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January 29, 2014

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Great post! Do you maintain the rentals yourself or do you have a company? What is the experience with doing it or with the management company?

What was your educational path to your eventual career? Any jobs you held while in school or did you take out student loans? If so, is that the debt you finally paid off? Thanks!

This post really resonated with me, that its a pretty slow steady course that will get many of us to financial independence. Nice going.

My one question is related to your daughters, especially now that they're on the cusp of college age. How have you prepared, if at all, for that sort of expense and do you see it putting a big dent on your savings rate these next 5-7 years?

I like this quote. Very true indeed.

•We all do not “deserve” to drive a Lexus or live in a fancy new, large, home. Know the difference between a want & a need.

To me it's about living below your means, growing your job income, and prudently investing.

Thank you for sharing!

I'm a baby lawyer (practicing for less than 5 year), and I appreciate you sharing your situation. I assume that you don't worry with business development since you're inside counsel? Also, a bit off topic, but I'm looking to move up in house. I'm curious if you have thoughts on retaining my starter home as rental property, since you seem to have the side rental gig. I think it would rent for $1200 which is what the current note is. Goal would be to pay it off in a few years to start banking that cash flow.

@Luis- I have always maintained the rentals myself. Including finding tenants. These days I use craigslist, and it works great (and its free). In the old days I would pay several hundred dollars for a weekend ad in the newspaper. Being a landlord is not for everyone. It is occasionally a pain in the you know what. But I have always thought of my tenants as people DOING ME A HUGE FAVOR. After all, they are buying the property FOR YOU, paying the mortgage, taxes, maintenance etc.... while you get all the tax benefits, price appreciation and equity. It is a tremendous deal IMO. Even at its worst-- being a landlord is a part time job. I get "the broken toilet call" twice a year maybe.

My educational path was that I went to public university and then to a private law school in DC. I think getting a graduate degree ( law, MBA etc) is worth the money in most cases. I went private ( my parents paid the bill so no loans for me...... a wonderful gift I hope to give my kids !) but its a better deal financially to go public.

The debt I just recently paid off was my home and the two rentals. I kept refinancing to lower rates and shorter terms-- working it so that it would all be done when my kids entered college. The plan worked. My oldest daughter started college last fall.

@M

I timed my loan payoffs to the date my oldest started college. That date was last September. I was determined to pay for my kids education like my folks did for me. In addition, I saved about $500 a month in a special account earmarked for college too. That account has about $288K in it today. If both kids go to public school (I will push for that) at $20k/ year--- I should have it covered and it should not negatively impact my savings. In fact, My savings rate is higher as a result of the loan payoffs because I am funneling former payments on loans to savings & investment accounts now. But it is a drain on my net worth for the next 8 years-- so if you think about it like that, the 1st $20K/k I save does not increase my net worth going forward---it keeps me flat. But its a gift I want to give my children so that they are not burdened with school loans.

@MM

Its my pleasure. Glad it resonated with you. Honestly, I am not all that special.... it surprises me that I have been able to accumulate as much as I have........ slow and steady really DOES win the race!

@ Baby lawyer

Right. In house counsel gets to (typically) avoid timesheets and biz development. And your hours are better too. The one catch--- is significantly less money. My friends who went the BIGFIRM route and work 60 hour weeks (still) are partners making double what I make. But I have dinner with my family every night, weekends with the kids, and time with my wife. They do not. Its a tradeoff--- money vs. lifestyle. I did fine even with the "smaller" salary.

About renting your starter home. It depends. If it is located in an area where you can find a tenant rather quickly and you are business minded it might be a good deal. But you really need to run the numbers. If you invested the equity in a stock or fund would you be better off? What is appreciation like in your area? What is the demand for rentals? My rentals are in very high demand, transient, affluent areas-- and I have been able to find a new tenant- when necessary- within 30 days. When your place is vacant-- YOU need to cough up the mortgage payment yourself. You also need to paint between tenants, professionally clean and show the place to prospects. If that process takes 3 months or 6 months.... your annual profit goes down the drain fast. My best advice is to look at it like a business. Write a biz plan. Anticipate costs out for 5-10 years. Make solid assumptions on your income and expenses, including turnover costs. If it seems to make sense vs. other option ( stocks, bonds, funds)-- give it a whirl. But it is a business and should not be started unless you have properly thought it through.

@#19, that is very impressive. Really appreciate your humble approach, you have a lot to be proud of and a lot accomplished, yet you still consider yourself "normal." Also, GREAT point about clichés being true; that is how they become clichés, yet there are still so many trying to 'think outside the box'. It is a mathematical equation, that's all. Continued success to you!

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