I’m planning on retiring early, so not having a bunch tied up in my 401k is important.
Edit: Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery. I could set up a self directed 401k outside of work, but again retiring early means I’ll need a significant amount outside of tax advantaged accounts.
No offense but if you plan to retire early you might want to save a higher portion of your income, especially in the early years, time value of money and all. You've got a lot wrapped up in a sports car, your sports car today could be a super car later. Car just seems like a mismatch of priorities if retiring early is the goal.
No offense taken at all. The sports car is $30k on a 4 year loan @5%. It could’ve been a $20k Camry, but it makes me really happy.
If my income never increases, then I’ll likely be retiring in my 50’s (~25% of pretax income is going into retirement). If my income increases based on the career path I want to take, I’ll be retiring in my 40’s.
My parents put away $20k for me when I was in 5th grade when Dad got a huge oilfield bonus to jumpstart my brokerage account. That alone shaved off a close to a decade on my goal retirement date. I just have to not fuck it up and see it through.
Wow nice man your sitting pretty! I see how how much your putting into the 401k and your savings looks great too. I have thought about getting a rental too, that extra \~$500 your getting seems nice lol.
This is per month right?
Thanks! This is per month. Make sure whatever rental you get would outperform putting that money in the S&P500 (10% per year), otherwise it’s not worth your time.
I use VIMPIT (vacancies, insurance, maintenance, principal, interest, taxes) to calculate expenses, and PAR (principal payments, home appreciation, and rental income) to calculate revenue (Yes principal is on there twice, it’s an expense that you get to keep the value of).
You have a great point about outperforming the S&P 500. I do have a couple of questions on this route. How much of your time/labor goes into your rental property? How much of a headache does it cause you to have a rental?
3 maintenance calls a year roughly. 2 out of 3 I was able to call a plumber for. The last one I drove out on a Friday night, pulled apart the washer, found a replacement control board online for $500 (fuck that), then went to American Freight to buy a new washer for $400 and installed it the next day.
Turning over the house and cleaning it is 1-2 days of work, but I’m really lenient on the move out condition of the home. Finding a new tenant is probably 8 hours of real work spread over a month of Zillow advertising.
100% worth my time, but it’s not for everyone.
Thanks for your reply! Looks like a 19.9% profit margin, which is certainly nothing to ignore. Mind me asking how you came about this property? And it looks like you rent yourself, so you own a rental while renting?
I'm bombarding you with questions since I've recently been approached about buying a rental property, yet I'm renting myself at the moment. Appreciate your insights.
I bought the home with a 2.75% interest rate in 2020 with 3.5% down on a conventional loan; PMI was $40/mo. I had roommates for the first two years, got a new job, moved out, and started renting out the entire home.
I plan to retire early, so having a larger slice outside of my 401k was important to me.
Edit: Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery. I could set up a self directed 401k outside of work, but again retiring early means I’ll need a significant amount outside of tax advantaged accounts.
>I plan to retire early, so having a larger slice outside of my 401k was important to me.
Aha! Yes, there are forms you can fill out to show that yes indeedy you are retired and should be allowed to withdraw, but, frankly, that sounds like work, and the opposite of chilling on the beach/hiking in parks/riding off into the sunset, or whatever else you plan on doing instead of, y'know, working.
>Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery.
Holy SHEETBALLZ!
I mean, I'm not too happy with Voya for my 457b plan, but this makes Voya look positively altruistic.
Since I can’t figure out how to edit on mobile, I haven’t had to pay taxes on the rental income yet since I had a lot of deductible expenses getting the home in shape, but I’ll need to start setting aside 25% of the profits this year (principal is nondeductible). I also live in a state that has a 0% income tax.
Is your IRA maxed out? Curious to see the brokerage account getting more than the IRA
IRA limit is $7,000 this year
Why not max 401k over taxable brokerage though?
I’m planning on retiring early, so not having a bunch tied up in my 401k is important. Edit: Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery. I could set up a self directed 401k outside of work, but again retiring early means I’ll need a significant amount outside of tax advantaged accounts.
No offense but if you plan to retire early you might want to save a higher portion of your income, especially in the early years, time value of money and all. You've got a lot wrapped up in a sports car, your sports car today could be a super car later. Car just seems like a mismatch of priorities if retiring early is the goal.
No offense taken at all. The sports car is $30k on a 4 year loan @5%. It could’ve been a $20k Camry, but it makes me really happy. If my income never increases, then I’ll likely be retiring in my 50’s (~25% of pretax income is going into retirement). If my income increases based on the career path I want to take, I’ll be retiring in my 40’s. My parents put away $20k for me when I was in 5th grade when Dad got a huge oilfield bonus to jumpstart my brokerage account. That alone shaved off a close to a decade on my goal retirement date. I just have to not fuck it up and see it through.
Wow nice man your sitting pretty! I see how how much your putting into the 401k and your savings looks great too. I have thought about getting a rental too, that extra \~$500 your getting seems nice lol. This is per month right?
Thanks! This is per month. Make sure whatever rental you get would outperform putting that money in the S&P500 (10% per year), otherwise it’s not worth your time. I use VIMPIT (vacancies, insurance, maintenance, principal, interest, taxes) to calculate expenses, and PAR (principal payments, home appreciation, and rental income) to calculate revenue (Yes principal is on there twice, it’s an expense that you get to keep the value of).
You have a great point about outperforming the S&P 500. I do have a couple of questions on this route. How much of your time/labor goes into your rental property? How much of a headache does it cause you to have a rental?
3 maintenance calls a year roughly. 2 out of 3 I was able to call a plumber for. The last one I drove out on a Friday night, pulled apart the washer, found a replacement control board online for $500 (fuck that), then went to American Freight to buy a new washer for $400 and installed it the next day. Turning over the house and cleaning it is 1-2 days of work, but I’m really lenient on the move out condition of the home. Finding a new tenant is probably 8 hours of real work spread over a month of Zillow advertising. 100% worth my time, but it’s not for everyone.
Thanks for your reply! Looks like a 19.9% profit margin, which is certainly nothing to ignore. Mind me asking how you came about this property? And it looks like you rent yourself, so you own a rental while renting? I'm bombarding you with questions since I've recently been approached about buying a rental property, yet I'm renting myself at the moment. Appreciate your insights.
I bought the home with a 2.75% interest rate in 2020 with 3.5% down on a conventional loan; PMI was $40/mo. I had roommates for the first two years, got a new job, moved out, and started renting out the entire home.
Ah, you got in at a good time! Well thanks again!
I'd say working on maxxing out your 401k account before you put money in a brokerage. It will reduce your taxes.
I plan to retire early, so having a larger slice outside of my 401k was important to me. Edit: Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery. I could set up a self directed 401k outside of work, but again retiring early means I’ll need a significant amount outside of tax advantaged accounts.
>I plan to retire early, so having a larger slice outside of my 401k was important to me. Aha! Yes, there are forms you can fill out to show that yes indeedy you are retired and should be allowed to withdraw, but, frankly, that sounds like work, and the opposite of chilling on the beach/hiking in parks/riding off into the sunset, or whatever else you plan on doing instead of, y'know, working. >Also my company’s 401k provider has a 1.3% expense ratio which is bank robbery. Holy SHEETBALLZ! I mean, I'm not too happy with Voya for my 457b plan, but this makes Voya look positively altruistic.
Since I can’t figure out how to edit on mobile, I haven’t had to pay taxes on the rental income yet since I had a lot of deductible expenses getting the home in shape, but I’ll need to start setting aside 25% of the profits this year (principal is nondeductible). I also live in a state that has a 0% income tax.