How much do you save/invest every year?

[emergentmd]

This is a nice example of leveraging because the stock market has appreciated 303% since 2011, which is pretty close to that home's appreciated but a 10x return on your investment.

That said I would greatly caution anybody who tries to grant cardone or jared kushner their way to a billion dollar net worth with rental properties- it is far less rosy than your experiences.

I bought my apartment in residency. Great apartment, well cared for. When I graduated and moved out I decided I should give this landlording thing a shot.

My first tenant ended up being a professional tenant. Complete douche canoe. Had to evict him. Months of rents not paid, thousands of dollars of damages and fees in the process.

My next tenant's lease was actually up today, he told me months he wasn't renewing it. Great, so I gave him a 60 day notice of non renewal and found a postdoc that was going to pay 25% more and stay for the next 4 years. Current tenant decides a couple weeks ago since he hasn't found another place to live yet he ain't leaving and that I "should really show some gratitude he paid through the pandemic". When is he leaving? No clue. Lost the new tenant, now in process of filing for eviction (3-4 month process, several thousand dollars, not to mention lost rent).

Last month the condo management company thought a leak was coming from my apartment- maintenance guy went in unannounced, punched a huge hole in a wall. Leak wasn't coming from my apartment, but you think I have recourse to ask them to fix it? Maybe if I take them to court, not worth it.

Yes I have a management company, no I haven't had to step foot there since- still, its a near weekly perirectal pain to just manage one rental.
Did I mention the association decided condo fees are doubled the last 4 years to ramp up reserves? Your may be thinking your ROI is 5 or 10% or whatever, but it doesn't take much more than needing to replace an AC, water heater, boiler, or just a crappy tenant to cut into those profits and frankly make your life miserable.

Even with a management company, its far from hands off or stress free. Not discouraging anybody from it, just understand you need mental fortitude and many thousands in extra reserves set aside to weather it. I'm gonna give it one more shot before I cut my losses and sell it, but would I do it again? Nope. Even if the returns are lower, No ETF or REIT has ever disturbed my peace.

You are absolutely correct and real estate has their headaches/risks. I just think the upside and downside is better than the stock market.

If you invested in ETF/Reit and 2001, you would be down 50-80%. There were alot of heartburn during these downturns.


You have to be smart, start slow, learn, and have a good amount of cash reserves. I would never recommend real estate if you can't fund a big renovation or unexpected expense.

I have taken my lumps. 25K renovation when renter left the place trashed. Renter who stayed 3 months free during the no covid evictions. My STR lake house flooded and lost a 70K boat lift along + 80 K home repair. Insurance did cover the home but not boat dock.

But in the long run, the leverage/deductions greatly outweighed the headaches.

Things I would would avoid (just my opinion) - Apt/condos/townhomes or anything where I do not own the land. Rentals not in the same area I live.

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[emergentmd]

This is more of my mom's experience with real estate, which means I'm not super eager to get involved. She had a house that she started to rent with a management company when she moved out. There would be months when the management company wouldn't tell her a thing, and then they'd charge huge turnover fees (like needing new carpet after a 1 year lease (previously changed right before the tenant moved in), but not withholding their security deposit). Then there would be months when the house was sitting empty. Then we had to evict a tenant that paid maybe once every other month. Meanwhile, she still had the mortgage from her current house, and while the rent would cover the mortgage--that only happened when it was occupied and the tenant was actually paying. She finally sold the property and has a huge burden off her shoulders now.

Some areas just are not good for rentals. You have to research the market.

 

[Splenda88]

This is a nice example of leveraging because the stock market has appreciated 303% since 2011, which is pretty close to that home's appreciated but a 10x return on your investment.

That said I would greatly caution anybody who tries to grant cardone or jared kushner their way to a billion dollar net worth with rental properties- it is far less rosy than your experiences.

I bought my apartment in residency. Great apartment, well cared for. When I graduated and moved out I decided I should give this landlording thing a shot.

My first tenant ended up being a professional tenant. Complete douche canoe. Had to evict him. Months of rents not paid, thousands of dollars of damages and fees in the process.

My next tenant's lease was actually up today, he told me months he wasn't renewing it. Great, so I gave him a 60 day notice of non renewal and found a postdoc that was going to pay 25% more and stay for the next 4 years. Current tenant decides a couple weeks ago since he hasn't found another place to live yet he ain't leaving and that I "should really show some gratitude he paid through the pandemic". When is he leaving? No clue. Lost the new tenant, now in process of filing for eviction (3-4 month process, several thousand dollars, not to mention lost rent).

Last month the condo management company thought a leak was coming from my apartment- maintenance guy went in unannounced, punched a huge hole in a wall. Leak wasn't coming from my apartment, but you think I have recourse to ask them to fix it? Maybe if I take them to court, not worth it.

Yes I have a management company, no I haven't had to step foot there since- still, its a near weekly perirectal pain to just manage one rental.
Did I mention the association decided condo fees are doubled the last 4 years to ramp up reserves? Your may be thinking your ROI is 5 or 10% or whatever, but it doesn't take much more than needing to replace an AC, water heater, boiler, or just a crappy tenant to cut into those profits and frankly make your life miserable.

Even with a management company, its far from hands off or stress free. Not discouraging anybody from it, just understand you need mental fortitude and many thousands in extra reserves set aside to weather it. I'm gonna give it one more shot before I cut my losses and sell it, but would I do it again? Nope. Even if the returns are lower, No ETF or REIT has ever disturbed my peace.

Did you or any of these people use a property management company?

Based on what I have noticed, the people who use property management companies have quasi no headache dealing with tenants. You just have to be willing to give the 8% of the rent collected...

 

[airplanes]

Did you or any of these people use a property management company?

Based on what I have noticed, the people who use property management companies have quasi no headache dealing with tenants. You just have to be willing to give the 8% of the rent collected...

OP mentioned using a management company multiple times.

RE has the potential to be amazing, but I'm busy enough as is with my regular job and don't want to deal with the added stress. It's certainly not required. The idea of "stable" cash flow is the main draw IMO. Maybe someday..

 

[Dral]

I keep a rental property. The monthly rent pretty much pays my mortgage on the property even after paying rental management company. It's a fairly new property so there are minimal headaches with it.

I also use a financial advisor who after crunching numbers told me it makes more sense for me to just keep paying off mortgage because my other investments return more than what I lose on my mortgage interest rate (but I'm not sure how true that is these last couple months in the current economy).

 

[wamcp]

Expect 700K household income this year. We are currently saving 5K a week for investing.

anyone else got net worth updates since the bubble popped in the fall of 2021?

 

[Nocturnist]

Expect 700K household income this year. We are currently saving 5K a week for investing.

anyone else got net worth updates since the bubble popped in the fall of 2021?

Combined income around 750k this year. Saving around half of that between home equity, investments, and cash.
Stock market portfolio obviously took a hit this year but our real estate equity has more than made up for that.
Our networth is 2.8M, should be around 3M by year end. On the hunt for a ski house to add to our beach house and primary home.

 

[Splenda88]

First year as an attending. On pace to make ~400k this year.

Net worth ~700k. Most of it is in real estate. Only ~200k is in the market. Just purchased a 3rd property.

Biden can automatically make me a millionaire today if he cancels all student loan. Lol

 

[FarmerToDoctor]

Hey Everyone!

I stumbled upon this page recently and HOLY COW this thing is a gold mine! I've been reading this thread and have learned so much from what you all have had to say. I am only a 2nd year medical student, yes I know, still very early in my training, but I wanted to know what you would have told your younger self to do with your finances? What were some of your wins, losses, and lessons? Would you have done anything differently, and if so, how and what? Is real estate the land of milk and honey, or is it better to invest everything into HSAs, UTMAs, retirement accounts, brokerage accounts, etc? What are some of the best ways you have found to generate cashflow?

 

[Nocturnist]

Hey Everyone!

I stumbled upon this page recently and HOLY COW this thing is a gold mine! I've been reading this thread and have learned so much from what you all have had to say. I am only a 2nd year medical student, yes I know, still very early in my training, but I wanted to know what you would have told your younger self to do with your finances? What were some of your wins, losses, and lessons? Would you have done anything differently, and if so, how and what? Is real estate the land of milk and honey, or is it better to invest everything into HSAs, UTMAs, retirement accounts, brokerage accounts, etc? What are some of the best ways you have found to generate cashflow?

Live like a resident.

No, I'm not talking about clipping coupons and eating ramen. I'm talking about, keep working your butt off.

Sure, stick to the fundamentals- max out your retirement accounts, pay down your highest interest loans, Yada Yada..all that generic advice you'll typically find on the white coat investor is wonderful and you should follow them. That said, the single biggest contributor to your net worth especially in the first decade of your career by far will be your income. Theres no rule anywhere that says you have to work 40 hours a week or 1 FTE.
It's much easier to go from working 80 hours a week a resident to 60 hours as an attending for a few years and then cut back when you're financially secure than working 40 hours a week and then realizing a decade or two later you're no where near where you need to be financially. Besides, stashing hundreds of thousands or even millions more in your 30s invested over time with compound interest could set you up for life in your 40s/50s and beyond.

Working 60/70 hours a week doesnt have to be miserable like residency because you get to do it on your terms. Many of those hours in my case are even working remotely from home watching Netflix with my family. I've been doing it for 6 years now while visiting half the states, half of Europe, and more tropical islands than i can remember. I've been able to buy a second (and probably a third home soon) because of this saving rate. The investment on my first home has tripled in 2 years and doubled on my second home in one year. I would've never been able to do this working 1 FTE. And now, I'm financially secure enough to work 0.5 FTE for many, many years if not indefinitely so I can spend more time with my family.

Live like a resident for 5-10 years and you'll be set for life.

 

[Nocturnist]

Hey Everyone!

I stumbled upon this page recently and HOLY COW this thing is a gold mine! I've been reading this thread and have learned so much from what you all have had to say. I am only a 2nd year medical student, yes I know, still very early in my training, but I wanted to know what you would have told your younger self to do with your finances? What were some of your wins, losses, and lessons? Would you have done anything differently, and if so, how and what? Is real estate the land of milk and honey, or is it better to invest everything into HSAs, UTMAs, retirement accounts, brokerage accounts, etc? What are some of the best ways you have found to generate cashflow?

Second tip: marry well.
Nothing will build your net worth more than a like-minded goal oriented spouse that shares your vision. Nothing will set you back financially more than a bad divorce.

 

[finalpsychyear]

Hey Everyone!

I stumbled upon this page recently and HOLY COW this thing is a gold mine! I've been reading this thread and have learned so much from what you all have had to say. I am only a 2nd year medical student, yes I know, still very early in my training, but I wanted to know what you would have told your younger self to do with your finances? What were some of your wins, losses, and lessons? Would you have done anything differently, and if so, how and what? Is real estate the land of milk and honey, or is it better to invest everything into HSAs, UTMAs, retirement accounts, brokerage accounts, etc? What are some of the best ways you have found to generate cashflow?

Work like a resident being an attending (2-3 fte), and live like a resident version 1.5 was my moto. Meaning i took my final year monthly total paychecks (3200) and gave myself a 50 percent raise so about 5000 as an attending.

For almost 5 years i stayed in range; but i was also single,no kids, moonlighted in residency so pd off loans by graduation, and homeless. I truly wish everyone did that but i know circumstances don't allow it.

I know minimal about real estate so I put everything in the market tech/growth stock heavy. You can get great results sometimes both ways.

 

[Splenda88]

Work like a resident being an attending (2-3 fte), and live like a resident version 1.5 was my moto. Meaning i took my final year monthly total paychecks (3200) and gave myself a 50 percent raise so about 5000 as an attending.

For almost 5 years i stayed in range; but i was also single,no kids, moonlighted in residency so pd off loans by graduation, and homeless. I truly wish everyone did that but i know circumstances don't allow it.

I know minimal about real estate so I put everything in the market tech/growth stock heavy. You can get great results sometimes both ways.

What's your net worth right now?

 

[airplanes]

Combined income around 750k this year. Saving around half of that between home equity, investments, and cash.
Stock market portfolio obviously took a hit this year but our real estate equity has more than made up for that.
Our networth is 2.8M, should be around 3M by year end. On the hunt for a ski house to add to our beach house and primary home.

Well done. How long have you been in practice? What are your hours now?

 

[Nocturnist]

Well done. How long have you been in practice? What are your hours now?

6 years post residency.
Averaging 50-60 hours a week- around 18-20 night shifts and a combination of some remote shifts and evening hours, I dont do any day shifts.
About a quarter of our net worth came solely from the appreciation on our real estate in the past couple years. Overall 1.6M in real estate, 1M in stocks and the rest in cash. I tried to aim for a 1:1 ratio between stocks and real estate but the last 6-12 months really threw that off. Goal is 5M net worth in 4 years (year 10 as attending), which I'd consider the bare minimum for financial independence given our expenses. In 8-10 years, all our real estate will be paid off, and aiming for a 7.5-10M net worth. At 10M+, I'm off the hamster wheel and working for fun. Dream would be to keep working just enough not to have to touch the investments for a few decades to create some real generational wealth in the 10s of Ms.

 

[Splenda88]

6 years post residency.
Averaging 50-60 hours a week- around 18-20 night shifts and a combination of some remote shifts and evening hours, I dont do any day shifts.
About a quarter of our net worth came solely from the appreciation on our real estate in the past couple years. Overall 1.6M in real estate, 1M in stocks and the rest in cash. I tried to aim for a 1:1 ratio between stocks and real estate but the last 6-12 months really threw that off. Goal is 5M net worth in 4 years (year 10 as attending), which I'd consider the bare minimum for financial independence given our expenses. In 8-10 years, all our real estate will be paid off, and aiming for a 7.5-10M net worth. At 10M+, I'm off the hamster wheel and working for fun. Dream would be to keep working just enough not to have to touch the investments for a few decades to create some real generational wealth in the 10s of Ms.

Will you be able to keep up with that pace for another 8-10 yrs?

My gig is not hard but I usually find myself somewhat tired in my last day when I work 9 days in a row. Therefore, I avoid working more than 9 days in a row.

 

[finalpsychyear]

6 years post residency.
Averaging 50-60 hours a week- around 18-20 night shifts and a combination of some remote shifts and evening hours, I dont do any day shifts.
About a quarter of our net worth came solely from the appreciation on our real estate in the past couple years. Overall 1.6M in real estate, 1M in stocks and the rest in cash. I tried to aim for a 1:1 ratio between stocks and real estate but the last 6-12 months really threw that off. Goal is 5M net worth in 4 years (year 10 as attending), which I'd consider the bare minimum for financial independence given our expenses. In 8-10 years, all our real estate will be paid off, and aiming for a 7.5-10M net worth. At 10M+, I'm off the hamster wheel and working for fun. Dream would be to keep working just enough not to have to touch the investments for a few decades to create some real generational wealth in the 10s of Ms.

5m liquid NW is a pretty safe amount I would think with a 3% SWR. Once reaching that if you go PT for 5-7 years to let that grow while using your PT pay for expenses and maybe have 1-2 years of cash reserves your pretty much bullet proof even if the market tanks 50% in year 7 of your last day of PT work.

Anyone reaching 7.5-10m liquid NW if they choose could retire the next day withdrawing 200k (3%) and obviously adjust it up or down based on market conditions

 

[emergentmd]

5m liquid NW is a pretty safe amount I would think with a 3% SWR. Once reaching that if you go PT for 5-7 years to let that grow while using your PT pay for expenses and maybe have 1-2 years of cash reserves your pretty much bullet proof even if the market tanks 50% in year 7 of your last day of PT work.

Anyone reaching 7.5-10m liquid NW if they choose could retire the next day withdrawing 200k (3%) and obviously adjust it up or down based on market conditions

Correct. But if you hit 7+M, I would diversify and not leave it just in the market like QQQ/S&P. that 7m could be 3-4M quickly.

 

[finalpsychyear]

Correct. But if you hit 7+M, I would diversify and not leave it just in the market like QQQ/S&P. that 7m could be 3-4M quickly.

If i ever get there it will be a good problem to have. I'd probably put half in bonds that by itself could give me my 100-150k to live on comfortably and the rest I'd just leave in the market.

 

[airplanes]

6 years post residency.
Averaging 50-60 hours a week- around 18-20 night shifts and a combination of some remote shifts and evening hours, I dont do any day shifts.
About a quarter of our net worth came solely from the appreciation on our real estate in the past couple years. Overall 1.6M in real estate, 1M in stocks and the rest in cash. I tried to aim for a 1:1 ratio between stocks and real estate but the last 6-12 months really threw that off. Goal is 5M net worth in 4 years (year 10 as attending), which I'd consider the bare minimum for financial independence given our expenses. In 8-10 years, all our real estate will be paid off, and aiming for a 7.5-10M net worth. At 10M+, I'm off the hamster wheel and working for fun. Dream would be to keep working just enough not to have to touch the investments for a few decades to create some real generational wealth in the 10s of Ms.

Good luck! You're definitely putting in the time.

My goals are a bit less ambitious. FIRE or switching to non-clinical around a 4M portfolio with paid off house should be plenty for me and my family. We are about halfway there, I started practice 4 years ago. With some luck, maybe this compounding business that everyone keeps raving about will start putting a little wind in those sails eventually.

I see you connect your NW to your FI status, wouldn't your portfolio (investments/RE) be a better marker for FI since that's where the income will come from? Personal real estate, cars, hard assets, etc. that go into NW don't factor into my FI number.

 

[Nocturnist]

Good luck! You're definitely putting in the time.

My goals are a bit less ambitious. FIRE or switching to non-clinical around a 4M portfolio with paid off house should be plenty for me and my family. We are about halfway there, I started practice 4 years ago. With some luck, maybe this compounding business that everyone keeps raving about will start putting a little wind in those sails eventually.

I see you connect your NW to your FI status, wouldn't your portfolio (investments/RE) be a better marker for FI since that's where the income will come from? Personal real estate, cars, hard assets, etc. that go into NW don't factor into my FI number.

You have a 2M portfolio 4 years out of residency? Amazing job! Do you mind if I ask what your NW is? Agree 4M portfolio and a paid off house would be more than enough for most people.

Why wouldn't you factor hard assets, especially real estate, into your FI? If instead of stocks I invested in 100 Rolex watches at 10k each that have appreciate at 10% a year, should I disregard that 1M addition to my NW? When I sell one per month in retirement to fund it, is it not contributing to my FI?

I see what you mean but I dont think you can (nor should you) decouple the rest of your assets/your NW from your financial independence. Every appreciable asset is a marker of your FI. While I'm not one of them, some would even advocate counting your cars in there (i can sell my 100k car, trade it for a 20k one and cash out).
My personal homes are every bit a part of my portfolio as my brokerage and retirement accounts. If stocks were the only marker for FI, then everyone should keep renting, put their down payment in the market, and never buy a home again- right? I dont see it that way. My homes are an appreciable asset, with a return on investment around 100% in the past couple years (I dont count on that continuing, but that's the beauty of diversification..one return goes down and hopefully another goes up).

In 8-10 years I'm mortgage free, my payments go away, my monthly expenses go down 80%. My asset continues appreciating, I dont have to pay rent or worry about shelter. Isn't that part of FI? If I need to- I could sell, reverse mortgage, rent (one room, or the whole house), or tap the equity of my personal homes. I could rent my beach house out for half the summer, yield much more passive income than I get from my portfolio, and still get to enjoy it part time. There are even companies these days that will cut you a check for a percentage of your home equity in return for just getting that percentage back plus appreciation (even if its posthumously) whenever you decide to sell. No interest involved. Isn't that FI?

 

[airplanes]

You have a 2M portfolio 4 years out of residency? Amazing job! Do you mind if I ask what your NW is? Agree 4M portfolio and a paid off house would be more than enough for most people.

Why wouldn't you factor hard assets, especially real estate, into your FI? If instead of stocks I invested in 100 Rolex watches at 10k each that have appreciate at 10% a year, should I disregard that 1M addition to my NW? When I sell one per month in retirement to fund it, is it not contributing to my FI?

I see what you mean but I dont think you can (nor should you) decouple the rest of your assets/your NW from your financial independence. Every appreciable asset is a marker of your FI. While I'm not one of them, some would even advocate counting your cars in there (i can sell my 100k car, trade it for a 20k one and cash out).
My personal homes are every bit a part of my portfolio as my brokerage and retirement accounts. If stocks were the only marker for FI, then everyone should keep renting, put their down payment in the market, and never buy a home again- right? I dont see it that way. My homes are an appreciable asset, with a return on investment around 100% in the past couple years (I dont count on that continuing, but that's the beauty of diversification..one return goes down and hopefully another goes up).

In 8-10 years I'm mortgage free, my payments go away, my monthly expenses go down 80%. My asset continues appreciating, I dont have to pay rent or worry about shelter. Isn't that part of FI? If I need to- I could sell, reverse mortgage, rent (one room, or the whole house), or tap the equity of my personal homes. I could rent my beach house out for half the summer, yield much more passive income than I get from my portfolio, and still get to enjoy it part time. There are even companies these days that will cut you a check for a percentage of your home equity in return for just getting that percentage back plus appreciation (even if its posthumously) whenever you decide to sell. No interest involved. Isn't that FI?

You make good points. I think for someone such as yourself who is accumulating and will be for some time, it doesn't make much functional difference. For my family, it makes more sense to use our invested assets because that is where our drawdown/spending/cashflow will come from. We will need a house and cars no matter what and those don't throw off any income or reasonable appreciate. For someone following the 4% guideline/rule (more like 3.3% for a 40-50 year retirement timeline), it doesn't make sense to include my personal home or my weekend car. If I sell my house, I would still need to buy another.

Thanks, my NW is close to 2M. I have student loans and am eligible for PSLF in 18 months (fingers crossed). The loans + mortgage and home equity just about cancel each other out.

 

[Splenda88]

You make good points. I think for someone such as yourself who is accumulating and will be for some time, it doesn't make much functional difference. For my family, it makes more sense to use our invested assets because that is where our drawdown/spending/cashflow will come from. We will need a house and cars no matter what and those don't throw off any income or reasonable appreciate. For someone following the 4% guideline/rule (more like 3.3% for a 40-50 year retirement timeline), it doesn't make sense to include my personal home or my weekend car. If I sell my house, I would still need to buy another.

Thanks, my NW is close to 2M. I have student loans and am eligible for PSLF in 18 months (fingers crossed). The loans + mortgage and home equity just about cancel each other out.

It does make sense. For instance, I can lean fire if I have 1 mil (4% draw down... 40k/yr) because I have a paid off home. However, If I didn't not have a paid off home, I would need 1.5 mil (4%... 60k/yr). The extra 2k/month will be used to pay for shelter. Having a paid off home is extremely important since rent/mortgage is the the biggest expense out of most people monthly budget.

 

[airplanes]

It does make sense. For instance, I can lean fire if I have 1 mil (4% draw down... 40k/yr) because I have a paid off home. However, If I didn't not have a paid off home, I would need 1.5 mil (4%... 60k/yr). The extra 2k/month will be used to pay for shelter. Having a paid off home is extremely important since rent/mortgage is the the biggest expense out of most people monthly budget.

You're talking about the effect of a mortgage on your annual expenses. Financial independence is achieved when your "nest egg" covers your annual expenses. Your home is an illiquid asset. Sure, you can sell it, and it absolutely appreciates and counts in your net worth but it doesn't provide income. Note, I am just talking about a primary home. Investments in real estate should definitely be included in a portfolio, and I not saying otherwise.

Person A has a paid off home worth 500k and 2.5M invested/cash/equity/assets.

Person B has a paid off home worth 1.5M and 1.5M investments/cash/assets.

They both have a 3M NW but they are not the same. Person B has a much higher chance of running out of money if they want to retire for 40 years and have annual expenses of 100k.

 

[Splenda88]

You're talking about the effect of a mortgage on your annual expenses. Financial independence is achieved when your "nest egg" covers your annual expenses. Your home is an illiquid asset. Sure, you can sell it, and it absolutely appreciates and counts in your net worth but it doesn't provide income. Note, I am just talking about a primary home. Investments in real estate should definitely be included in a portfolio, and I not saying otherwise.

Person A has a paid off home worth 500k and 2.5M invested/cash/equity/assets.

Person B has a paid off home worth 1.5M and 1.5M investments/cash/assets.

They both have a 3M NW but they are not the same. Person B has a much higher chance of running out of money if they want to retire for 40 years and have annual expenses of 100k.

I think we are talking past each other. We also can put it this way:

Person A has a paid off home worth 500k and 2.5M invested/cash/equity/assets.

Person B with a mortgage payment of 3k/month and 2.5M investments/cash/assets.

Anyway, I got your point. However, I dont know any financial institution that do not use your home equity as part of your net worth.

 

[airplanes]

I think we are talking past each other. We also can put it this way:

Person A has a paid off home worth 500k and 2.5M invested/cash/equity/assets.

Person B with a mortgage payment of 3k/month and 2.5M investments/cash/assets.

Anyway, I got your point. However, I dont know any financial institution that do not use your home equity as part of your net worth.

Like I said, home equity is definitely included in net worth. I just wouldn't use it in determining my FI status.

In the example you listed, A has a NW of 3M, B has a NW of 2.5M minus whatever their mortgage debt is so they are different in NW and presumably expenses at well. I digress.

 

[Nocturnist]

You're talking about the effect of a mortgage on your annual expenses. Financial independence is achieved when your "nest egg" covers your annual expenses. Your home is an illiquid asset. Sure, you can sell it, and it absolutely appreciates and counts in your net worth but it doesn't provide income. Note, I am just talking about a primary home. Investments in real estate should definitely be included in a portfolio, and I not saying otherwise.

Person A has a paid off home worth 500k and 2.5M invested/cash/equity/assets.

Person B has a paid off home worth 1.5M and 1.5M investments/cash/assets.

They both have a 3M NW but they are not the same. Person B has a much higher chance of running out of money if they want to retire for 40 years and have annual expenses of 100k.

Not at all.Their situations are almost exactly the same..Both person's families and situations being equal, why would person B need a 1.5m home in retirement when they can live just as comfortably in person A's 500k home? What exactly is stopping B from selling their 1.5m home, buying a 500k home, and buying stocks/bonds with the 1M net? So person B is just some realtor fees/sales tax and a few weeks away from As situation. Yes, if person B decides they need 3 times the home they can comfortably live in, they have to either continue working longer or will run out of money sooner. But you can stretch that logic to the extreme: why not live in a 100k trailer and have 2.9M invested? Why not live in a $50 tent and have 3M invested? Why not take my 1.5m home in the northeast and get twice the house for 500k in Alabama? (Hint:I'd have to live in alabama). This is perpetually the paradox between lean and fat fire, and as as a high earner who likes their job and doesn't mind working, I'm going for the latter.

But let's turn that situation around:
Person A and B saved 500K in cash 5 years ago. both purchased their homes for half, 250k and 750k respectively, 5 years ago. Both homes doubled in value in that time frame (pretty realistic scenario). Person A used 50k for their down payment and invested the other 450k. B used 150k for their down-payment and invested 350k. Both's investments doubled in value as well. Person A now has 900k in stocks and 500k in real estate=1.4M NW. Person B has 700k in stocks and 1.5m in real estate=2.2M NW.

Now, who's in a better financial situation and better situated to retire early? B can now sell and buy a 500k home, and all the sudden they have 1.7M in stocks, almost twice of A's. Can you find a bank that will routinely lend you 5 to even as much as 30 times your down payment at 2.5% over 30 years to buy some stocks?
Leveraging in RE is a very powerful tool that cannot be dismissed or overlooked in FI.

 

[geromeanichini]

Last year I invested around 150 000$ in stocks and cryptocurrencies. I bought some gold and cryptocurrencies like Cardano, Solana, Luna, and DMC. Hopefully, I didn't invest much in Luna, so I didn't lose more this spring when the Luna coin market fell. In common, I got good profits, but now I am afraid to keep my money in cryptocurrencies since they are pretty unstable after the BTC price fall. After reading an article here, youngandthrifty.ca, I'm considering investing my money in real estate since this option looks solid right now in terms of huge inflation and crisis because of war.

 

[finalpsychyear]

Like I said, home equity is definitely included in net worth. I just wouldn't use it in determining my FI status.

In the example you listed, A has a NW of 3M, B has a NW of 2.5M minus whatever their mortgage debt is so they are different in NW and presumably expenses at well. I digress.

I don't know enough about real estate to feel comfortable investing in additional units and renting them out. What I do know is your primary residency for a lot of doctors is a luxury item more than utility which is fine. Now there may be areas where houses appreciate close to the stock market but i am not in one of them. Also, if you know you are planning to sell your 5k sq ft house and downgrade to a different area I can see that being helpful in retirement. Too many variables such as ongoing taxes, maintenance small and major, plus fees in selling a house then needing to buy another that i don't count it in my FIRE goals but surely its counted in NW. Also, if your investing in real estate outside of your primary house that is also a different animal.

i don't know about others but if 2.5m was someone's fire number I'd rather they have that in liquid investments in a brokerage rather than counting their primary house as far as the fire number goes.

 

[dpmd]

Not at all.Their situations are almost exactly the same..Both person's families and situations being equal, why would person B need a 1.5m home in retirement when they can live just as comfortably in person A's 500k home? What exactly is stopping B from selling their 1.5m home, buying a 500k home, and buying stocks/bonds with the 1M net? So person B is just some realtor fees/sales tax and a few weeks away from As situation. Yes, if person B decides they need 3 times the home they can comfortably live in, they have to either continue working longer or will run out of money sooner. But you can stretch that logic to the extreme: why not live in a 100k trailer and have 2.9M invested? Why not live in a $50 tent and have 3M invested? Why not take my 1.5m home in the northeast and get twice the house for 500k in Alabama? (Hint:I'd have to live in alabama). This is perpetually the paradox between lean and fat fire, and as as a high earner who likes their job and doesn't mind working, I'm going for the latter.

But let's turn that situation around:
Person A and B saved 500K in cash 5 years ago. both purchased their homes for half, 250k and 750k respectively, 5 years ago. Both homes doubled in value in that time frame (pretty realistic scenario). Person A used 50k for their down payment and invested the other 450k. B used 150k for their down-payment and invested 350k. Both's investments doubled in value as well. Person A now has 900k in stocks and 500k in real estate=1.4M NW. Person B has 700k in stocks and 1.5m in real estate=2.2M NW.

Now, who's in a better financial situation and better situated to retire early? B can now sell and buy a 500k home, and all the sudden they have 1.7M in stocks, almost twice of A's. Can you find a bank that will routinely lend you 5 to even as much as 30 times your down payment at 2.5% over 30 years to buy some stocks?
Leveraging in RE is a very powerful tool that cannot be dismissed or overlooked in FI.

That is assuming person A and B do no other investing. More likely that person A would have more money available to invest more because of their lower mortgage payment so that complicates your analysis.

Regardless I think it is important to track both numbers. Total net worth you can think of as your FI target knowing that it would require a life change (moving is a big life stressor and trying to sell your house for a cheaper one isn't guaranteed to succeed so you might have to stay out and reduce your expenses for a while). When you have enough though it means you could say F you to your job if it no longer pleases you. I consider this a worthy thing to track if just for the psychological bump you get from reaching it. Liquid assets is a good number to track because that means you could walk away and not have to change your life at all. That to me is important because it means if I said F you to my job I wouldn't then feel obliged to find a different one I might be happier at. Everything after that point is just gravy.

 

[finalpsychyear]

That is assuming person A and B do no other investing. More likely that person A would have more money available to invest more because of their lower mortgage payment so that complicates your analysis.

Regardless I think it is important to track both numbers. Total net worth you can think of as your FI target knowing that it would require a life change (moving is a big life stressor and trying to sell your house for a cheaper one isn't guaranteed to succeed so you might have to stay out and reduce your expenses for a while). When you have enough though it means you could say F you to your job if it no longer pleases you. I consider this a worthy thing to track if just for the psychological bump you get from reaching it. Liquid assets is a good number to track because that means you could walk away and not have to change your life at all. That to me is important because it means if I said F you to my job I wouldn't then feel obliged to find a different one I might be happier at. Everything after that point is just gravy.

Nothing compares to having 25x in liquid for most people. There will be a few rare real estate guru's who know when to harvest the losses on their taxes and all that jazz and come out ahead but that is the exception just like those who invest on margin, options, puts etc. Also, you can withdrawal 100k with 0 tax with the proper liquid investments which is a plus. I think a great goal is to shoot for the 25x liquid imo and your house is bonus.

 

[goldsummer]

I've been pumping 6-8k/month in the stock market in recent months on the more down days. Mostly dividend stocks.

Buying some crypto... Just got into Hex.

Seeing how things go....