$4MM...Quit rat race and become an owner operator? WWYD?
Late-20's acquisitions associate in an HCOL city.
I just received a $4MM cash gift this year. I've been planning to quit the corporate job, lever up conservatively, and acquire a SME/income producing property to run as an owner-operator.
$4MM is a significant amount for someone my age but it is hardly FUCK YOU money. I could lever up and buy a Class B $10MM apartment/self storage site/golf course but would have to become a property manager and deal full-time with the Joe Schmoe tenants & customers. The deals I'm seeing would need an owner-operator to run instead of third-party management for the economics to make sense.
I like the idea of working for myself and building up equity but am not sure if I want to trade in being surrounded by sharp people from ib/repe/big law backgrounds to deal with retail customers (collecting checks, coordinating plumbing maintenance, making sure the customers/tenants are happy)..but I guess that's how value is extracted in RE lol.
Has anyone had similar thoughts? Would like to get the community's thoughts on this...would you keep grinding and just stash the extra dough in the VOO?
If you’re looking at 10 MM properties, they can 100% be managed by third party PM firms so you don’t need to deal with the tenants. However, since this is your first acquisition, don’t blow the house on one. Start with a $250k-400k down payment and buy a small property. Actually deal with it. Learn. And than scale. If you do a 4MM equity check that goes bad, you just lost your whole gift.
Can’t really tell you about holes in your analysis. If you don’t want to pay someone $70K to manage the asset because you feel it costs too much, than you are buying yourself a new job and saying your time each year is worth $70K. So sure, you’re keeping $400k instead of $330K, but you’re working a new full time job. You should at least underwrite the deal with the budget for paying someone, because in three years you may not want to manage the deal. But if you didn’t budget for the cost, it’s going to wreck your returns. Budget for it even if you manage it yourself.
I've always told people that the best day to buy real estate is yesterday, the second best day is today. There are a number of ways to do this you just have to figure out what strategy is best for you. For example the highest rewards come from entitlements, then followed by development, then value add, then stabilized. Everyone knows each has different levels of risks, but they also have very different levels of required work output.
The thing no one will tell you about real estate is it doesn't matter how much work you do in the industry be it acquisitions, development, property management, etc. there is an entirely different reality when you are primary sponsor on a deal. The emotions are different, the demands are different, it just feels different. Some people are advising starting small, others say to keep working and put the money in the stock market, others say go travel. The reality is if you want to do this, you gotta go for it. Half and halfing it can "work" but it isn't for those who want to create destines and dynasties.
Figure out what it is you want, then go for it. There isn't a wrong answer either, you just have to know what you want and what your capacity for output and risk is.
4% of 4 million is 160k annually, which outside of New York, San Francisco, and a handful of other tier 1 cities globally is absolutely fuck you money.
Which gets taxed.
Lets say you clear $100,000 net of taxes, and never have to touch the principal. Hell, double it, lets say it's $200,000. Guaranteed income stream. How is that "fuck you" money? That's a great passive income and you could live quite comfortably on that. But the reason it's referred to as "fuck you" money is because you can do almost anything you want. And with $200,000/yr... even leaving out a family, you're not buying a new exotic car every year, or vacationing in the Swiss Alps, or anything else that the term "fuck you money" implies.
"Fuck You Money" means you can walk into your bosses office and say "Fuck You," quit, and then not need to work another job.
160k annually is more than enough to do this, even after you pay your (efficiently structured) taxes.
So literally any amount of money? I could pick up a quarter on the street, go tell my boss fuck you, and live in the wilderness?
To me, "Fuck You Money" means you can tell the world to go fuck itself because you have the money to throw at any problem such that it will go away. Besides, our friend making $160,000 a year certainly is going to have trouble retiring for his life. What if he wants kids? That's an expensive proposition right there.
Yes exactly, and the number is different for everyone. I have friends who banked just south of $1mm and retired before 30. They don't live large, but they do live life on their own terms.
Well your definition of "Fuck You Money" is something you just invented for yourself, and there are plenty of problems that money can't solve.
Also, I'm the VAST majority of people raise families on FAR less than 160k per year.
You are describing retirement. That's not the same thing.
No less than your definition is something you invented. I actually googled it, for shits and giggles, and the first hit I got was "the amount of money you need in life to say 'fuck you' to any person that asks." Which is a far sight closer to my definition than yours. Your definition is basically "I'm quitting/retiring" which obviously isn't the implication of "fuck you money."
Sure. Most people also keep working. Most people's salaries adjust for inflation. Most people get raises. Forty years ago a dollar was worth three times what it is today. If inflation keeps up, our friend with his nice $160k/yr nest egg (assuming it still exists) has a purchasing power in today's dollars of $53,000. Pre-tax! Suddenly a lot less viable.
Again, your definition is essentially meaningless since it can be any dollar amount. Tripping over a penny constitutes fuck you money, according to you, which strips any meaning from the phrase.
That's funny, when I google Fuck You Money, the first result is from urban dictionary, which says:
fuck you money
The exact amount of money required in order to tell an individual or organization to go fuck themselves without facing repercussions.
I still don't know why I engage in conversation with you...
I'd be willing to bet $160k that if a vote was taken on this forum, 99% of people would not consider $160k a year to be "fuck you money"
Considering that the average person will make less than 4m over their ENTIRE life, I'm willing to bet 160k that if you polled every working person in the U.S. they'd say 4m is "fuck you" money.
This forum is a horrible proxy of actual reality/real life.
$160,000 being a wage slave is not fuck you money. You're still beholden to someone or something.
$160,000 without lifting a finger is absolutely fuck you money. That's on top of $4 million (technically millions) in untouched principal.
Fuck you.
It's always hilarious to me that the people scoffing at *insert $X million* windfall and how it's "not that much" are the same people who do not have said money. Unless you have at least $4 million liquid, you are not in a position, nor are you qualified, to speak on the subject. That's more than enough to be considered "fuck you money", in that you are effectively liberated from needing to be a wage cuck to get by. If your idea of fuck you money is $20MM or $40MM, guess what, you can blow that all on a single property in Beverly Hills or Palm Springs. The key takeaway here is that what matters most is your expenditures and lifestyle, rather than the absolute number. You can blow through $50MM as fast as you can blow through $4MM. Stop with the clown takes folks.
These folks out here gatekeeping millionaires. “Heh well I know you have $4 million before 30 but that’s really not much”. Wtf kind of alternate reality is this
It's reality. The premise is that you quit your job and live off of the money. $4M when you are 65, have an expected life span of 20 years or so is plenty when combined with conservative returns and principal draw down. When one is 28 that number will never last, aside from inflation alone, market volitility will destroy the base because you are never building it. If there is a single down turn in the market your base is cut down for good.
It's billion or bust you lazy fuckers.
Buddy of me retired from his trade job (electrician) at age 35, with $1.5 in savings and investments. He saved like crazy for 15 years, investing everything in index funds.
Now it should be mentioned that he lives in a crazy LCOL area, so his house alone didn't cost more than around $50k.
Will he afford a yach? No. Will he afford a Ferrari? No. Will he own 3 different homes? No. Does he need to show up to work 5 days a week? Nope.
He now lives his life pursuing his hobbies, while doing consulting work on the side, when he feels like it. After retiring, he got a degree in Electrical Engineering, which opened up tons of consulting opportunities. He's a normal, modest guy - spending less than what his investments yield.