tended to be peanuts.

Oct-2018 until Feb-2019 was extremely turbulent - Roadblocks/Detours:

Aug/Sept – Repairs for property won at auction (unexpectedly wiping out my liquidable funds)
Oct – Changed from overseas Full time IT/Career to hometown part time realtor
Nov/Dec – Rental investment property taxes & insurance became due
Jan/Feb – personal taxes (which were not taken out correctly) became due
March – Golden Handcuffs / Offered a local IT computer job that needed my skillset (Took the job).

The job has a good 401k, excellent medical benefits, HSA, and was more rewarding than being a realtor.  They sought me out and offered more than I was asking.  My Net Worth is almost all investment properties.  That puts a financial strain at the end of the year and beginning.

My new goal is to start focusing on my taxable Vanguard account.  That is after all the tax deferred accounts have been maxed out.

This is the 'general discussion area' and I was wondering who else found that RE wasn't as great of an option and had to make changes near the end and refocus?  I see it from others who have stated 2019 will no longer be their FIRE date.

[Valvore]

I'm not quite near my FIRE date, but I will say that my FIRE plan is always changing depending on new circumstances or new income streams.

A few roadblocks, especially toward your goal date, shouldn't have derailed you so suddenly. Maybe your FIRE plan wasn't as solid as you seemed? (I'm not trying to be mean nor have I read any of your previous postings. I'm just speculating/asking)

This is the 'general discussion area' and I was wondering who else found that RE wasn't as great of an option and had to make changes near the end and refocus?

To answer your question more directly - My FIRE plan is ALWAYS changing because there are just so many options. I could figure out a way to RE right now, its not a great option at the moment. I think the path is whatever you choose. Maybe you'll love this new job and it wont be golden handcuffs but a golden parachute!

[Enigma]

A few roadblocks, especially toward your goal date, shouldn't have derailed you so suddenly. Maybe your FIRE plan wasn't as solid as you seemed? (I'm not trying to be mean nor have I read any of your previous postings. I'm just speculating/asking)

I agree that my FIRE plan isn’t/wasn’t as solid as I thought it was.  I do have a solid monthly residual income but didn’t plan for the end of the year as well as I would have hoped.  With a large rental investment empire there are countless expenses at the end of the year.  My LNW (liquid net worth) is too low to sustain a solid FIRE plan.  Now shifting to increase my LNW substantially from 15% to 50%.

My LNW may have been closer to 5-10% back in Oct-2018 before being hit with countless expenses that I could have planned for.

[Valvore]

That's exactly the reason why I've been hesitant to get in Real Estate investing/land lording. The regular income sounds awesome and seems great... until one big event wipes out your gains for the year. I see why the job/golden handcuffs lured you in.

[Another Reader]

It's difficult to RE when you are not FI.  Based on your difficulties with the newly acquired property and the completely predictable operating expenses, you were not FI.

Yes, you probably need to invest in some paper assets, but you also need to get better at your income and expense projections for your rentals.  You also need a substantial cash cushion when you own rental real estate, as you learned.

Do you have mortgages on the rentals?  Would your numbers improve if you paid some or all of those off?  If your returns on free and clear properties would approach that of the stock market, investing in mortgage payoffs might be something to consider.

[FIREstache]

This is the 'general discussion area' and I was wondering who else found that RE wasn't as great of an option and had to make changes near the end and refocus?  I see it from others who have stated 2019 will no longer be their FIRE date.

My plan was to FIRE about the same time as you, but last December, when stocks continued falling and with the ACA lawsuit ruling in the same month, I decided to OMY it.  Stocks came back, and my stash hit a new high, but the ACA remains a concern.  I'm old enough that I don't think I can easily re-enter the job market for anywhere near my current pay if I wanted to, especially where I live, so when I FIRE, I plan to stay that way, except for maybe some temporary or part time work if I really feel like it.

[Enigma]

It's difficult to RE when you are not FI.  Based on your difficulties with the newly acquired property and the completely predictable operating expenses, you were not FI.

Only one property was newly acquired in Aug/Sep.  Other than that most of my properties I have owned for over 5 or 10 years.  About $40k in liquidable funds that should have been used towards my end of the year expenses was put into that.  How often are you going to be offered a house in a MCOL area for $20k that needs $20k of work?

Do you have mortgages on the rentals?  Would your numbers improve if you paid some or all of those off?  If your returns on free and clear properties would approach that of the stock market, investing in mortgage payoffs might be something to consider.

Of the 1.4MM in properties I still maintain 330k in mortgages roughly 24%; However, all the interest is written off (income - interest - most expenses) = capital gains/profits which is taxed at 20% (less than other income).  Instead of paying off the mortgages I am goign to lean more towards growing the liquidable accounts and different income sources.

[Another Reader]

It's difficult to RE when you are not FI.  Based on your difficulties with the newly acquired property and the completely predictable operating expenses, you were not FI.

Only one property was newly acquired in Aug/Sep.  Other than that most of my properties I have owned for over 5 or 10 years.  About $40k in liquidable funds that should have been used towards my end of the year expenses was put into that.  How often are you going to be offered a house in a MCOL area for $20k that needs $20k of work?

Do you have mortgages on the rentals?  Would your numbers improve if you paid some or all of those off?  If your returns on free and clear properties would approach that of the stock market, investing in mortgage payoffs might be something to consider.

Of the 1.4MM in properties I still maintain 330k in mortgages roughly 24%; However, all the interest is written off (income - interest - most expenses) = capital gains/profits which is taxed at 20% (less than other income).  Instead of paying off the mortgages I am goign to lean more towards growing the liquidable accounts and different income sources.

If part of your retirement plan is to pick up deals for cash when they appear, then in your shoes I would have a slush fund to do that.  Going back to work to pay for this is sort of like one more year.

I had to turn down some great opportunities in 2011 after I exhausted all my reserves to pick up properties for cash at 30 cents on the 2006 dollar. No way was I going back to work to float those purchases.

As an active investor. the first 20 percent of the net income should be deductible.  I get that.  My question is about the risk and reward balance on keeping mortgages that may have high interest rates at what may be the peak of the real estate cycle and the paper asset markets.  I can see building substantial cash reserves to fund capital improvements plus rent loss and reductions in a down market, but the desire to continue to acquire properties has to be accounted for somehow.  Right now, you are a kid in a candy store with only a couple of nickels.  Need to make a decision on how much candy you can eat before you finally retire.

[41918]

you can tell my hopeful fire date by user name. I got golden handcuffed, but this truly is my last year.10 more months for another 5X of annual expenses. I've been fortunate on the corporate ladder with a fortune 200. I also have an 11 year old that I wanted to completely button up through college which I've done. 3.31.20