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April 17, 2012

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Guess I am missing something but why are you quitting your job? You make 80% of the family's income? If your husband wants to retire early and both of you want a large family why dosen't he stay home while you work?

I would be very cautious about diving into real estate without spending a few years doing some research. Many people think that it's just as easy as investing in mutual funds or other financial institutions, but in reality the risks are much higher. It is true you can make good money becoming a landlord, but you also need to be prepared for things like 6 month vacancies, maintaining the property (or paying someone to do that), and handling evictions. It can easily turn into a second job if not handled correctly, which defeats the purpose of "passive income". You also need to make sure it's something you love doing because it is hard work.

Will your husband's job require travelling in the future? If so I can't see how having 6 children will work without a full-time father.

$100K also seems like a large amount for a down payment, unless you are in a very high-cost area. If that is 20%, I don't see how living on a single salary with 6 children is feasible.

Noah - a few years doing research? Let's be realistic...yes, you should know what you're getting into before investing in real estate. But it's not rocket science, and the vast majority of what you need to know about it comes from experience rather than research.

KG, it sounds like you guys have thought through your plan, which is good. I'd recommend getting away from the big focus on retirement savings and save up more cash for your shorter-term goals like buying a house, investing, and just having cash on hand for when you start having children.

Also, regarding your comment to not listen to others - a much wiser strategy would be to learn to distinguish between constructive and destructive criticism. Don't let someone talk you out of your dreams or your strategies when their motives are jealousy or cynicism. But there are a lot of people with a lot of wisdom and there's no sense making mistakes that can easily be avoided just by heeding wise counsel. I'm only 5 years older than you but I see in your writing a lot of the headstrong, all-knowing attitude that I had several years ago (and to people older than me, probably still have!). My point is simply that there is much you don't know, and what works for someone won't work for everyone, and what worked the first time might not work the second time, so build a little flexibility into your plans and seek wise counsel.

Jonathan - Yes, you are correct. A few years is probably too much but too many people jump into real estate with absolutely no idea what they are doing and are quickly finding themselves over their head. Bottom line is it's a lot harder than most people realize.

Wow, so young and so wise...I just hope it all works out, 6 children and no working parents, no matter what the savings will account to before it begins. Anyhow, great goal focus at such age.

My advice would be to not count your chickens before they hatch. Also, I cannot put all these ideas and see it working out for you. Something has to give regarding kids, SAHM, dividend income, and rental real estate.

Take just the dividend income as a means to replace a working salary. At the very best right now you can get 5% dividend payments on your investments. You would need a $1 million portfolio to return $50K before taxes(your yearly budgeted expenses for the current year) to replace lost income. You would have work 20 years assuming you'd bank your (unguaranteed) bonus checks (100k down payment on 2 bonus checks equals i'm assuming $50k). Not doable if you are going to leave your job in 1 1/2 years.

You have very little liquid savings. Like you said most of your savings are in retirement. To make matters worse, your idea of rental real estate would have you tying up even more savings into the equity of your property. You have little left for day to day expenses, especially with a large family. How are you going to fit 6 kids into a duplex? Not to mention having a harder time finding tenants who do not mind all the kids nearby.

I am in the business of rentals and I may bank up to $4k on a property on any given year or I may take a loss any given year. It takes years to build up your rental investments to make it profitable. I work for myself and I would not recommend partnering with anyone as a solution for beefing profit! That's just my risk profile.

It would work out much better if your husband made 80% of the income for you to stay home. Have you thought about keeping your job and having your husband stay at home? Have you thought about your husband coming to live with you? Where can you both live to max out your career goals?

Not sure whether to be impressed or worried for you, KG. I'm impressed that you put so high a value on living within a certain budget as a percentage of your current income - that's great! I'm not entirely sure how you've managed to put 15K in your Roth (each) already given that the yearly limit has been 5K and you're only 23 (with such a high income as of late, no less... the limits are 107-122K single and 169-179K married).

I think you and your husband are living smartly on your large income, and that's commendable. But your husband is still breaking into his career path, and I doubt he'll be making anywhere close to your yearly income for at least a few years to come. It sounds to me, like many other commenters, that he should be the one who becomes the parent to stay home, and you continue to bring home the bacon. Especially when we're talking about a family of 8. At your ages, probably saving for retirement should come before saving for a down payment on a home for yourself, or a rental property. Time is on your side - if you throw everything you've got into investments/retirement now, you'll have no issues getting to a comfortable place in 30 years. Maybe wait to really start looking at homes to move into until you're closer to 30, when you've had a decent amount saved for a down payment + a hefty retirement fund. I'd imagine by then you'll have had a couple kids too, and maybe the idea of having 6 won't appeal to your husband anymore at that point... but you won't have gotten yourself into a huge house for a family of 5 instead of 8.

I think your doing great for your age, you just have to prioritize your goals better as things are up in the air for your situation. I would begin to invest the brokerage account money with well known Dividend aristocrat companies who have been in business for decades and continue to pay dividends even during economic downtimes. Just buy and reinvest and watch it grow.

I wish you luck, but like some others said, there are so many goals and plans listed here and they seem to contradict each other -- having a lot of kids, quitting your job, rental income, oy vey! Hone in on a few priorities.

First of all, don't quit your job until you find an equivalent one in the new city. Better yet, why can't your husband pursue his risky career path in the same city where your established & lucrative job is? None of your plans for the future will be possible if you lose your income in the next few years.

KG is doing pretty well so far. Especially for a couple in their early 20's.

If you aren't experienced with real estate then I would caution you to take it slow. Don't jump straight into multiple properties or a larger mult-unit. First do your research and understand what you're getting into. Read a book or two on real estate investing and owning and operating rentals. Be aware of the time commitment (its like a part time job) and the financial risks. Read up on landlord / tenant law in your city/state so you know how to do things legally. Rentals can be a great investment but you need to be careful and know what you're doing.
Also.. rental real estate is NOT a get rich quick system. Its a long term investment with a job attached.


Your goals seem a little lofty. You want to have 6-7 kids, quit your job and be millionaires in a decade? Its great to shoot high to motivate yourself, but you have to keep your goals realistic.

For your age, it seems like you're very goal oriented which is great. I think some of these comments give some great constructive criticism, but individuals may be misunderstanding your rental property goals (or maybe I am!). It seems to me you plan to use a duplex as your first home, and plan on using the rental income to pay the mortgage. Correct? I like that idea as a first foray into the rental market and moving away from renting yourself before your family gets too large. Just make sure to do your research first, as mentioned ad nauseum above, the rental market is a long term investment and does have its risks and challenges. I won't rehash those here, but make sure you incorporate vacancy and other risks in your plans.

I obviously wouldn't plan on quitting your job anytime soon. In fact, to keep the comments constructively moving forward, and avoid being redundant, I'll eliminate that from the equation for the moment. Not the worst thing in the world as you seem to have a great career path. I also don't quite see the problem with you wanting a big family if that is your dream. You just most likely will have to work longer to achieve that goal.

You and your husband seem to have saving down, and your BIGGEST issue now is deciding how exactly to allocate and invest those savings. I'd start shifting focus more on your shorter-term, more liquid investments and away from retirement. Focusing more on your down payment and dividend portfolio are good starting points. Create a plan of attack on how you'd like to allocate your resources over the next year or two in preparation for acquiring a property when you and your husband reunite.

Working with the assumption you invest wisely and continue to work, with you and your husband seeing expected career growth, I think your other goals are absolutely within reach. Continue to remained focused on your goals, and most importantly continue to educate yourself on ways to reach them.

Good luck!

I started investing in single family rental estate 8 years ago. As @Luis mentions, some years have great cash flow and others are terrible. You definitely need to be financially sound to take the big swings. For example, my average expenses over the 4 house is 9k/year. The actual results are approx. 4,6,6,12,12,14. Keet that in mind.

If you want to read about real estate investing, my favorite book is "Building Wealth One House at a Time".

I am glad that we made the decision to purchase investment properties but you need to make sure you will be in the same town for many years.

Good luck.

Erik, are those expenses in order of occurrance? I sure hope not! :)

I'd like to know how you swing the following:

$300/month for Food
$15/month for gym - what gym is this?
$150/Utilities for two Apts.

You really are frugal.

SR - Planet Fitness is $10-20/month depending on whether you choose only a single location or any

http://www.planetfitness.com/Planet-Fitness-Reviews

I'm guessing KG is an investment banker or hedge fund trader. If he/she is at the top of that game, $500k+ annual compensation by 2020 is within reach, and that makes all the lofty goals look more realistic.

http://www.careers-in-finance.com/ibsal.htm

Still, you can't bank enough in ten years on Wall Street to retire and raise six kids. The husband's career in sports must have some substantial upside. I wonder what it is.

Thanks for all your comments!

I have always wanted to be a stay at home mom, and we are working to make that happen. I took my job strictly for the money, figuring I could make the maximum amount of money in a short period of time before I stopped working. I do not enjoy what I do and am unlikely to continue making the same salary after my contract is up. We decided that I could suck it up for a few years since I had an end in sight, but since my husband will be working for much longer, I wanted him to do something he enjoyed. He is not making much now, but in a year or so he will be salaried and making enough for our future family to live on especially since we are so frugal. He does not travel for work, but the industry standard is that people will change teams/cities every couple of years early on in their career. So we may not buy a property for several years until we know where he will end up and we could even end up paying cash for our first property.

As for the real estate, I've always been interested. I took several real estate courses in college and have been reading any real estate book I can get my hands on, so I will definitely add Building Wealth One House at a Time to my reading list. I have have been using my 3 year contract to study up so that when we do buy a property, I will be somewhat knowledgeable. John, you are correct, the rental property will only be our first home. We figure with a larger downpayment and us living in one of the units, we hope to reduce some of the risks. I realize rental properties are more work than most people think, and once I stop working this would become my "job" as we hope to eventually buy more properties.

And as for our lofty goals, we tend to follow the "shoot for the moon, even if you miss you'll land among the stars" way of thinking. We understand we may have to revise them, but it would be for the best possible reason - starting our family!

Best of luck KG! Way to grit your teeth and get 'er done quick.

I don't think much matters in your decisions right now (given the high number of variables) except to save as much as possible, continue realizing your current income in not sustainable in a life you want, and for your husband to find a career he likes with what you two consider a livable wage.

I spent a few very tough years often away from wife and first child for a huge opportunity. The money saved paid off a house with cash plus much more and has greatly improved the situation for the rest of our lives (the business I own today only made possible b/c of this b/c of both money and contacts made during opportunity). I know work from home with my now 3 children and stay at home wife. In fact, she may think I'm around too many hours in the day now ;-) ....


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