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More FIRE Talk

December 10, 2018

There is so much to say on the topic of FIRE that I had to have another post on the topic. I will probably over time have a few more.

So I finished up the last post telling you a little about my last 10 years. We have become more frugal in our everyday lives. Also, we have bought value add projects that will increase our income and add to our net worth.

I have mentioned many times about saving money by driving your car until it hits 150k miles instead of 50k. It has been said many times that you should cook at home. I dont know your lifestyle. And I really should not be telling you what YOU need to do. You are an adult and can and will make your own decisions. I am only saying these are some of the things that have worked for me.

If you are stashing away $1000, $2000 or even $5000 every month into your savings or investment account, you should not even read this. If you are 50k in student loan debt or consumer debt, you need to go back to the beginning and read every word. And then you need to read it again and do exactly everything that I have said to do.

I think most people are somewhere in the middle. Take a little of what I say and maybe do a few things here and there. Its all up to you. I hope that what I have said has helped you or your partner see a little clearer how money is being spent in your household.

I usually talk about how to spend less by being frugal, but you need to know that you can make more also!! It was mentioned that a great way to increase your income would be to purchase value add properties. This is a fact. You can increase your net worth dramatically over time with several properties. But what if you don’t like dealing with tenants?

How about buying cars from friends that are about to trade in their car? You know that the car dealers will give you 60-70% of the value of your car when you trade it in. Somehow people know this, but they keep doing it. You could step in and buy that 4 year old car for 30% less than retail. Maybe you could sell it with owner financing at 10%, 15% or even 18% interest rate.

You might even be able to sell it for over market price even while getting $2k or $3k down payment. This could be a crazy rate of return for you if you could create notes that are producing 18%. Believe it or not the “Buy here, pay here” people are charging 18% to the people who buy with them. They usually throw in some fees and end up with 25%+ rate of return on their loans.

I know someone who goes on craigslist and offer up and a few others to look for “FREE” stuff. She looks at the pictures, asks the right questions and goes to pick up the item. Again, its all free. I like free stuff.

Then she cleans up the items to make them look more presentable. She will then put them for sale to make a few bucks. Just think if you could turn this into a business!! Free stuff that in turn gets sold for 100% profit, WOW.

I must tell you that the items are usually not $1000 items for free. They are usually items that are going to get sold for $10, maybe $15. Most of the time, when you go to pick up an item, they will say, “Can you use this also?” Cha-ching, more free stuff. Sometimes they will ask if you want to buy something at a really great price also. The prices are usually 80% to 90% off retail price.

How can you go wrong with 90% off retail. I know some people will say, “How dare you suggest that I go get free stuff from people and then re-sell it.” I am just saying that it is something that people do.

Sometimes people give away clothes that they do not wear anymore. Sometimes they started running and lost a bunch of weight. They have lots of clothes just sitting there. Can you find someone to buy dress shirts for $3? Pants for $2? Maybe a dress or two for $5 each? Just think if you got a whole bunch of clothes from a friend or friends.

I am just saying that you have to think out of the box a little. This could be a little part time/weekend thing that makes you a few bucks here and there. OR it could be a business that you start up and franchise then take public.

Since I have been purchasing homes I have almost always owned a gas chainsaw. I decided some years back that I would use my chainsaw to make a little money. I know how to cut up a tree that has fallen. If it is down and on a house or in the middle of a yard I can usually get it cut up and off the house in about an hour or two.

It is some hard work, but again, it is only for about an hour or two. I must say that I do not have a license or insurance or any of that stuff. I usually only do jobs that are NOT close to a house or they have already fallen and done the damage. This way I could not be held liable, it already hit the house and broke a window. I didnt do it.

Sometimes I do it for free for friends and family. I make a little money here and there. When I do charge I can usually make a few hundred dollars for the hour or two that I spend working hard. Again, it is extra cash that always comes in handy.

If you make plenty of money and dont want to do the hard work, you can always buy a note or finance other people’s investments. People will pay plenty of interest if they dont have the cash to get something done. I know that I have paid 8 to even 12% for my money to get into some great real estate deals that net me a good return.

There are ways to get into deals with little or no money. Sometimes it is just a matter of having friends that want to make the money without having to roll up their sleeves and get dirty. Myself, I dont mind getting dirty.

The whole point of buying real estate and having the little side jobs is so that you dont have to work full time for the man until you are 65 or 70 years old. Personally I can not imagine going to a job that I dont like, deal with people in the office that gossip and talk about everybody, and work for a boss that you dont really care for. If you love your job, great, stay there until you are 65 or longer.

If you are like most people, you would like to leave your job as soon as possible.  It is not easy to get to the point where you can do that. It takes focused concentration to spend less and make a little more. But just think, would you rather have a little more time to spend with your spouse, kids, maybe grandkids by working less? Maybe the thing to do NOW is build up that surplus before you have the grandkids.

To be in a position to leave your job and be secure, you would need to have some assets (like real estate or a solid stock portfolio) that would add up to 500k or maybe even $1mil., or maybe even more. Of course most people say they can not get there or at least not at 30 or 35 when you have lots of student loan debt already.

The idea is to be able to live off of the income that the assets generate. This money is going to be your safety net. It is not something to spend.

It is there to make some interest or rent payments from. If you can amass $1mil in rentals, which might be 8 houses worth about 125k each. Your rent should be about 1% of the rent per month. Over time, as mentioned in the last post about FIRE, you can get these paid off in about 15 years.

You are not going to spend your gross income of 1% per month. There will be taxes, insurance, upkeep and plenty other expenses. You should net about 50% of your rents or about 5k per month. With 5k per month, you should be able to cover all your expenses and even have a little left over. This is of course that you have become a little more frugal and learned to live within your means.

If you cant live on that, you may not be able to retire completely, but you can downgrade the job that you dont really care for and work part time. When you have the income coming in from other sources, you dont need to make a bunch of money from your job. You can get the job of your dreams even if it does not pay very well because you already have some income coming in.

If you have to live on 75k per year rock bottom minimum and you already have 60k per year coming in from rentals, you can start to look for a job starting at 15k per year. I would set my sights a little higher, but maybe you could find a part time job and do some volunteer work. Maybe work for a non-profit that you really would like to help. The ideas are endless and so is the bliss of doing something that you really enjoy and find worthwhile.

But lets say that you already have 50k or 60k coming in from rentals and investments per year and you already make the 75k per year. If thats the case, I hope that you are NOT living off of the 125k or 135k per year.

When you live within your 75k or even less, it is that EXTRA 50 or 60k that can compound into more investments per year. After a couple of years, you will be able to purchase another small home CASH and increase your net income by about 7k or 8k per year.

To get to the point of having some homes that are all paid off is going to take some time. It is not a get rich quick scheme. Most mortgages are 30 years. I try to find deals that will cash flow with a 15 year mortgage. That just means that I will get to FIRE even faster. Even if you are 30, you dont want to wait 30 more years to get the house paid for.

I know that I have mentioned that you need to find deals that are value add. That is the only way to get properties that are way below market price. Good notes are a way to get a good stream of income, but you can also buy BAD NOTES for a greater return.

My personal goal is to get a few more rental properties or notes and do 2 rehabs per year. That would be a nice slow pace that I would really enjoy. I can make 15k+ per rehab so we would make about 30k+ per year. That is not a crazy amount of income. But this combined with the rental and interest income from the notes and rentals we should be pretty comfortable.

If you have questions about FIRE or anything related to this post, please comment in the section way down below. If you want to chat about real estate or need some guidance on your road to FIRE, please reach out to me. My links are next to my photo down below.

Good luck on your FIRE journey!!