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How much is enough to FIRE in San Francisco?

andrenader.substack.com

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

#81

Post by andrenader »

willsmith72 wrote: post #36

why does he skip the taxes though? surely at 140k, even long term capital gains taxes are going to eat up a significant portion.

OP here. Married Filing Jointly has nearly 90k of long term capital gains in the 0% tax bracket. Most the "income" coming from qualified dividends, long term capital gains, and importantly the original cost basis of the investments you sold. This is all before more complicated withdraw strategies. So the taxation at that level ends up being smaller than you think. I need to make a longer post going into all the details explaining it all.

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

#82

Post by creer »

jwells89 wrote: post #60
I_o_IllI__o_I wrote: post #45

Earlier quoted context omitted.

>That ever-looming possibility of needing to move again come lease renewal time, whether that be due to rent hikes or the landlord deciding to do something else with the property wore on my nerves. That sounds dreadful and that's why there should be laws against landlords kicking out long time tenants at their whim. Your home should be a safe space and having that sword of Damocles constantly looming above your head…

It’s not great, but what makes it that much worse is the hunt for the next apartment that one needs to start a good deal before lease renewal just in case. Just having a single small cat cuts your options in half, and then of course price and whatever other quality of life things you might be looking for (e.g. adequate windows/natural light/building facing) cut that down further. Apartment hunting is anxiety-stoking.

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.

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

#83

Post by slg »

adam_arthur wrote: post #70
slg wrote: post #68

Earlier quoted context omitted.

Do you have an example of an REIT that fits your hypothetical that has a history of delivering these yields consistently for decades?

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…

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.

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

#84

Post by jandrewrogers »

adam_arthur wrote: post #70
slg wrote: post #68

Earlier quoted context omitted.

Do you have an example of an REIT that fits your hypothetical that has a history of delivering these yields consistently for decades?

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. You have to finance growth with earnings and if they stopped investing in growth it would boost earnings at the new (higher) equilibrium. Investors take the long view.

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

#85

Post by harmmonica »

gotaran wrote: post #7
thefaux wrote: post #2

The funny thing is that I just plucked 5MM out of a hat for my number 5 or so years ago when asked and I guess this analysis supports my intuition. The one big problem with renting is instability. If the owner decides to sell the property, it may be difficult to find something equivalent on your terms or you may be forced to hop around a few times before settling.

At least in SF, tenants get pretty generous buyouts when the landlord decides to sell.

If the landlord buys out the tenant then that typically means the unit is rent-controlled, which means the tenant does not have to leave, and their rent doesn't change, just because the building is sold (rent control goes with the building, not the owner). Just adding in case that's not clear to other readers here. Tenants can and do accept buyouts, but just pointing out that a tenant's rights under rent control do not end with the transfer of the property to a new owner.

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

#86

Post by ldayley »

foooorsyth wrote: post #49
y-curious wrote: post #41

Earlier quoted context omitted.

Where did you move to, if you don't mind my asking? It's hard to leave here for sure :'(

The Carolinas, near the Blue Ridge Mountains where it is also pretty. Not quite the Sierras but it’ll do

As somebody who would prefer to return to California—- The Blue Ridge line between Roanoke, VA and Greenville, SC is probably where I’ll end up myself. But sadly the mountains are not nearly the same, I’ll miss that elevation.

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

#87

Post by jwells89 »

creer wrote: post #82
jwells89 wrote: post #60

Earlier quoted context omitted.

It’s not great, but what makes it that much worse is the hunt for the next apartment that one needs to start a good deal before lease renewal just in case. Just having a single small cat cuts your options in half, and then of course price and whatever other quality of life things you might be looking for (e.g. adequate windows/natural light/building facing) cut that down further. Apartment hunting is anxiety-stoking.

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.

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

#88

Post by pc86 »

sceptical wrote: post #79
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…

I retired three years ago at the age of 49. I was rather successful as a software engineer and is content with what I achieved. My response to your thoughts. 1) I have not missed work at all for the last three years. Not a single day. I have not done any programming since I retired. Instead I spend my time on other hobbies and travelling. I try to take two week-long trips every month to new locations. That is plenty…

I think "rather successful" is an understatement if you're able to travel for 24 weeks out of the year on only a 2% withdrawal rate.

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

#89

Post by pc86 »

subsubzero wrote: post #71

A few things you can do to reduce costs, my family does this and hope it helps others. - Gardening/yardwork - We do all this ourselves, its exercise and gets you outside, plus you have made something better in the physical world(I work in software so get extreme satisfaction from this!): savings per month/year ($240/$2880) - Cleaning - We also do not have cleaners, our house is not particularly messy and we clean as…

Non-project landscaping in my nondescript midwest suburb is a minimum $600-800/mo. This is one mulch application, weekly mowing, biweekly weeding, pruning / cleanup on a half-acre lot with no difficult terrain and a generous back patio. It's a big part of why we just do it ourselves, it's hard to justify $7-10k or more on someone mowing the grass and getting rid of sticks.

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

#90

Post by adam_arthur »

slg wrote: post #83
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…

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

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