Big Changes Ahead

I'm moving out of state. I'm quitting my job. I'm renting out my house. I'm starting a business. I'm trying to max out my 403b before my last paycheck. I'm trying to live on $660/month (plus the money from my roommates who pay for my mortgage). I actually think this will all work out. Craziness!

Moving Out of State
I am thrilled to have finally made the decision to move further south. I've been in the Northeast now for almost a decade and I am SO tired of the cold, the brown slush, the SALT, the pot holes, the greyness. The sunny skies south of the mason-dixon line have been calling me for a while!

Quitting My Job
This one was tougher. I've stuck around here as long as I have because I love the work I do and the people I work with. But it is time. My last day of work is June 5th. My last paycheck is August 31st.

Renting Out My House
The idea of putting my house on the market, hoping to find a buyer, and coming back up here for closing was not at all appealing to me. I figured I might as well see what kind of potential there was for renting out the house. I do have some experience being a landlord, I have a rental property a few miles away.

On May 7th I posted some pics on Craigslist with a pricetag that sounded good to me. I got 17 emails within 24 hours. I made appointments for the following week with 3 people. They came, they saw, they loved it, they wanted it. It's true, my house is very cute.

I offered it to the ladies who wanted to rent it furnished for an extra $100 a month (yay, I don't have to move my decade-old stuff...!) They are coming down on Thursday to sign the lease. So, starting July 1st I will get $1295/month for a house that costs me $840/month in mortgage, insrance and taxes. That's right, that's $455/month more than I have to pay. I told you, cute house.

Starting a Business
Now this one will be quite an adventure. I've done a lot of research, I think I have the right market, the right demographic for my services, and some funds for start-up costs. I'm excited to see how this turns out!

Maxing out the 403b (or Trying to)
I was all set to max out my 403b by the end of December. But now that I won't be getting much of a salary once I start my business, I want to put away as much as I possibly can while I'm still getting a paycheck here. I've upped my contributions to the point that my paychecks are about $660/month. I do have some roommates now who pay me enough to cover my mortgage. So, that $660 has to be enough to cover utilities, groceries, gas, internet etc. Oh, and and a $750 charitable contribution pledge. I think I can do it. I may post the exact budget some other day.

Definitely big changes ahead.

If I Had a Million Dollars

...how would I spend it? I'm a fan of Your Money or Your Life by Joe Dominguez and Vicki Robin so my focus tends to be more on my time and how I want to spend that rather than accumulating stuff (which is not to say that I don't have stuff).

I'm also a fan of Rich Dad, Poor Dad and the main thing I walked away with after I read that book was the idea that I don't work for money, money works for me.

Here's how I would make my million dollars work for me to give me more time: in a nutshell, I would try to set up a source of fairly passive income so that I could pay for all my expenses without having to be tied down to a job. Don't get me wrong, I still love my job, but there's a freedom that comes from knowing that you don't have to do that job, or any job for that matter.

I know how to live pretty cheaply. Some commenters don't seem to believe my budget is accurate, but oh well. If I had a million dollars, I would definitely want to raise my standard of living, so let's say I double it. Let's say I want $5000 a month before taxes.

So, how can a million dollars give me $5000 a month?

1. Put it in a Savings Account

If I put it in a savings account or CD averaging 3% APY (who knows what the economy will offer in the next few years) and took out $5,000 a month, I would run out of money in 16 years. Lame.

2. Invest it in Stocks and/or Mutual Funds

Let's be really optimistic and assume the economy recovers well and we go back to average returns of about 10%. How long would my million dollars last? According to this MSN Money retirement planner, the money would not run out! That sounds good. But the 10% return rate just seems like such a dream right now :(

3. Real Estate?

I have some experience being a landlord. I currently own my own house in which I rent out two bedrooms, and I also own a small rental house that I rent out to a family. Let's see what's possible if I replicate the numbers from my rental house experience.

I live in a place where home prices are pretty cheap. I bought my 3-bedroom single family rental house for under $60K and I put in about $2K for repairs. Seriously. I currently rent it out for $820/month not including utilities and I pay $260/month for property taxes and insurance.

So, let's assume I can buy a similar house for $75,000 after all closing costs and repairs and that I can rent it out for $800. Assuming I spend/save $400 each month for taxes, insurance and put some money away for future repairs, I can make $400 per month.

In order to generate cash flow of $5000/month with that, I'd need 13 houses. It would cost me $975,000 to buy those 13 houses for about $75K each. My positive cash flow from that portfolio would be $5200/month. Even if I had two houses vacant at any given time, my positive cash flow wouldn't go under $4500/month.

AND, as the years go on, I can raise the rent to keep up with inflation.

I think I like this plan the best. So far.

Of Renting and Ranting

Renting
I am very excited. I found a tenant who has signed a lease for my rental house. This means I can talk to my 403b administrator this week and make the necessary payroll adjustments so that they take out $1290 from my paycheck each month.

Ranting
I've been having a funky vibe about this tenant :( One of my goals (not mentioned on this blog yet) is to simplify my life and this tenant looks like he might be high maintenance.

Okay, so that wasn't technically a rant. Oh well. I'm going to keep a positive attitude about this and not worry unless something actually happens.

Yay! 403b here I come!