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CYAI: guest house/workshop and early FIRE?

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  • CYAI: guest house/workshop and early FIRE?

    While I’ve been on hiatus, we’re finally back with another Can You Afford It? This week, we’re talking about the feasibility/affordability of spending almost a quarter of a million on a detached building to be used for a combo workshop/guest bedroom (which, impo, carries a lot of intrinsic value on its own.) for a family doc hoping to FIRE at 52.

    XRAYVSN and I don’t always agree and, I must admit, I was really curious about his thoughts on this one - I never know until the post goes live. What do you think?

    FYI, I have no financial relationship with XRAY and am not a paid advertiser. These columns are hobby only.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    For a minute I thought work shop and guest house meant that he would attract people to stay there and pay him money and learn some spiritual healing, yoga or some other numbo- jumbo that is all the rage now, in order to make people part with their money.

    Instead his guests will be non paying and his work shop is not what I thought but a hobby for him that will mean purchase of expensive tools that will sit idle most of the time and not make much income for him.

    4 kids under 5 and not high savings yet wants to retire at age 52 in 18 years. Unless the kids get no college assistance from parents I don't see that happening. And there will also be much more additional expenses.

    He can have a detached house and some hobby that does not take up too much money but just needs to work and invest well. At 52 he can go part time.

    Thumbs down from me. Or at the least a thumbs at horizontal position.

     

    Comment


    • #3
      ************************ no. He has a high income but low savings. Annual expenses of $140k, savings rate of 33%, and income of $500k don't add up. Where is the money going? He doesn't have $210k in taxes or he needs a new CPA.

      Comment


      • #4


        He doesn’t have $210k in taxes or he needs a new CPA.
        Click to expand...


        Where did you get that figure?
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          Looks like he did $500K - ($500K x 0.3) - $140K = $210K.

          He probably meant to use 33% not 30%. That would put taxes at $195K. That would be a 39% income tax rate, reasonable if it includes a state income tax.

          Comment


          • #6




            Looks like he did $500K – ($500K x 0.3) – $140K = $210K.

            He probably meant to use 33% not 30%. That would put taxes at $195K. That would be a 39% income tax rate, reasonable if it includes a state income tax.
            Click to expand...


            Correct, my error. $195k on $500k income seems very high, doesn’t it? Our AGI was nearly $500k and we paid well under $100k in income taxes last year. Of course some was investment income, taxed more favorably, and we live in a no income tax state. But is that worth a doubling?

            I bring it up because I wonder if he’s tracking his spending accurately.

            Comment


            • #7
              xrayvsn i think you made an error in calculating his net worth. If I'm reading correctly his home is worth 600k but he owes 497k. So his NW is just under 700k. I think you forgot to subtract the mortgage liability.

              That said, I think he can afford it but I would wait a couple of years.

              We built a similar project along with renovating our home. I love it. Has space for home gym, space for husband's woodworking, space for my creative endeavors, space for guests. If in laws (on either side) come for a couple weeks it's smoother. If friends come to visit everyone has more space. I'm an outgoing introvert so even though i love guests i go a little crazy if I have too much intrusion on my personal space for too long. So it makes me more likely to say "please come, and stay as long as you like" (and mean it).
              Also if husband wants to rock out on the guitar and I don't particularly want to listen we won't fight about that ?. Bottom line, I love having the attached hobby and guest space. Like Kamban said, it doesn't increase our income and it possibly increases the amount spent on entertaining and hobbies but it increases our enjoyment of our home life which is very worth it to me.

              But our financial picture was different (and we were a few years older) when we decided to build it and it took a while to design so during that time we just decreased our taxable investing and cash flowed it. Also, even though the construction won't be in your house, it'll still be on the property with lots of noise throughout the day so personally i would be inclined to wait until the youngest is a bit older to start.

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              • #8
                I would wait.  I really do not see that income staying at 500k.  (Unless it is a 2 physician income.)  Bulk up your savings now.  Plenty of time for hobbies as you age.  I recently bought a house that has a space above the garage similar to your description.  Separate HVAC.  I figure if I ever need home health aid to live in I have the space.

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                • #9
                  Great point on the net worth mistake. I did forget to subtract the mortgage which does make a difference with net worth calculation. Thanks for pointing it out

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                  • #10


                    I’m an outgoing introvert
                    Click to expand...


                    I found this description fascinating. I’m definitely an introvert. However, have never understood why it’s so easy for me to strike up convo’s with total strangers - and enjoy doing so whenever, wherever - when I always choose private time over socializing. We have an apartment that is separate from our living space (connected to our house but guests can come and go as they please in a separate entrance). So, as long as I don’t have to socialize whenever we have guests (which my extrovert hubs thrives on), I am cool whenever someone is visiting.

                    So, am I an outgoing introvert?
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                    Comment


                    • #11





                      I’m an outgoing introvert 
                      Click to expand…


                      I found this description fascinating. I’m definitely an introvert. However, have never understood why it’s so easy for me to strike up convo’s with total strangers – and enjoy doing so whenever, wherever – when I always choose private time over socializing. We have an apartment that is separate from our living space (connected to our house but guests can come and go as they please in a separate entrance). So, as long as I don’t have to socialize whenever we have guests (which my extrovert hubs thrives on), I am cool whenever someone is visiting.

                      So, am I an outgoing introvert?
                      Click to expand...


                      I always like an opportunity to plug the book "Quiet."  Recommended for introverts and any extrovert who has to deal with introverts.

                      In your line of work and that limited description, my guess is that you are a pseudo-extrovert.

                      Comment


                      • #12








                        I’m an outgoing introvert
                        Click to expand…


                        I found this description fascinating. I’m definitely an introvert. However, have never understood why it’s so easy for me to strike up convo’s with total strangers – and enjoy doing so whenever, wherever – when I always choose private time over socializing. We have an apartment that is separate from our living space (connected to our house but guests can come and go as they please in a separate entrance). So, as long as I don’t have to socialize whenever we have guests (which my extrovert hubs thrives on), I am cool whenever someone is visiting.

                        So, am I an outgoing introvert?
                        Click to expand…


                        I always like an opportunity to plug the book “Quiet.”  Recommended for introverts and any extrovert who has to deal with introverts.

                        In your line of work and that limited description, my guess is that you are a pseudo-extrovert.
                        Click to expand...


                        Thank you, @g - I have actually read that book (albeit 3 years ago), just looked it up again on Audible. I think this was the book that led me to understand that I am an introvert. That’s the most I remember, though, will go through it again as I think I must have more understanding about my limitations since first reading and so need a 2nd assessment.
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                        Comment


                        • #13
                          @Johanna,
                          Your modesty is amazing.
                          Take your choice:
                          Charisma or the glam factor? It’s just natural.

                          Comment


                          • #14
                            He can afford it.  With that salary as a FP, probably working a lot with little vacation (if not dual income). But, I’m guessing family and friends will like the addition.

                            This is a 34 yo fam Med doc with zero student loans and almost 600k in cash/investment accounts. That’s probably in the top 1% of all FP and top 5% of all docs age 34. Maybe savings are “lower” because of paying off student loans.

                            The issue is wanting to retire at age 52. Is it due to grinding so hard? How about cutting back in 5 years, drop salary 100-150k, then stretching the career closer to age 60. Or go part time at age 52. One of the kids will likely need extra help after age 18. Also weddings. No need to watch life pass you by and burning out while chasing FIRE.

                            Comment


                            • #15
                              A family physician at age 34, making 500K, with no student loan debt is much better than the normal circumstances of most recent graduates. How much of this is spousal income? (With 4 kids, it's probably very little, but always best not to assume).

                              I feel like the hidden question to these CYAIs is, this purchase a one-time deal, or a symptom of lifestyle inflation and increased spending that will throw off all other calculations?

                              I think he can afford this workspace pretty easily, but I don't know how anyone can possibly comment on whether early retirement is going to be feasible *18 years down the road*. There's a lot of stuff that could happen between now and then.

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