Location, location, location. You cannot cheap out on location. Even if it costs several multiples more. In a downturn, the first areas in a city to suffer are the areas that no one really likes to live in. The popular areas are most resistant to downturns. Never buy in a town reliant on one industry. If that drops, so does real estate, maybe forever. Think Detroit.
Retirement plan to support my "habit"
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Location, location, location. You cannot cheap out on location. Even if it costs several multiples more. In a downturn, the first areas in a city to suffer are the areas that no one really likes to live in. The popular areas are most resistant to downturns. Never buy in a town reliant on one industry. If that drops, so does real estate, maybe forever. Think Detroit.
It is location....like buying a multi family in a college town....can't go wrong there for a moment! I like to think I was smarter than lucky, but either way real estate will cushion our retirement substantially. But we're not retiring yet...
Stoo
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That's partly my current situation... When Iwas 30, I bought a "handyman special" on the main street of Tobermory.It cost us $24,000 (but we split it 3 ways!) We gut it and replumbed, rewired, insulated, new drywall, knocked out a wll or two... all either ourselves or diving friends who were in the trades. Free labour got them a place to crash...
Within a year, two of us bought out the third... his girlfriend wasn't "compatible" with the place. My friend and I shared the place successfully for 17 years. Eventually I bought him out. Since then, we spruced the place up more, but it's still a modest little place.
But for location... overlooking the harbour and lake, 7 doors from the liquor store, 11 doors from the Brew-pub and not much further to two dive shops.
We want to travel a little more so we are offering it up to rent on a very limited basis this year, and we think as we do that more, it make become more of an income property.
Our $24000 investment was recently appraised two years ago at $325,000 and things are booming...
The place is well known in our local dive community and referred to as Squaller Holler. It gets enough mentioned on Facebook that Facebook generted a page for it. It's earned a 5-star rating... as a "Circus"... seems right.
Shameless plug: Wanna rent a place in Tobermory: Squaller Holler
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Agree with all on the location. It does assume that employment-wise, you have opportunities to buy and live in a non-One Industry town. If that's what your job skills are, you may just be SOL. See--many of the mining towns across northern Canada.
This is a great thread for me, as I'm looking at opening up a dive op in the Greek islands. The future missus supports me in this. Now there are a lot of issues to be addressed. People often ask me when. One of the items that needs to be met is to have my house fully paid off. I live in the Seattle area, and the real estate prices are insane, so I plan on renting my house (as the future missus will continue to rent her townhouse), so I expect we will have some good base income to get the business up and running. There are multiple stages to it (first dive op, second hotel). While I am half-Greek and qualify for citizenship, unless I meet certain conditions, I would lose my Dutch citizenship, which I do not care to do. I will need both legally and practicality have Greek employees, so no issue there. I still have a lot ot learn about opening a business there, but fortunately with family and friends, I think I'll be able to sail those waters without too much difficulty.
The big thing is cash flow and not tapping into savings. I am counting on renting two homes (one paid off, the other one not) to give us a cushion. I was fortunately to have bought in at a reasonable time. Selling price of my home would probably be double of what I paid for it.
I could retire today if I wanted to. However, to retire in the lifestyle I'd like means I'll be working until I'm in my late 40's. A small "pension-like" income helps, but 70-80% of my projected retirement income will be coming from investments. I "sacrificed" in many ways that some people don't (smaller house than I "could afford", keep the same car until it's going to cost more to keep it running than it was worth, not going out to eat all the time, not running to Starbucks every morning etc). That, coupled with a good income, allows me to save 40%+ of my annual salary most years, maxing out my 401k contributions, getting the full company match, maxing out my IRA, HSA contributions, and putting money into my taxable brokerage account.
Again, it's all about location. Most people choose where to live. If they choose to limit themselves to a very HCOL area, that's a choice they can make. It won't (generally) help them achieve financial independence unless they're willing to later move to a lower cost of living area (to cash out home equity) or they achieve massive salaries only available to them in that location. Unfortunately, most jobs don't increase pay nearly as much as the cost of living goes up in a HCOL area.
jonhall
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Good thread with good ideas. Looks like those who have retired already have reached that point through different means and given some advice on how to do it.
Since my last post several pages back, I thought I would add a couple of specifics that turned out well for me and that might at least provide other ideas for people who are still a few years out. As a reminder, I am a lucky one with a pension.
Roth IRA - started and fully contributed for 7 years before retiring. Started withdrawing a small monthly amount to supplement pension at retirement, tax free. My favorite part is occasionally looking and seeing I have as much in the account as I did months earlier even though I'm taking money from it (of course, the market has been doing well.)
Power of index annuities based on the S & P - took some money I had in an annuity acct.that gains 4% interest. Also at 7 years before retirement, rolled over a part of the annuity to an index annuity where you could never lose your investment but only gain (at each anniversary) if the S & P went up. Had to keep the index annuity for 8 years but it gained 8%/yr. Have rolled it over to the same type of acct. again but for 7 years. Will have made more money in 15 years than had I left it in the original annuity. The S & P generally goes up every year.
Social Security - took it at age 62 (just started last year.) If I had waited until ~66 or 70, the break even point, money wise, was approximately age 81 and ½. Although I am not investing it, I would guess a person who did invest their social security could come out ahead of the break even point.
Since my last post several pages back, I thought I would add a couple of specifics that turned out well for me and that might at least provide other ideas for people who are still a few years out. As a reminder, I am a lucky one with a pension.
Roth IRA - started and fully contributed for 7 years before retiring. Started withdrawing a small monthly amount to supplement pension at retirement, tax free. My favorite part is occasionally looking and seeing I have as much in the account as I did months earlier even though I'm taking money from it (of course, the market has been doing well.)
Power of index annuities based on the S & P - took some money I had in an annuity acct.that gains 4% interest. Also at 7 years before retirement, rolled over a part of the annuity to an index annuity where you could never lose your investment but only gain (at each anniversary) if the S & P went up. Had to keep the index annuity for 8 years but it gained 8%/yr. Have rolled it over to the same type of acct. again but for 7 years. Will have made more money in 15 years than had I left it in the original annuity. The S & P generally goes up every year.
Social Security - took it at age 62 (just started last year.) If I had waited until ~66 or 70, the break even point, money wise, was approximately age 81 and ½. Although I am not investing it, I would guess a person who did invest their social security could come out ahead of the break even point.
There is no free lunch in investment. You can get lucky or be extremely clever but on average everyone is a loser. Those big towers in financial districts with fancy cars in the garages, they are paid for by fees. Middle men are taking a cut on every transaction. Don’t plan on making a killing on the stock market or property. Plan on saving enough money to eat when you are old. If you get lucky and things go your way, you might get to eat, have a place to live and enough to go diving.
There are fundamentals required to pay the dividends which support stock prices. If they are not there you are probably riding a bubble or fashion. That might work in the short term but isn’t a plan.
The bit in bold is called a structured product. They are a classic (legal) scam. Conditions such as a particular index performing in a particular way look like certainties until you actually look at the probability. Then the returns start to look very poor. High (but hidden to the average non quant) risk and returns which do not justify the risk. Typically the returns will be half what a professional would expect to take that risk. These are like the most complicated and impervious mobile phone contrac5 you ever met. Designed to be difficult to follow and literally take a PhD to unravel.
With historically low interest rates it is tempting to try to get a return which will pay your bills. The trouble is you are very likely to lose your shirt when you can least afford it.
Please google “structured product scams”.
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