Author Topic: Survival 101: Learn to build a FIRE!  (Read 1476 times)

MarcusCorvus

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Survival 101: Learn to build a FIRE!
« on: May 10, 2020, 10:08:16 AM »
I would like to first start out by saying I致e read a few hundred posts in the last few days, and will continue to read more and learn, but for now my head hurts from data overload.
I thought I might better benefit from explaining my situation and getting some pointers and direction from the forum and then read the posts that might better guide me based on what you all have to say.

Our stats: (couple)
Joint income net: 75k
Savings: 80k
Rental Income: 6,800 breakdown below
Mortgages: 3,800 @ 4%
Monthly spending +/- 2,500 (I know we need to work on this, who doesn稚, I blame organic shopping)
Mortgage balance House 1: 220,000 renting for 3800/month
Mortgage balance House 2: 240,000 renting for 3000/month
Am I missing any pertinent info here?

NOTE:  Unless I知 not seeing this correctly, my FOCUS here is to knock out my mortgages as quickly as possible.  I know there is a lot of discussion around this topic, but for me and to make FIRE successful, I need to reclaim the $2000/month mortgage on house 1 and the $1800/month on house 2.  Mainly, because I知 throwing a lot of money away toward interest every month and that drives me crazy.

So, my question here is how do I get there (paying off my mortgages) the quickest/safest way possible. Heck even getting them down to around 100k each and then recasting/refinancing my mortgage for free would get some more money in my pockets.  Obviously, saving money every month and chunking down the mortgage would help, but I知 thinking more along the lines of investments?  Any pointers would be greatly appreciated.

Thank you all
« Last Edit: May 10, 2020, 05:10:39 PM by MarcusCorvus »

MDM

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Re: Survival 101: Learn to build a FIRE!
« Reply #1 on: May 10, 2020, 12:03:49 PM »
MarcusCorvus, welcome to the forum.

You might get better responses if you put your question in the Case Studies board, using the template provided in the sticky post there.

The primary objective issue in mortgage vs. invest is whether you would earn more by investing vs. the amount of interest you are paying.  As you note, there is a lot of discussion....

secondcor521

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Re: Survival 101: Learn to build a FIRE!
« Reply #2 on: May 10, 2020, 12:22:46 PM »
First and most important question:  What does your partner want?  Whether they're truly on board with FIRE, vs. being OK with it but not being the driver, vs. wanting something else will determine your path forward.

Secondly, the fastest way to get there is probably sell the second house and use any equity from that to invest - see the Investment Order thread which is stickied around here somewhere.  If you don't want to sell the second house, then you're extending your work career for the second house.  It is worth it to some people; it wasn't to me.

Finally, if your remaining mortgage has a rate over maybe 3.75% or so and you plan to stay there for a while, consider refinancing.  A 15-year fixed mortgage can save even more interest because they come with lower rates, and the payment should be manageable - maybe more than your existing payment on that house, but almost certainly less than the two mortgage payments you currently have.

terran

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Re: Survival 101: Learn to build a FIRE!
« Reply #3 on: May 10, 2020, 01:07:19 PM »
see the Investment Order thread which is stickied around here somewhere.

Agreed. This this the first place I would send someone for answers to questions like this: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

SwordGuy

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Re: Survival 101: Learn to build a FIRE!
« Reply #4 on: May 10, 2020, 01:51:40 PM »
Rental Income: 7,000

What does this mean?   Annual gross rent?  Annual profit after set asides for vacancy, repair, utilities, property management, etc., plus other PITI costs?

Is that included in the net income amount listed above, or in addition to it?

MarcusCorvus

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Re: Survival 101: Learn to build a FIRE!
« Reply #5 on: May 10, 2020, 04:34:33 PM »
Rental Income: 7,000

What does this mean?   Annual gross rent?  Annual profit after set asides for vacancy, repair, utilities, property management, etc., plus other PITI costs?

Is that included in the net income amount listed above, or in addition to it?

Sword guy, 7k after my PITI and other costs is more like 6,800 monthly income and is not included in my net income.
Thx

secondcor521

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Re: Survival 101: Learn to build a FIRE!
« Reply #6 on: May 10, 2020, 05:00:02 PM »
It's not clear if house 2 is a rental or not.  It sounds like it is.

If house 2 is a rental, I'd only keep it if (a) I liked owning rental real estate, (b) I can handle the risks, and (c) I thought this particular rental property had a good ROI.  I'm not that knowledgeable about rentals, because I don't like owning them, but as a first pass I'd look at my net profit yearly divided by my equity in the property.  I'd probably also consider the tax effects, especially depreciation.  For me the ROE would probably have to be better than 7% for me to keep it.  That's just me, though.

Anyway, many more people here know more than I do on rental property and can advise you better.

(If house 2 isn't a rental, I'd stick with my earlier comments.)

Dicey

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Re: Survival 101: Learn to build a FIRE!
« Reply #7 on: May 10, 2020, 09:42:27 PM »
HAHAHA, my tired brain led me here, thinking, "Well, I was a Girl Scout, I know how to build a fire. Surely I can help."

Now that I'm done laughing at myself. @MarcusCorvus, please consider this a gold-plated solid gold titanium invitation to come hang out with the cool kids over at the DPOYM Club. If you never read anything else, your future self will thank you for the time spent there, whatever you ultimately decide.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

BTDretire

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Re: Survival 101: Learn to build a FIRE!
« Reply #8 on: May 11, 2020, 06:41:42 AM »
NOTE:  Unless I知 not seeing this correctly, my FOCUS here is to knock out my mortgages as quickly as possible.    Mainly, because I知 throwing a lot of money away toward interest every month and that drives me crazy.

So, my question here is how do I get there (paying off my mortgages) the quickest/safest way possible.

  Many here would question the wisdom of paying off a 4% mortgage when the long term return of the sock market is 10%. You are looking longer term at retirement right?
 Add the idea that you or her could lose your jobs or having a rental downturn, having money vs equity could pull you out of any financial difficulty.
                               


MarcusCorvus

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Re: Survival 101: Learn to build a FIRE!
« Reply #9 on: May 11, 2020, 08:56:06 AM »
I know it's hard to know my intentions here without a lot more detail, but I'm looking to soft retire/FIRE today, but trying to find other sources of income like rentals/stocks side gigs etc.  Everybody keeps talking about 10% in the stocks, it sounds to me like it might be better to sell house (1) which I paid 525k is now around 600k and I'm only making 1800/month net on rent (PITI).  Take that 600k and put it in the stock market?  Obviously, I would need money to live on so I would also need to pull money out monthly or every other month, and live off dividends of some sort.
« Last Edit: May 11, 2020, 09:00:40 AM by MarcusCorvus »

 

Wow, a phone plan for fifteen bucks!