Basic finance questions for self employed

So, I would do exactly what you mention. Grow real estate if you can find deals. Depending on the business though, it may be beneficial for you and your partners to invest so you can grow and scale that. Don’t know enough about it to know if that is viable. If it is something you can scale and turn into a “business” (Others do the work for you) instead of a “job” (job relies solely on you and partners).

Sounds like your business is going well...can you further invest in it to accelerate the growth rather than doing the RE on the side?

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Sounds like your business is going well...can you further invest in it to accelerate the growth rather than doing the RE on the side?

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i had this great debate in 2016 before i stalled my self progress and went backwards a bit. hopefully i end this year strong and start 2020 strong to get back into this headspace. i want to diversify my personal business exposure while simplifying my primary business (so theoretically it can "run itself" with a realistic, conservative annual net)

I'm scratching my head as to why you'd save up $200K and not pay off the $60K in student loans.

Those expenses are crazy, crazy low. How are you renting an entire house and paying utilities for $300, and how is self-employed health/dental costing you $50/mo?

Good ole tricare

I could get into a car wreck, rack up a million in hospital bills, and the max I'd pay is $150

I've been paying off big chunks of my student loans here and there. The combined rate is low 4%, so that's pretty damn low.

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I'm 30, girlfriend, no kids.

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Fook mi - I recall when you were trying to get into Grad/Law school.

Where does the time go?

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Not intended to be a brag post

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....okay....

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Last year I grossed 130k and this year I will gross ~$250k.

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The frick you don't...

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And I'm sure a few hundred per month on other stuff.

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Stop what you're doing and get a handle on that. Even if you can't stop it - you MUST (not may, not "good to know" MUST) figure out how much is going, to whom and why. ASAP. That is your future bleeding out of your proverbial a-hole.

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~$200k saved.

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Like cash? Is that your self-employment capitalization reserve? What's the yield on that - you have it in money market or CDs?

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Haven't started any retirement accounts yet.

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Yeah, that needs to be priority #1 - I would just set a retirement window of 35 years just to give you a target date.

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Any ideas on where to start investing wise?

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If you want to directly manage it, open a Fidelity account and go with Vanguard - use Boglehead principles, dollar cost averaging and you should be fine with a 30 year investment window. See if they have an option for self-employed so you can do everything through there. If you have to go with a SIMPLE or whatever through your business, just do the minimum to get the deduction and do the rest in your own name.

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Ultimate goal is $1mm net worth by 35

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Yeah - that's just 5 years. Too much pressure because the priority is going to be growing/maintaining your business. I would set it at $750k (based on performance to date) or even $500k. You can adjust these goals every year or every other year as you meet/miss/exceed benchmarks.

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I'd like to purchase one to two new rentals per year.

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This is what I'm talking about, using leverage, you're contantly going to be flirting with $0 equity - and then trying to get cash flow up, then new investment - "growth" will feel like you're not growing at all from month-to-month, and then, one day - POOF - you'll be rich AF.

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Have around $60k in student loans.

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Obviously, they have to go. Probably 6.2%, but depending - may be cheaper to just service it as scheduled than try to put money in and get it from somewhere else.

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Not worried about car loan since the mileage is a huge write off for me.

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If you can, do all of that through your business - or as much as you can. "The whole thing" is a better write off than mileage.

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Haven't started any retirement accounts yet.

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Your side Real Estate hustle sounds like a good plan. As far as retirement accounts a SEP IRA is a good place to start - Max out with up to 25% of your salary up to $56,000

Scratch the side hustle man, why? Seriously? If you are grossing $250k on your primary at 30 you are imo dumb to work on a side hustle. Put your effort and time into your primary job and grow that.

I'd work on hiring people.

Are you an Scorp? Have you paid personal income taxes on the money in your business bank account? If so you should get that money into a separate account and not operating fund.

I'd open SEP retirement account or solo 401k or whatever. SEP is like 3 pages of paperwork and boom you are done.

Then SCALE.

IMO you are working way too hard on this millenial idea of having multiple side hustles that you manage and no actual job. I don't know what your actual take home is, but I'd work on your primary and primary only for another couple years.

ETA: Rental properties are great if you are sitting on your arse as like a government worker with routine time off and 4 day weekends and crap. But I have my own rental properties, and if it wasn't for email reminders I'd forget to check to see if rent was paid and other things were done. Its still takes your time, and it still needs to be worked on or you can lose money real quick. Scale is great don't get me wrong, but you already have a business doing well. I'm simply saying don't spend a ton of time on a project that might work out when you have a project that IS working out.

There's been a lot of great advice and questions brought up here already. I have a feeling your expenses are quite a bit different than what you posted. I'm not saying you're being dishonest. In my experience (Financial Advisor) when people give me some of the answers you provided here, expenses are typically 25 to 30% off. I'd challenge you to get a firm grasp on both personal and business expenses.

You are not going to answer questions about liquidity needs without a strong handle on your cash flow.

What's your goal on rentals and how do you plan on hitting those goals? As Ace pointed out, accumulation of RE for long term wealth is mostly done through leverage especially with current rates.

Here's something that hasn't been mentioned yet and hinges on your long term RE goals...

Are you aware you put those rentals inside a Roth or IRA? You would have to backdoor a ROTH first and it will take time but the tax benefits are huge. I picked up a client in NOLA recently with 17 rentals in a self directed Roth account! One of the best DIYer investments I've come across lately.

Are you still in reserves? That why you asked about TSP?

I think step one is budgeting for the main purpose of figuring out liquidity needs. It makes no sense to pay on a 5% student loan if you have 200k sitting idle earnkng next to 0%