California E&S Insurance

Home buying dilemma for FIRE, solved. I have been lurking here and on other blogs for a while. Highly interested in FIRE obviously and I may have finally solved a dilemma(in my mind at least) and wanted to share here and get some feedback. The ideas below might be simple and common sense to some, but I think it is always nice to put it down in simple terms for beginners like me to benefit. The main question here is for people who just started their career, renting their first apartment, and wondering if they need to make the big move to buying a house, and how that can affect FIRE in financial terms. Some background about my situation as each one is different. I am a physician who just finished his residency and got a job in last August. Currently 29 years old(yes 11 years of school/training) but fortunately no student debt. My salary is decent to say the least which motivates me more to FIRE. I moved to California(Fresno) and currently renting at around 1600$ per month, nice 2 bedroom apt. All my colleagues are buying fancy homes and it’s contagious, unless you are focused on your goals. The big question when you FIRE is: How are you going to pay for shelter? Rent? mortgage? or none of the above because you already own your place? Of course the best scenario is the third and that’s what I am here to talk about, and how to achieve before you retire. The simple answer is to save and pay for the house full in cash. No mortgage, no rent any more. The list of benefits for this is long but the main two points: 1. No mortgage payment for 15-30 years-> less money you need to retire 2. The staggering amount of money you save by not paying the bank hundreds of thousands of dollars in interest. Example: for 300K loan over 15 years at 4.5% you pay 113k for the bank. 30 years loan? 247K in interest!! That is money dumped down the drain for sure(yeah yeah I know about tax “benefits” but don’t believe in) Ok the way to do it then is to rent for 3-5 years, save the cash, buy the house and prepare to FIRE. The following is intended to show that paying rent is not dumping money down the drain. Renting expenses over 3 years: \~1600 x 36= \~**60k** To buy a decent 350k house in Fresno with 50k down payment, the following paid expenses(estimates) over 3 years will not contribute to principal or the value of the house, in other words money dumped down the drain as well: Closing costs: 10k Property tax: 3k/year x3 years=9k insurance : 5k Home inspection/moving costs: 1-2K Maintenance fund/furniture/miscellaneous: 8k per year= 24k Interest only(15 year fixed 4.5% loan): 35k Opportunity cost of downpayment invested at 5% return: 8k Total: \~**92k, dumped.** Please note that you still have to come up with 42k in principal payments over the same 3 years period when buying a home. For 5 years now Rent: 110k Buying:130k, dumped, plus 75 in principal payments. I am sure I am missing a lot of details and hidden stuff, but this is a rough estimate of things in my limited knowledge. The above also assumes that in 5 years you will be able to save to buy a house, which if you are planning to FIRE, you should be able to do regardless of your salary. Thanks for reading.

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