Help me thru a Dilemma - live in GREAT place, or live financially free on the cheap?

[jasonwisdom]

Hi,

First post on these boards. However, I have been reading Tim's book/blog for about a year now.

I am having a bit of a crossroads dilemma, and I am reaching out for support and advice.

2 years ago, I moved to New York City and one of my top reasons for moving here was to focus on my entrepreneurial ambitions.
By the end of this month, September 2009, my apartment lease will end, AND my main client project will end.

Which means... I'm at a bit of a crossroads!

During the last 7 years, I've saved up a decent bit of cash - more than I've ever had before!!

Come October 1st, I am considering two paths:
Option 1) use this cash as a down payment on a nice studio condo in the Financial District of NYC. There is a place I have in mind, and it is SWEET. It would easily be the nicest place I lived.

Option 2) use this cash to buy an income-generating investment vehicle. Minimize my expenses, move into modest digs (a spare bedroom of my friend's house - still clean, safe, and not far from Manhattan), and I am very nearly "passive income financially free" as defined by Robert Kiyosaki's Cash Flow game.

1) is a dream, and 2) is very close to another dream.
I want to live in a beautiful place, and real estate that I own.
I also want, as one of my life's very top goals, to "have enough money so I never have to work again a day in my life."

Here are some pros&cons of each:
In Favor of Option 1):
- It's a NICE place. The energetic vibe would be as close to top-notch as I could get without having a full-floor penthouse suite.
- I could have friends over, parties at my house, etc.
- It is presentable to women (thinking both single life & LT girlfriend). Whereas if I live in a spare bedroom of some share, ladies are going to say, "Shouldn't you have your OWN place?!" (I have heard this in the past)
- Real Estate in Manhattan's FiDi is SO cheap right now!! Buying a condo could have some serious appreciation value, if I stay there 3-5 years.
- A friend wants to start an events business using my space.. if I don't move here, the biz opportunity will be gone.
- I am good enough at what I do (freelance Database Administration & Business Analysis), that I'm not too concerned about being able to fund the mortgage.
- Owning Real Estate is the ultimate inflation hedge... and if/when all this government "greenback emissions" causes another round of double-digit inflation, I will be covered.
- If the investment vehicle I have in mind, for Option 2), collapses (unlikely but still), I won't lose my shirt.
- I'll be living in Manhattan, in my favorite area the FiDi. (If I go cheap, I'll have to be a long bus or train ride away)
- The vibe & location may just inspire me to create something bigger & greater.

In Favor of Option 2):
- After mortgage, utilities, building common charges & property taxes, I'll be paying about $3,100 per month - !! (Compared with $650/month after utils at my friend's house)
- If I put my money into income-yielding investments...I will be so close to "financially free" I can taste it. (easily there within 1 year)
- I can do "mini retirements" a la Tim Ferriss. I can relax and breathe!!
- I'll be free to travel for work - if a company in L.A. wants me onsite for 3 months, I can do that & just bill them the extra $650 per month to cover my NYC rent.
- If I don't take on the big mortgage of Option 1) above, I wouldn't HAVE to do corporate DBA and Biz Analysis work in NYC for the next 3-5 years. This is work I don't LOVE - it's okay, I even LIKE it at times....it doesn't ignite my passions and make every day a pleasure to wake up to.
- Option 1) would basically force me to work work work, squeezing in as much overtime as I can, in a field that I don't LOVE.
- Time. By following Option 2), I could work very little (I could work none if I put my nose to the grindstone for 1 more year), and have LOTS of time to do whatever I want.
- If I don't have to work for money.. I could do anything. I could spend all day at the library studying demographics for a new information product idea I have. I could work as a friggin bartender 2 nights per week just to save up for that 1-week cruise I've wanted to take.
- My life would not be super-upscale posh with this move. But it would free me to be able to do whatever I want.
- If opportunities come up, in other parts of the world... Las Vegas, Shanghai, etc., I will be available to take them if I am living on the cheap. If I have a $3000/month mortgage, I will not be free to take them.




I realize this is a good problem to have...I also, years ago, designed my life so I would have these kinds of "good problems". I still seek out guidance, for I want my life to allow the very highest options possible.

Any thoughts??

Much gratitude,
Jason

[Sven]

Your post was too long for me to read but here is a basic thought as a responce to the subject line:

Never compete on price. That is about selling stuff but it also aplies on life.

You seem to have no measure of value of your own, you are looking for external confirmation. Life Design is about what YOU feel is important. "for I want my life to allow the very highest options possible." is not about what you choose. There will allways be a better option. This kind of questioning is a recipe for unhappyness.

[officer_dibble]

Sven's right. It's about what you want. But I suspect underneath all of this is really an investment question: which is going to meet my addiction to food, shelter and fulfilment in the long term?

Which option is most fulfilling is up to you. Both will satisfy your addiction to food and shelter - unless the investment vehicle is complete rubbish.

Why not have both? Go with the investment vehicle, rent and work hard for another 2 years (probably less with the investment in place) to get together enough cash for the condo? At least that way you'll know if you can hack it for the long term. Worse case scenario -you now have enough cash for two investment vehicles.

It is worth reading a book called Work Less, Live More as it tells you how much cash you really need to semi-retire and how to manage your money to do (sadly not really applicable to people outside of the US).

And yes - you are in a lucky position. Although I'd think about whether you have a long term girlfriend or are single - it's hard to be both. Does your other half have a view on this?

Finally toss a coin. If the coin comes up with the answer you like - you'll know it. If you have a feeling of dread in your stomach - do the opposite.

[jasonwisdom]

My apologies for the extra-long post.

Thank you both.
You are both half right.

Yes, I am looking at this as an investment decision.
One of the most important considerations is, what will give me the highest net worth?

To be honest, it comes down to do I want to be free / vagabonding / unattached,
or do I want to be grounded and stable because so much of my life to date has been the exact opposite.

As for the romance thing, I am single now, and have been enjoying it. At the same time, I am very aware of the important qualities I want in a partner, and in a partnership, and I am ready for such a partnership, as soon I recognize it is being offered to me.

[Sven]

I'd say, hapiness is the highest return.
And hapiness generally comes from making A decision, it does not matter what you decide or where you base the decisions on...

That probably does not answer your question, I know ;-)
If you are free, you ARE free. No amount of posession should be able to change that...

[DaveinHackensack]

Any thoughts??

Much gratitude,
Jason

Go for option 3): Rent your own place somewhere inexpensive, but still close to the city. Look at Rutherford, for example, which is a pretty town. You can still have women over, since it will be your own place.

You can then use your cash for a new business venture, or keep your powder dry and wait for NYC real estate prices to fall further, which they probably will. Nationally -- and even in NJ, for example -- real estate may be bottoming out, but NYC real estate didn't start dropping right away. Probably has more to go, with Wall Street decimated and unemployment continuing to rise. I wouldn't feel any pressure to buy now if I were you.

[jasonwisdom]

I think I'm going to do Option 4 - go to South America for 3 months.

[DaveinHackensack]

That works too, but remember: the seasons are reversed. You might want to head there for four months starting in November or January.

[ILoveLife]

Why Not Have It All?

I think part of the 4HWW is creating a lifestyle that you like and enjoying it. You don't have to live in NYC's financial district. Open your eyes to the possibilities out there across the world. There are a number of places that can be just as exciting for you.

I was also considering staying in NY but decided to move to Miami because it's so much cheaper and you get more for your money with an exciting city. I'll have more time to focus on my muse because my expenses will be significantly lower.

I do know that the financial district is an amazing and exciting place right now. The luxury buildings downtown right now are an excellent long term buy :D

[jtrigsby]

Here is the only line from you post you need to make your decision, IMHO...

"Option 1) would basically force me to work work work, squeezing in as much overtime as I can, in a field that I don't LOVE."

Why would you CHOOSE to take this route?

@jtrigsby

[jasonwisdom]

That works too, but remember: the seasons are reversed. You might want to head there for four months starting in November or January.

To properly plan this, not to mention finish up some client work and a family commitment...I am looking at a departure date of 1 Dec. 2009.

[jasonwisdom]

Why Not Have It All?

I was also considering staying in NY but decided to move to Miami ...


I do feel called to stay in New York at least for the time being.
I am growing from the experience in too many ways to relocate permanently at this time.
Never been to Miami... most everyone I know who visits there has good things to say about it.

Thx for the perspective.

[jasonwisdom]

Here is the only line from you post you need to make your decision, IMHO...

"Option 1) would basically force me to work work work, squeezing in as much overtime as I can, in a field that I don't LOVE."

Why would you CHOOSE to take this route?

@jtrigsby

Yes I feel the same way.
Some days it's like, "hey, working isn't THAT bad...at least I'm not carrying bricks or forced into prostitution".
Yet.....it clips my creative energies - doing this mindless corporate drone stuff sitting here at a desk/cubicle and wondering when all my escapist-web surfing is going to finally be noticed.

I do have to say the creative contribution and fulfillment I get from my life is mostly limited to outside the 40-hour-work-week.

Right now I cannot argue against my quote from you...I really do feel that strongly about it.

Today I called the broker & said, "I don't absolutely love the place, and I cannot go forward if I don't love the place".
Which is true - if the place truly was the home of my dreams (in NYC I'm talking about top-floor penthouse of a high building with 360-degrees windows)..............hmm, maybe I'll add such a manifestation to my wish list.

Jason

[birdman]

didn't get chance to read it properly as in a rush but the bit about meeting a chick and it not being presentable for a LT girlfriend.

Wouldn't it be great to find a girlfriend that wants you for you? that can jump on board and support you in your dreams and she can reap the rewards later. i think it's a great time to find the right type of girlfriend.

[Napoleon]

If I were in your situation, I'd move to South America and live like a king. You could have all the girls you want over there and none of them would have the materialistic attitude associated with "Shouldn't you have your own place?"...:eek:

"Traveling is the ruin of all happiness, there's no looking at women here after having met South American women" :)

[johnnywolf]

The post was well written and not "too long" I always welcome bullet point pro and con threads. I read it all.

After reading it, I would say definitely #2.

The "dream" is one all of us Americans have, but it's not the best thing to do. If you go for option #2 and actually use your money towards passive income, then you can always buy a house later.

If you go for option #1, you'll be stuck in the rat race until the house is paid in full. Don't do it.

It's always better to have options and to be free. Good luck!

[Bohemiana]

I just went through this exercise recently...
I took Option 1...but 2 years later I opted for Option 2.

In 2007 things were going great...I was overworked but making a ton of money. My husband and I had a lifelong dream of buying with an ocean view. We bought a penthouse condo with a giant ocean view...and a giant mortgage. It was good for about a year and then the view wore off and I realized it wasn't that much fun to have an ocean view if you are always working and can't really look at it that much. Then I read then Vagabonding book and realized how that property really felt like an anchor around my neck. We have other properties but they are rented out with cash flow so they are not anchors. The ocean condo could not be rented to cover the mortgage.

Then the economy started going down and our income (both self employed) started going down and stress started increasing as we had to work twice as hard to make less money.

We recently sold and decided to buy two small basic condos we can rent out for the full mortgage--we live in one currently but are in the process of renting out so we can leave on a 1-year mini-retirement in Jan.

Even though our new place is tiny and 2 miles from the beach, it was a huge relief to sell that anchor! And, it was incredibly exciting to buy our airline tickets for Fiji to start our big trip!

One more point...a few years ago we read The Total Money Makeover and decided to pay off our first house that has been a rental for many years. Our accountant tried to talk us out of it for tax reasons but since it has been paid off it provides a lot of passive income.

Debt is an anchor.

[melar]

John, just wondering what you wound up doing?

My girlfriend and I actually considered buying in the FiDi in early '09. We also considered getting our dream house in Westchester for a little bit more. In the end we decided to NOT do either because it ties us down way too much. We love renting because it gives us the chance to live in some really cool places that would be much higher on a monthly basis to purchase. We like the idea of having a "crossroads" like the one you described EVERY year so we can always do what we want at that time.

We've seen the same FiDi places you were looking at...they are great, but there is still a HUGE glut and it might take longer than five years to realize the profit you are hoping for. I think there are quicker and more certain ways to realize profit than investing in a single piece of NYC real estate.

For the 3,000 you were going to pay for your mortgage, we have a spacious two bedroom in a quite corner of W'burg with a balcony AND a private 800 sq. foot roof deck that we are pimping out this spring with outdoor projector and screen, BBQ, storage for stuff we don't want in our apartment, etc. Not only a very luxurious place to live but GREAT to use for housing swaps to do mini-retirements in any city we want. A great value add.

We have moved a few times over the past two years, and this was by far our best decision yet.

P.S. The identical apartment right next to us is still available :) if you are still looking.

[Zach.Ho]

Hi,Jason
I'm not native English-speaker but I read the whole post.I really like your thinking about your life design.

Option 2 is the target of most people on this forum.As many people said above,it's all about what you want from life,mundane & rich or free & high-quality.

I am now 23,I think about this problem during college time and find I aspire(deep from my heart) for free life that containing amazing things. Of course something inspire me,I watched the movie <The Motorcycle Diaries> which is about young Che Guevara.Also 4HWW shows me a way that my family & friends never think about.Now I'm preparing to run my own biz and let it automated.

Zach

[lovesong]

Hey Jason, first day posting on this forum so I don't know if you already made up your mind but bro, I'd say go for option #2. After reading the book, I think everybody here would agree that freedom is way more valuable than being tied to a mortgage. I first started telecommuting a few years back when I was doing deals in California while partying in Tokyo. It's great being free to roam around, live in cheap ass places in cool cities versus being caught in the grind and stuck somewhere.

Now from a financial standpoint, option #2 IMO also makes more sense as an investment because as you mentioned, keeping your cash flow low and investing your money into an income generating property ala apartment, office, etc gives you more control over your investment as you can look for inefficiencies to improve upon. Can the property be managed better? Can you convert the building to a LEED green certified building to save on expenses. Are rents too low and possibly be raised higher to market, thus increasing your annual income. Unlike residential, a commercial property's price is based on how much income it generates whereas in residential, it's all based on the supply and demand of the specific market. That's why so many people got screwed the last few years because of cheap money inflating property prices on the residential side. And when that cheap money went away, those inflated prices deflated.

Anyways, sorry if this came off soundling like a commercial real estate tutorial but it was also because of Robert Kiyosaki that I got into commercial real estate. I've worked with residential agents for a decade and NONE OF THEM gave solid investment advice. It was all speculative with no financial analysis.

Whatever happens, good luck! If you have to be stuck somewhere, New York is a cool place to be.

lovesong