06 Oct

The Honest Truth: You May Want More Than $1M Before Retiring

We were pretty confident that $1M would be more than enough to retire on. All our research indicated that it should be pretty straight forward with just a bit of self discipline and smart money management. After all, for the most part, all one needs to do is live in a city with a reasonable cost of living, right? Well, for Amanda and I, it turns out that this advice is easier said than done.


Blue Ridge Mountains in October

Cautionary Tale

It’s now been one and a half years since we first quit our high income jobs in the San Francisco Bay Area and started driving down to Costa Rica with Bruno, our beloved 4Runner. We had calculated that it should be easy to eventually find a new home after traveling and proceed to live a lavish lifestyle on $30,000-$40,000 per year.

We did some analytics on cities across the US and ended up buying a home in Asheville, NC. There’s only one problem: we ended up spending more on a home than we had originally budgeted. That is to say, we had calculated a max budget of $250,000 for a new home and we ended up going $25,000 over that.

Total catastrophe? Not quite. We spent a lot of time talking about this and decided we were comfortable with “overspending” by considering it a temporary $25,000 “debt” that we would eventually need to pay off. Financial Accounting Mumbo Jumbo Trickery? Maybe. But we knew that the house we wanted would be perfect for having Airbnb guests – which would be a great way to pay off the debt. The basement, which we’ve now fully renovated, has it’s own separate entrance with two bedrooms and it’s own bathroom. This fancy basement suite, when rented out on Airbnb provides us an income of $190 per night, and so far we’re expecting an income of $2250 for the month of October – which is almost 10% of our “house debt” paid off – not bad!

Will the Airbnb guests drive us crazy? Yeah, maybe. But for now it seems like a pretty easy way to get some temporary needed income!

But the entire story should be shared as a cautionary tale for any of those following a similar journey – do not underestimate how easy it is to buy a house that is outside of your budget! Yes, there are tons of cities in the US that are super-affordable. But once you start doing your analysis, you’ll inevitably start getting more and more picky. By the time you end up looking at actual houses and neighborhoods, you’ll tend to slip to the max of your budget immediately. Be ready and plan for this! Either save up more money before quitting your jobs, or you’ll need to accept that your new home will not be in a city as hip as Brooklyn, and you’ll not be having weather as nice as San Diego – be ready to compromise!


Wild Horses of North Carolina’s Outer Banks

Summer In The South

Anybody curious what summers are like in Asheville, NC? Well, this one was super f*cking hot and humid – and it turns out mosquitoes have total ownership of our backyard. It’s a harsh reality that Amanda and I have really been spoiled rotten for the last six years by the essentially perfect climate of Oakland, CA.

That being said, this summer was ultra hot across the entire country. Records for “hottest summer” were broken for 45 cities in the US – many of which were in the South East!

Even in the madness of such heat and humidity, since Asheville is in the mountains, it turns out to be slightly less hot compared to most other parts of the South – those people actually come TO Asheville for some reprieve from the heat! All in all, as climate change accelerates, I’m really not looking forward to these heat extremes becoming more frequent.

But now that we’ve experienced it, it does reinforce our future plans to travel away during the hot summer months and rent out our house. Since we don’t have jobs holding us down, it seems like a no-brainer!


Appalachian hike in October

  • It seems you will certainly be OK with the AirBNB side hustle. I will retire with more than $1 million, but I struggle to nail down the best date and dollar amount to make it “just right.” The goal is to minimize the Likelihood of Regret. I’d rather not wish I’d had worked longer, or retired earlier, but that sweet spot is elusive.

    Asheville sounds like a great place 8 months of the year. Booming craft beer industry, and lots to do oudoors. Try spraying some cyhalothrin to kill of the backyard mosquitoes. OFF makes a solution that attaches to a garden hose, but I dump it into a pump sprayer to control the concentration.


    • Travis

      Hey PoF, thanks for the tip! When Spring rolls around next year I plan on doing more research on understanding this mosquito problem, since other parts of Asheville don’t seem to have many bugs – they’re mostly concentrated in our back yard! I may need to apply for city permits to Napalm my neighborhood. TBD.

  • Glad to hear you have the Airbnb up and running. Housing prices have really been going up in Asheville, but it looks like you are set to get a good amount of income from your rental to cover expenses.
    The kids we rented from down there said they were usually booked solid every month except January.
    Best of luck!

    • Travis

      Thanks Crazy Kicks! Airbnb has been interesting so far, although I’m a little worried about annoying our neighbors with the guest traffic. For example, just last night our guest was a District Judge in NC traveling with his wife. Sounds nice, right? Well, when Amanda and I got back home last night after a music show – we found the judge and a friend drunk at midnight, hanging out in the street, eating pizza from a box, talking a loud as drunk people do. Considering all three of our immediate neighbors have young children, I had to shut down the party. I wonder what the future holds… 🙂

      • WTF! I’m thinking about renting out our house while we go somewhere during summers (you know, avoiding being roasted alive in the Hades that North Carolina is in July and August).

        • Travis

          Let me know if you’d like me to refer the judge to you! He might be interested in having a house party at your place…

          • I might like his name just so I could permablock him from ever requesting a booking at my place. I’m definitely interested in your airbnb’ing experiences since I’m thinking hard about the pros and cons for renting for 8-9 weeks this summer for what might be $4000-6000 gross if we rent for 2-4 weeks minimum.

  • BrianD

    Every time I read your blog, I’m reminded of my college days and how happy I was with such a simple life. It’s a good reminder that it’s the experiences in life that matter most.

    I’ve always been curious about AirBNB. What kind of people are you finding that rent from you? People passing through, on vacation?

    Keep up the the great posts. I always learn something from your experiences.

    • Travis

      Hey thanks Brian! We kinda just started with Airbnb, but it seems most people visit Asheville as a short vacation. Drive/hike/bike the mountains, drink beer, eat food, walk around downtown, maybe see live music, or visit the Biltmore Estate – which is nice but super expensive!

  • Dennis

    Sounds like you guys are saying you spent $275,000 on a house (plus renovations I’ll estimate at $25,000). Perhaps another way of thinking about it would be to say you bought the world’s best annuity for $300,000. It pays out 9% annually (2,250/month x 12 months = $27,000 in rents), you get a free place to live, and you get the bonus of all the equity and appreciation. Win, win, win!?

  • Jess

    Awesome post! I really appreciate the honesty here. I also think it sounds like you guys are doing okay–as other commenters noted, you have a good plan to make back the money, and then can further add to the stash with the rental! The biggest challenge I have is that fear that I could never make any more money once I call it quits, but as you demonstrate there are many options for flexible earning and spending.

    • Travis

      Thanks Jess! Another idea for temporarily earning money is to embrace a hobby that involves buying something not-so-good on craigslist, transforming it into something better, then flipping it back on craigslist. It would just be a matter of finding out if you have a passion for something like refurbishing furniture, making artwork, doing mechanical work on vehicles, or perhaps even making cat or dog-fur yarn and then selling it for big $$$ to cat/dog obsessed people on the internet!

      • Jess

        Ha!–I don’t have as much of a love of cats as you do! But I am considering some low key side business like SEO optimization. In my case my husband will continue to work so its not actually particularly risky.

  • In your last post on the house I speculated that you’d be able to make a pretty decent income from the airbnb, and it’s good to hear it’s working well (other than the occasional insanity dealing with guests).

    What is your long term plan/goal? Think you can still make FIRE work with what you have left of the $1 million? I always planned on a bit more than that here in Raleigh plus a paid off house (which is half the value of yours probably). I imagine that airbnb revenue would cover most of your living expenses if you stay put in Asheville, and renting out the top part of your house would cover most travel expenses if you go to a low COL country during summers to escape the heat (and with the forex the way it is, Canada is quickly becoming a low COL country 🙂 ).

    We HATE the heat and humidity and so we’ve taken extended vacations during the past 3 summers and plan on spending all of summer 2017 in Europe. When we are at home in the summer we don’t spend much time outside. Mornings and late evening can be comfortable sometimes. Hit the pool a lot and that helps. But going somewhere on vacation is ideal too for us FIRE types. I love central Mexico during summer because it’s not humid and most places don’t get very hot, or are in fact quite cool (Mexico City I’m looking at you!).

    As for mosquitoes, I know it can be possible to avoid them. Our yard is almost completely free of the buggers but some neighbors have an unbearable amount buzzing in their yard. I don’t know what we are doing right, but we don’t have many tall trees which might help. Also remove all sources of standing water (where their eggs grow). I’ve heard bat houses are good to attract bats which eat mosquitoes like crazy (our bats live naturally around the other trees along our lake). Occasionally we’ll have to douse ourselves in bug spray to spend much time outdoors, but usually it’s not so bad.

    • Travis

      Before we checked out Asheville, we knew it had a good tourism in the summer which would allow us to rent out the house and travel away. This is still the short/medium term plan.

      The fundamentals of living on 3% of our portfolio hasn’t changed, and we’ve been pleased with the lower cost of living in North Carolina so far (utilities, housing, taxes, insurance). The main problem is that our home, as an asset, is holding too much of our portfolio. An asset that will likely not provide returns much greater than inflation. So for the time being, we’ve got to hustle some income to bump up our portfolio a bit (roughly $25,000 of income!)

      Yeah, next spring I’ll be taking more anti-mosquito counter measures. I like the idea of bat houses!

      • Good to hear NC doesn’t disappoint in the COL department. And Asheville is probably one of the less friendly cities in terms of COL from what I hear (hey, there’s a reason why it’s popular and that drives up demand for things like housing).

        Bat houses sound crazy but my eco-friendly (eco-nazi?) neighbors swear by them, and I certainly appreciate their presence (as long as they keep their distance).

      • Johnny Cash

        Asheville has a complete ban on STR if owner is not present (renting the entire home). I tried it for a while personally and received a notice.

        • Travis

          Hey Johnny! Yeah, short term rentals less than a month are still not allowed, but doing Airbnb with a “home stay” is allowed, you just need someone living in the non-homestay part of the house. I think our plan is to have a house sitter live upstairs when we’re away, and have them take care of any Airbnb guests that may stay downstairs. Sounds odd, but it seems like the only way to do it.

  • Jay

    Glad to see you guys up and posting again! $1M gives you a good foundation for maximum flexibility. It may not be enough to generate a totally passive income, but its enough so that you can pick from a world of options (like the Air BNB) to supplement it. I’m surprised that you can get $190 a night for a basement apartment. Is this due to the high season brought about by fall colors?

    • Travis

      Thanks Jay! I’d say it’s a combination of peak tourist season, great location, and a great basement setup! We’re actually hoping to raise rates once our place is nicer (and our deck is finished). We’ll have to see how that goes…

  • Very happy to see a new post from you! I appreciate your openness about the financial situation, though it sounds far from grim. That rental income is a great opportunity and provides some diversification from stocks, plus you’ve upped the value of the house should you decide to sell at some point. (I regularly remind myself of the same things, with a meaningful portion of my assets tied up in a short-term rental condo.) Even if your $1M ends up being only enough for your bare-minimum retirement lifestyle, I bet you’ll find yourself earning money from occasional side hustles here and there, too. I’d love to hear more about how you enjoyed your retiree summer, when you have time!

    • Travis

      Thanks Matt! Aside from the heat and mosquitoes in the back yard, summer was definitely good. We’ll soon put together a post showing off the construction of our two story deck. No serious injuries.. yet!

  • Freedom35

    Nice to hear from you guys again. If it helps, I think this is one of those things that doesn’t sound like as big a deal from the outside. In enough time, you probably won’t even notice the difference in price of the house and be too busy enjoying life 🙂 It is a good cautionary tale nonetheless, and I appreciate your honesty.

    I agree with you about being able to avoid summer when you have nothing holding you down. That is something we consider, since once kiddo is in school, we won’t be able to avoid awful winters, but awful summers can still be escaped.

    • Travis

      Thanks Freedom35!! Yeah, I’m thinking summer is an ideal time to travel, especially since we have lots of family in Canada. Europe should be great too!

  • Evan

    Perhaps $1M seems like a stretch because you didn’t already own property. If you have a house paid off and you have $1M, your plan becomes a lot more feasible. If you have to dip into your savings by 25% within your first two years of a lengthy retirement, that’s a seriously scary thing to do! However, being an Asheville native and seeing how things are going these days, I’m sure you’ll make the money back on the house.

  • Mrs. BITA @bayalisistheanswer

    Thank you for your honest “we _may_ have screwed up and this is how we will recover” post. Most other FIRE bloggers never seem to stumble (the _market_ stumbles, but rarely the blogger), and to those of us still on our journey to FIRE that can sometimes be a bit intimidating (especially if, like me, you’ve had a history of being well, um, what is a polite way to put this – dumb with your money, and you’re just about starting to figure it all out).

    You seem to have a solid recovery plan. I’m sending good AirBnb guest vibes your way – may you be blessed with hordes of polite, clean and non-destructive customers.

    • Travis

      I fully accept your blessings – I’m really hoping for non-destructive guests. If we ever get a guest who breaks some stuff, I’ll post back here to let you know!

  • bugaboo

    Maybe more than $1 million but right now I’m insanely frustrated with a relative (we’ll call him “parent”) who insists you need $5 million, who rejects the 4% rule (“no one is getting 4%”), who doesn’t understand the math behind getting equal payments out of a lump sum and ending up with an amount less than where you started (so you aren’t even limited to 4%! (like $2M to $500K from now until age 95)), and is and has always been negative, pessimistic, and discouraging.

  • Josh Barnes

    Was is always your plan to eventually buy a house or is this something that you decided to do after retiring? In other words, was this financial calculation accounted for during your run up to Financial Independence?

    • Travis

      Hey Josh, I think the original plan was to travel the world and rent. After doing this for 9 months, the desire to have a home-base to live out of started to grow – and so we started hunting for a place where we could own a home. We’re thinking it should be easy enough to rent out our home for a few months each year whenever we want to travel (likely in the summer when it’s hot & humid in the SE).

      All in all, the financial implications of renting vs owning are not complex, and it all boils down to how much can you spend on a house purchase? For us, we did not plan on spending $275k on a new home – this is above our original budgeting for sure. So now we need to bring in some income via Airbnb to pay off our extra-budget spending.

  • Ines

    Thanks for the post but I still do not quite understand why 1 M is not enough. If you just overspent a bit on the house but you still expect to spend 30-40k a year, I don’t see why it is not feasible. Also, I am sure you will both can find ways to make some extra money, in case eventually you need to!
    My goal is to have less than 1 M and I am quite confident that it should be enough (maybe too confident?).

  • firstbank mortgage

    Thank you for the information and airbnb idea. I have also noticed an increase in baby boomers using the reverse for purchase option to supplement their retirement income. http://reversemortgagelenderintn.com/