Would you retire early like so many Millennials are doing?

Photo by Kelli McClintock on Unsplash   

Living a life on FI/RE

 

I didn’t really have a defined plan when I got into real estate investing. Some of you may know it all started with my personal residence purchased back in 2017. I had a burning desire to own a house and further than that, to own an income producing asset. There wasn’t much past that at that point. I knew I wanted to own houses and make money. It wasn’t until a couple years later that I discovered the FI/RE movement and how the average person across America is using the system in place to retire early and live a fulfilling life. It blew my mind to read of all these different, average America, people leaving their job to do whatever they wanted and just further solidified everything I’ve wanted to do.

 

Financial Independence / Retire Early

 

If you’ve never heard of the FI/RE movement….then you have now. It’s the idea that the average American can buckle down and save their way to financial success using mostly low risk Investments (401k, Real Estate etc.). There are tons of blogs and articles that explain it more in depth than I can, but from what I see from the community and reddit it’s mostly about compounding interest through a stock account like a 401k, IRA, Vanguard account. That’s simply not me unfortunately. I’ll never be the type to track pretty graphs and move money around different accounts trying to make a buck. The only reason I currently have a 401k account is because I get a company match.

 

That’s where I’m different. I’m part of the few doing FI/RE through real estate. From everything I’ve seen and the way I’m doing real estate it has by far outpaced earnings through the stock market. In the past 3 years I’ve put in less than $50k and I’ve currently got $100k in cash and $800/m coming from properties. I tried comparing this to dividend earnings and there is no comparison. I’d need close to $1M in dividend producing stocks to get to these numbers and that’s without principal paydown or appreciation. When I start to get closer to my FI/RE scenario it’s mostly going to be through Real Estate and not the stock market.

 

Lifestyle Changes

 

I went through some pretty standard changes early on while aligning myself with the movement. I stopped spending more than I made and spending unnecessary money on things I didn’t need. I also used my tax return to clear all of my credit card debt and have consistently had a goal to keep that under control, which is currently going pretty well. From there I actually ended up getting a newer car which became my forever car. It’s a 2014 Chevy Impala that can look good for the rest of my life. It’s really a beautiful car. I do all the maintenance and upkeep myself which allows me to pocket even more money each year. We’ve limited our eating out to $200 per month which was a huge change for me shifting from mainly eating out. We’ve made some huge changes, but we’ve come so far now, and things have gone so well that I wouldn’t change a step on our path.

 

My FI/RE Number

 

Throughout my time in the community I’ve become accustom to the 4% rule for stocks and finding the magic number that covers their monthly expenses and allows them to live a happy life. I’ve honestly been having trouble pinning down an exact number for this and believe I’m looking more for the barista FI/RE lifestyle. I want to have the freedom to do the type of work that I would enjoy and would afford me more life appropriate skills instead of doing work that solely brings a high income. As far as monthly payment is concerned though I believe I can live a happy life on $8k per month. That would cover all of my expenses, allow me to continue purchasing assets, save money for maintenance, and live a little bit. To hit a number like that I would need to own over $3.5M in cash flowing real estate with my current plan and most likely have $2.5M in debt or so.

 

This is where things get complicated. That’s a lot of debt. It’s also 50+ properties with my current plan. At one point I may decide I don’t want that kind of debt hanging over me and instead of continuing to purchase properties I could just use $5-$6k per month paying down that balance and get a couple free and clear houses. That would take a few extra years, but it’s a much safer option. If a leveraged property is worth $150 per month, then a free and clear house is worth $400 per month. If I owned all of my houses outright I would only need 20 properties and $1.4M in total assets to achieve my goals. This is what makes it so complicated to pin down an exact number, or quantity of doors, or net worth to get me where I need to be.

 

Summary

 

At this point I’m riding out my life the best way I know how with as much balance as possible. With a small family and my personal comfort in mind I could never go to some of the lengths some of these FI/RE people do like living in a van or being homeless to improve savings rate. To me it’s about balance. I want to be able to live a little and retire early while having options to purse any type of career or passion that comes to me on a whim. What do you think of the FI/RE movement? Are you currently retired and living it up? I’d love to hear from all walks of life on what you think these movement means to you.