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How much is enough to FIRE in San Francisco?

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Re: How much is enough to FIRE in San Francisco?

#91

Post by creer »

asdfman123 wrote: post #59

I've spent years thinking about and pursuing early retirement. My thoughts: 1) You should never stop working. Humans need purpose . It may be worthwhile to think of it instead as saving money so you can transition to a more meaningful job . Maybe one that doesn't pay anything at all, like child rearing, or volunteering. This conclusion implies that if you CAN already do something meaningful, it's probably better to d…

Not everyone's purpose is their job. The question is more "will you be active, interested, fed, fulfilled, if you stop working?" Even "busy" is not a requirement.

Re: How much is enough to FIRE in San Francisco?

#92

Post by adam_arthur »

jandrewrogers wrote: post #84
adam_arthur wrote: post #70

Earlier quoted context omitted.

O (Realty Income) pays 6% today, AFFO multiple of 12x, low debt (35% debt to asset value), low payout ratio (75% of AFFO), and has never cut their dividend, including during the GFC And I think this is one of the poorer income choices today. People would rather buy Costco at 50x earnings multiple and try to sell the principle down at 4%/year, apparently! The responses to this thread are really eye opening to why such…

Realty Income is higher risk and lower return net of taxes right now than e.g. some US treasury tracking ETFs. As an example, the effective yield on BOXX is only 0.25% lower than O, and can be recognized as long-term capital gains. For a company like Costco with high revenue growth and a very low price/sales ratio, earnings are a fairly meaningless number for valuing the company and experienced investors know this. Y…

I'm a fan of bonds too, though think yields will go a bit higher from here.

A 12x AFFO multiple is not lower return than a 5% yielding (20x multiple) US treasury bond though. The treasury bond coupon is safer, but more exposed to inflation risks.

I'm not sure what BOXX is, but a quick look showed they hold options against SPY, so sounds like an options selling strategy for income. These work alright too, though your income will grow/decline along with the price of the underlying.

And you should check again revenue growth for COST or a stock like AAPL, which is projected to have -5% revenue growth over the year.

A 50x earnings multiple implies 2% yield today. Even if Costco doubles their revenue, at the same margins their earnings yield would only be 4%. So say they grow it 3x, they now have an earnings yield of 6%.

So in 15-20 years when they've 3x their revenue, you're entitled to a 6% yield on your original investment at 100% payout ratio.

To be a remotely good investment on a fundamental basis, they must either carry a lower multiple, or expand their margins over time. Given that Costco's whole premise is being a discount retailer, expanding margins is unlikely.

Please don't participate in an investing conversation if you don't have anything data driven to contribute.

Re: How much is enough to FIRE in San Francisco?

#93

Post by creer »

asdfman123 wrote: post #59

I've spent years thinking about and pursuing early retirement. My thoughts: 1) You should never stop working. Humans need purpose . It may be worthwhile to think of it instead as saving money so you can transition to a more meaningful job . Maybe one that doesn't pay anything at all, like child rearing, or volunteering. This conclusion implies that if you CAN already do something meaningful, it's probably better to d…

"4%" is very much in dispute. It's easy to get that by reading click-bait article titles, but the question is obviously more nuanced. "N%" works anywhere you don't have total chaos. Do you have many years of plausibly relevant statistics? Can you envision these statistics (which by now include minor wars, major wars, self-inflicted major nonsense, high-inflation crises, other economic crises, demographic waves, and sitcom writer strikes) - can you envision these statistics to be reasonably relevant going forward? (You should ask yourself the questions, but "now is different" is a red flag, as economic thinking).

Re: How much is enough to FIRE in San Francisco?

#94

Post by the_real_cher »

hparadiz wrote: post #48
the_real_cher wrote: post #24

Earlier quoted context omitted.

Yeah but have you seen the interest rate on the national deb and the amount the fed government is borrowing every year? The interest we pay on the debt has just passed defense spending this year as a percentage of the federal budget. I cant imagine how 4% inflation will continue to be the norm as the government has to print more and more money to pay for this stuff.

If China starts a war with Taiwan we're gonna be looking at WW2 level of taxation. Ordinance shortages are already here due to Ukraine.

I mean most of our debt is to entities within the USA.

Which means instead of taxing the wealthy were paying them for the privilege of using their money.

So that could be a good thing.

When the rich were taxed heavily post WW2 the US was a pretty great place to live if you were middle class.

Not sure if that would work out still in a post-gold standard, modern uni-party ruling class USA where taxes may not be used efficiently.

Even some rich people question how little taxes they pay.

Re: How much is enough to FIRE in San Francisco?

#95

Post by pc86 »

hparadiz wrote: post #43
dinobones wrote: post #34

Earlier quoted context omitted.

I think what he means is: Some SF companies pay very large compensation packages so that their engineers can afford to purchase homes. I don't think this is true. There are only a handful of companies that pay $500k+ TC for senior+ engineers. The vast majority of companies top out at $250k, be it F500 or startups (not including their worthless "equity"). You can't afford a home, on your own, at $250k in the Bay Area.…

250 is no where near enough to buy in SF. Maybe if you pinch pennies and save for 10 years. Or if you can put up a lot of equity up front.

> > You can't afford a home, on your own, at $250k in the Bay Area.

Re: How much is enough to FIRE in San Francisco?

#96

Post by creer »

jwells89 wrote: post #87
creer wrote: post #82

Earlier quoted context omitted.

Let's not go too far either. IF that happens, you can live in a too expensive, or not optimal location, or otherwise imperfect place for a few months or one year while you hunt for better.

For me that scenario is all the more stressful since that means there’s going to be at least two moves upcoming instead of just a potential single move.

It's a "might have to" - not very likely - in exchange for going house hunting every year just before lease renewal. That's a lot of work every year. But sure, it's a choice.

Re: How much is enough to FIRE in San Francisco?

#97

Post by pc86 »

briffle wrote: post #73
koolba wrote: post #33

Earlier quoted context omitted.

CA assessed value for property tax calculations is capped at 2% growth per year. So if you bought a house in the 1970s you’re never selling that thing as the tax hit on any new property annually would be much more. If anything, you keep the property, rent it out, and never do any major renovation that would trigger a full reassessment.

Oregon passed a ballot measure in the early 90's that is essentially the same. A mile away I have a literal mansion that is on the market for $8m. looking up the property taxes, the house has been owned by a trust since the late 80's, and they pay less in property taxes on the mansion and 15 acres than I do for my regular house in the suburbs.. I'm don't know them, but have heard its the kids that live in the house n…

It's not just the West Coast, midwest suburb here and our home's previous owners only had it for a decade but we had a 60% property tax increase after buying.

Re: How much is enough to FIRE in San Francisco?

#98

Post by slg »

adam_arthur wrote: post #90
slg wrote: post #83

Earlier quoted context omitted.

You pretty quickly when from "yielding 8% on distributions alone" and "REITs that often yield 7%" to "pays 6% today". There are plenty of windows in which an investment in O wouldn't have met your original criteria.

I gave a widely known larger cap name. We are discussing a proposed strategy of selling 3-4% of principle as your "income". 6% is clearly far higher, and in this case safer too (imo), which was my original point CTO pays 8.8% with similar setup, higher payout ratio and debt, but below market rents across the portfolio, and well situated in the Sunbelt. As one smaller cap example

And I can get 4-5% by just holding cash in a high yield savings account right now. The point of the 4% rule is that is has remained true over large scales of time in which a lot changes. Compare that to your CTO example, and that 9.5% yield hasn't exactly been consistent.

https://www.nasdaq.com/market-activity/stocks/cto/dividend-h...

Re: How much is enough to FIRE in San Francisco?

#99

Post by pc86 »

olliej wrote: post #67
starttoaster wrote: post #18

Earlier quoted context omitted.

Not sure how it works in every state, but my property taxes are liable to increase year to year, for a home I own. Are you saying this is not the case in California? They just true up property taxes for a property upon next sale?

Businesses in CA got people to vote for prop13 in the 70s I think (the propaganda justifying it was essentially “the Supreme Court said your property taxes have to pay for the same quality of education for poor people”, but the actual reason is a massive tax cut for corporations as they never actually sell property so get a permanent cut to property taxes). It basically says “unless a property changes ownership the t…

It's interesting that in your example, your specific situation would still have tax rates subsidized by your neighbors while the people you consider the out-group (corporations, landlords) get minimal or no benefit from it. I'm also not convinced corporations are getting any outsized benefit, business buy and sell real estate all the time.

The fix doesn't seem complicated. Assess a home's value. Tax it. If you're concerned about it disproportionately impacting low or fixed income folks, move as much of that tax as you can to income and commuter taxes.

Re: How much is enough to FIRE in San Francisco?

#100

Post by hot_gril »

foooorsyth wrote: post #57
hparadiz wrote: post #38

Earlier quoted context omitted.

Entire central coast plus LA offers much of the same.

Doesn’t really solve the cost of living problem being in coastal CA :)

It's still less of an issue than Bay Area, and the other parts are more fun.
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