No Regrets – Walking Away from $200,000/year

by FI Fighter on March 7, 2016

in Post FI, Thoughts, Updates

swad1g1xmyolckwhxvev

Well, today is the first Monday since I told my previous employer, “No mas“… The last post was just my announcement to the blogging community that my days as a corporate wage slave are finally DONE! However, I didn’t get into too many specific details, which I will try to address starting with this entry.

No, I don’t have everything figured out, but hey, how many of us in life are ever fortunate enough to say that they do?

Pulling the plug wasn’t too difficult, but it wasn’t entirely easy either. I know many early FI enthusiasts who get close to the summit oftentimes find themselves getting caught up with “one more year syndrome”. It happened to me as well… Back in 2014, I landed my “dream job”, and that kind of forced me to re-write my retirement plan… slightly.

Ultimately, I finally ended up doing what I really thought I was going to do in 2015, so not too much has really changed on that front.

And now we are unemployed and perhaps happier than ever before. It’s a feeling of liberation that I cannot even begin to express in words.

 

Anyway, let’s address the “final standings” of where my financial situation lies before we start embarking on this exciting new journey.

Assets:

  • 100% ownership stake in 5 rental properties (7 units) generating ~$2,000/month in semi-passive income on a typical month.
  • 50% ownership stake in 1 rental property (1 unit) that is cash flow positive each month.
  • 25% ownership stake in 2 rental properties (2 units) that are cash flow positive each month.

 

  • $500,000 in liquid assets; $350,000 in gold mining stocks and another $150,000 in cash/cash equivalents.

 

Well, what I’ve got is what I’ve got…

 

For the most part, I realize that most people will want to scrutinize my meager $2,000/month in cash flow and question whether or not my plan is sustainable or not…

 

Fair enough.

 

Here’s my take — To live in the Bay Area forever and ever, most definitely $2,000/month will not cut it. There’s almost no way around that fact… In my own situation, I have no plans of staying in the Bay Area permanently unless one or two things happen:

1) Over time, my cash flow rises enough where it makes sense for me to come back (with the way rents have been appreciating around here, perhaps that’s not too outlandish a thing to say; my mortgages are all 30 year fixed-rate, btw).

2) There’s another market crash and Class A assets are selling for 50% off again. I definitely will come back as an aggressive buyer, I assure you! Of course, everyone at this moment in time is claiming that will NEVER EVER happen…

 

So, what’s my current plan?

 

Simple, leave the Bay Area…

 

But I do have some “aces” up my sleeve. I own 2 rental properties (both 100% ownership stake) in the Bay Area, and I could easily raise rents on each unit by $500/month. I would still be charging below market value, in spite of that. This would net me an additional $1,000/month in income. Why haven’t I done so? Because I’m not desperate to do so! I have wonderful tenants in place who always pay rent on time and they take great care of my property… If I was in dire need for more cash, no doubt I would. For now, I’m content with the hefty principal paydown I’m getting each month.

Yes, it’s true that my cash flow kind of sucks right now, but while so many are fixated on that metric, I look at the fact that I have $500,000 in liquid funds to tide me over…

That’s what gives me true peace of mind.

Look guys, I’m not that insane, I realize the importance of sustainable cash flow… However, I’m someone who vividly remembers what it was like investing during the Depths of Despair, between 2009-2012, and let me tell you, my own personal take is that income assets are NOT cheap right now.

  • I refuse to buy dividend growth stocks right now.
  • I refuse to buy real estate right now.

Let me tell you, it’s absolutely no fun to be holding onto a portfolio that earns essentially ZERO passive income. For anyone who thinks that I am a total goldbug, believe me, I am NOT that enamored with the yellow metal! At some point in the future, trust me, I will liquidate my entire mining stock portfolio so that I can utilize the funds to acquire more income generating assets.

 

That has been the plan all along…

 

Anyway, I do find it almost comical that everyone is so obsessed with passive income and cash flow… Believe it or not, I would rather only have $2,000/month coming in and $500,000 in liquid funds than someone who has, say $3,500/month rolling in and only $20,000 as a buffer.

 

Even today, if I wanted to, I could convert that $500,000 lump sum into some decent, conservative cash flow. At 4% yield, that’s $20,000/year, or an additional $1,667/month.

 

Thanks, but no thanks…

 

I’m NOT planning on hoarding cash forever, so rest assured that at some point in time, I will do the right thing! 🙂

 

On this blog, I’ve always preached PATIENCE! Let the markets come to you… Don’t chase! Fortunes are made in bear markets when you are able to capitalize on opportunities.

 

And for anyone who doesn’t believe that stocks and/or real estate will crash again, check your history! Every asset class goes up and down. Nothing goes up in a straight line forever! That’s the bottom line. However, at market tops, most retail investors cannot seem to grasp that fundamental fact.

 

Oh, and that’s the other nice perk about being well situated and having a strong foundation already in place;  if the markets keep going up, I stand to profit and win. If the markets do indeed tank, I will probably win twice as big.

 

So, really, it’s kind of win, win at this point (I’m quite hedged)… I just gotta make sure I stay afloat, nimble, and liquid while I wait for the tide to turn.

 

With all that said, the numero uno reason why I’m not concerned with the future at all is because I’ve still got my brain intact that I can hopefully use to help me side main hustle. Not that long ago, Apple Inc., one of the premiere engineering companies in the world, valued me enough as an employee to pay me $200,000/year, total compensation, to work for them…

I know I’m not that bright, but if on my own, I can even find some kind of way to earn 15% of that, that’ll help me garner $30,000/year, or $2,500/month in gross income.

That should help a bunch…

apple - 1

 

Swim in the deep end…

 

Nah, man, that was playing it safe!

 

I’m swimming in the really deep end now…

 

But you know what, who cares?

 

Life ain’t binary! You aren’t one minute 100% reliant on an employer to survive and the next 0%. Financial independence is a GRADUAL process, and just because you might not have made it all the way to the top of the mountain, it doesn’t mean that everything you’ve accomplished up to that point is for naught either!

 

Keep up the good fight, and slowly, inch by inch, you will win the prize and ultimately succeed!

 

What’s the worst thing that could happen? I have to go back to 9/5 and work as an engineer again?

 

Brain, don’t fail me now! 🙂

 

Fight On!

 

 

Note: Shout out to my brother’s friend BC for inspiring me to post today’s pic of Braveheart; it really captures the spirit just right, I must confess…

{ 26 comments… read them below or add one }

1 Special Agent Dividend March 7, 2016 at 11:52 am

Great write-up and I wish you the best! I can certainly see your logic in not throwing all your cash assets in the market. It appears you have a great plan moving forward with the rental properties and that cash reserve ready to be put to work for you when you have found the right time.

Reply

2 FI Fighter March 8, 2016 at 8:59 am

Special Agent,

Appreciate the support. As much as I would love to throw all the cash into assets, there’s nothing out there that remotely suggests to me that now is a prudent time to “back up the truck”.

So, I’ll be patient even if it’s beyond boring…

All the best!

Reply

3 Doug March 7, 2016 at 11:55 am

Been silently reading your blog for awhile. I was able to get in before the recent run up in Gold stocks. Thanks for the tip help!

Congrats! Wish you the best. Keep writing!

Reply

4 FI Fighter March 8, 2016 at 9:00 am

Doug,

Thanks! Congrats to getting in at the right time, not always easy to do.

Take care!

Reply

5 Midwestern Landlord March 7, 2016 at 12:21 pm

Long time followers will really appreciate the content of this post. Congrats on working for such an iconic company like Apple. But at the end of the day, there is a bigger prize.

I for one do not have any concern about your long term financial viability. $500K will get you through a lot of rainy days. Your rental properties are building equity each month. Your cash flow margins on your rental properties will increase over time in part due to 30 year fixed financing. It sounds like you can already increase the rent substantially ($1,000 / Mo) on your Bay Area rentals. I see no risk here at all. The risk is the other way around; continuing to work for someone else and being unhappy and unhealthy.

I continue to believe that your real estate base is your financial foundation and the $500K ensures that the wheels keep turning in the event that there are rough patches. Combined and you really have something. This is why I agree that passive cash flow today for you is overrated. Because it will grow and you have the resources to help make it grow (and keep it growing). But would it be viable (or a good decision) to make this move with only the $500K and no real estate? That just goes to show how critical it was for you to maximize on your real estate purchases and what a powerful tool they truly are. I just see it as much more difficult for someone to become FI only on paper assets.

Reply

6 FI Fighter March 8, 2016 at 9:03 am

Midwestern Landlord,

Thanks again! Yeah, Apple is truly a great company and I’ve only got positive things to say about it. Under different circumstances, I would have loved to stay.

But my situation is different and I am not strapped for cash any longer to fund my very basic and simple lifestyle.

At this point, I clearly have decided to choose freedom and health over immense stress, irrespective of how lucrative the pay is.

Definitely, no doubt that I agree and feel that real estate is the rock and foundation for my financial future. Without those deals, I really wouldn’t have much confidence with retirement and being able to execute out this plan.

I will touch on this in more detail at a later date. I realize one can become financially independent using various methods, but having experimented with a few, hands down, real estate is your best friend in a downmarket. The leverage to the upside is stuff dreams are made of.

Take care!

Reply

7 Justin @ Root of Good March 7, 2016 at 12:46 pm

Woah, congrats! Welcome to the club! Mrs. RootofGood just left her job about one month ago making our household fully early retired. Our available cash flow from the portfolio is just a tad higher than your total cash flow (based on the 4% rule) so we’re in similar positions (though it’s all index funds and zero real estate other than REITS). And of course we live in Raleigh (where luxury 1-2 BR apartments in the best part of town run $1000-1500/mo) instead of Bay Area (OMG can’t imagine what a comparable place runs – $4k? $6k?).

I’d say get out of dodge and save some $ on COL. Enjoy life. Maybe later you need to make some more money. Most likely you won’t.

Reply

8 FI Fighter March 8, 2016 at 9:07 am

Justin,

Thanks for stopping by! Congrats to your entire family on achieving absolute financial freedom. That is an epic achievement so hats off to you guys!

LOL! Yeah, I stopped paying attention to high end rents in SF Bay Area… Last I heard, my buddy’s very simple 3/2 SFH in Silicon Valley was able to fetch $4,500/month…

It really is nuts out here, but people don’t seem to care and are willing to chase real estate up to the moon.

I want out of dodge; I can’t run this race and don’t plan to.

Cheers!

Reply

9 Justin @ Root of Good March 11, 2016 at 11:32 am

Get out while you’re ahead as they say in Vegas.

Reply

10 Brian - Rental Mindset March 7, 2016 at 1:41 pm

Congrats, I bet you woke up pretty happy this morning!

Where are you thinking of moving? Would you possibly reevaluate the income real estate there or do you think it’s expensive everywhere right now?

Reply

11 FI Fighter March 8, 2016 at 9:10 am

Brian,

SE Asia will be the launch pad to the next chapter. Not sure where exactly just yet, most likely all over… I do still have some family scattered around, so it’ll be fun to meet some extended family for the very first time.

Very much looking forward to it.

Sure, income real estate still works, but quite honestly, I’m waiting for a much steeper overall market correction… I’ve got enough units so I’m extremely picky now… It’s an unfortunate thing to say, but I only want to buy when there is an abundance of: REOs, foreclosures, short-sales, etc.

Real estate is extremely, extremely lucrative at the bottom.

Best wishes!

Reply

12 Tawcan March 7, 2016 at 2:14 pm

Amazing stuff man, I wonder if you know some ppl I know that worked at Apple. 😉

Congrats on walking away. Maybe move to South East Asia where cost of living is significant cheaper than SF?

Given the choice of freedom and $200k, I think I’d pick freedom too.

Reply

13 FI Fighter March 8, 2016 at 9:22 am

Tawcan,

Haha, maybe… Apple is such a large company, I ended up reconnecting with 2 college buddies most recently…

Yup, SE Asia is where I’m headed to next… My travel hacking guru of a brother is in Shanghai right now, but when he gets back, we are gonna have to hash out a gameplan and start booking some tickets. Too many points to burn before further devaluation.

Freedom, you can’t beat that!

Best wishes!

Reply

14 No Nonsense Landlord March 7, 2016 at 8:10 pm

Best of luck to you! Often, jumping in the deep end makes you learn how to swim fast.

Reply

15 FI Fighter March 8, 2016 at 9:24 am

Eric,

Thanks! Yup, I’m gonna have to fight for every last inch in order to survive now.

But I do feel alive… for a change.

Take care!

Reply

16 Reepekg March 7, 2016 at 9:57 pm

Congratulations and well earned!

Will be looking forward to your gold mining stocks update as my GDX has been blowing up.

That Apple letter kind of made me throw up in my mouth a little bit. “The kind you’d sacrifice a weekend for”, indeed.

Reply

17 FI Fighter March 8, 2016 at 9:26 am

Reepekg,

Congrats on GDX, it has indeed blown up over the last 1-2 months.

Haha, well they’re just trying to inspire their workers… I’ll admit, watching the old clips they show you of Steve Jobs really gets you motivated to go out and do something great.

Take care!

Reply

18 mike March 7, 2016 at 10:31 pm

enjoy your time off. at some point you will need structure to keep you sane. Do something your passionate about. I dont believe you were made to sit on a beach and drink margaritas for the next 30 years. Explore and find out what your passion is and pursue it with all of your heart.

Enjoy and congrats!

Reply

19 FI Fighter March 8, 2016 at 9:28 am

Mike,

Most definitely. Quitting a job/career doesn’t mean you bum around for ever after… Although, the occasional splurge is just fine.

At this point, I’m not exactly sure what my next calling is outside of traveling the world… Focusing more on this blog would be a good start. I love the interactions and conversations with other freedom fighters. Don’t think my passion for that will ever go away.

Take care!

Reply

20 Hristo March 7, 2016 at 10:43 pm

Hi FIF,

I didn’t have the change to congratulate you for the braveness to leave work without having 100% clear plan what to do, so Congratulations!

But you know what – you can stay on the beach whole day and you will never understand what is the feeling to swim until you go into the water. There will always be some uncertainty and questions in your mind and as always the first step is the hardest one.

However, I think you have prepared to some significant degree and now is a matter of time the market to come to your level.

Regards,
Hristo

Reply

21 FI Fighter March 8, 2016 at 9:29 am

Hristo,

Thank you! Yup, I’m in a lot of water right now, so we’ll see what my brain can think of to keep me afloat.

You can only prepare so much… At some point, it’s time to play ball!

Best wishes!

Reply

22 Roadmap2Retire March 8, 2016 at 7:44 am

Congrats on finally quitting the rat race. Thats really great youve built up the assets so quickly over time and you are cash flow positive on all your properties.

Enjoy your new laid back lifestyle 🙂

R2R

Reply

23 FI Fighter March 8, 2016 at 9:31 am

R2R,

Thanks! Yeah, it wasn’t always easy getting to positive cash flow for all properties since I only won my last property last year. But everything is good now and I’m hopeful the cash flow will easily outpace inflation over the next few years.

All the best!

Reply

24 FFM March 8, 2016 at 11:17 am

Hi FIF!

First off, congrats on quitting. I’ve been following your blog for a while and have always been very inspired. Glad you could finally pull the trigger.

I wanted to say, though (and this is no fault of yours), but I can’t help but feel a little disheartened knowing that you have saved up so much cash and have been able to invest so much. Me and my partner have just started thinking BIG in terms of financial freedom and extreme early retirement, and we are in our mid-late 20’s. We are obviously very eager to quit the rat race as soon as possible, however, the situation is that we are still about $40k in student loan debt, we have a car loan and a mortgage (that’s actually being paid for by a renter plus some).

The point is, we are still in the red, and even though we can’t stand the thought of one more day in the office, we are enslaved to it. So while your blog and story has been very inspiring, I can’t help but feel disheartened because I feel like we won’t be able to quit our jobs with the same amount of cash/investments that you have currently. Or at least, that could take 10+ years, which is not something we can do staying sane.

What advice if any, would you have for people like me who so badly want to quit, but may not have the big funds to do so? Is there a minimum “net worth” you would recommend? Do early retirees ALWAYS need to have a plan before quitting their jobs?

Thanks and congrats again!

Reply

25 FI Fighter March 8, 2016 at 12:37 pm

FFM,

Thanks for writing. Everyone’s situation is different so I definitely wouldn’t feel disheartened. In reality, the majority of my “progress” was made by artificially creating money out of thin air (cash out refi through rental properties). So, it’s not like I “saved” every last penny to get to where I am now.

There are lots of shortcuts to early FI. If you can take advantage of those when they pop up, you’ll go far. The key is to pay attention for opportunity because it will never announce itself to the world.

Feel free to message me if you want to discuss more.

I understand all too well the struggle with wage slavery… Fortunately, there is a way out!

All the best!

Reply

26 Sundeep March 19, 2016 at 5:37 pm

I’m late catching up on your posts, but had to chime in here to say great answer…and of course congrats on cutting the cord, gotta feel amazing I’m sure.

Been a reader for a while now and its great to see your plan unfold and get executed…look forward to reading about your next chapter.

Reply

Leave a Comment

{ 1 trackback }

Previous post:

Next post: