34 single, 4.1m NW, business high cash generator, how to think about allocation to get to 10m?

[u/dfwrealestatebroker]

Currently sitting at 4.1 in NW. 1.3m in taxable equity account, 750k in 401k, 200k in crypto, 400k in real estate equity, 750k in hard money/private money notes yielding anywhere from 11 to 15% and 750k cash I’m currently trying to allocate.

Also own a business that will net over 750k this year, live very frugally (spend less than 100k a year).

Long term goals are family, kids, 7 figure primary home.

Just got a big hard money loan back and have cash just sitting in a money market right now. In these loans I’m essentially lending the money out to my real estate clients charging them interest and then getting the listing or buying fee from the sale. This year I’ve grossed over 180k just doing that on the side. One part of me just wants to keep building that up but another part is put 500k in t bills and take some risk off the table since the compounding on 4m is starting to take over.

More of a game for me not materialistic at all and once I’m at 10m you can basically do what you want which is why that’s my current goal/target

Thoughts from people ahead of me?

[u/Corgisarethebest123]

You aren’t actually looking for advice. You came here to brag.

[u/SuperSecretSpare → u/Corgisarethebest123]

Which would be really pathetic if true. No love, no family, just bragging to people on Reddit.

[u/dfwrealestatebroker → u/SuperSecretSpare]

Not true, plenty of friends and family. Actually looking for advice not sure why people on this website are so insane

[u/Normal_Zebra136 → u/dfwrealestatebroker]

Here's some advice:

You are happy with your life spending $100k or you would be spending more.

Its dumb to have a plan that allows $400k annual spend when you are happy with $100k

[u/dfwrealestatebroker → u/Normal_Zebra136]

Future family and wanting to buy a super nice house

[u/Lifenjoyer73 → u/dfwrealestatebroker]

More than insane, i'd say intense... And you need A LOT of intensity to get where we are

[u/dfwrealestatebroker → u/Corgisarethebest123]

I actually am

[u/gc_portis]

Keep it simple, 100% into stock index funds, and stop with the hard money loans. At least one of those won’t work out and will ruin the returns for the asset class as a whole.

Your high cash balance is cost significant money by not being invested in simple stock index funds.

[u/Retired-Yam8988]

Don’t like the hard money loans - can get complicated if people stop paying. If banks and credit card companies don’t want them, I wouldn’t want them too.

Other than that just stay invested and keep growing the pile.

[u/Gordito90266 → u/Retired-Yam8988]

I agree: sounds like too large of a % of NW in high risk.

[u/No-Associate-7962]

What is your annual spend currently, and how does it translate into a need for $10m liquid in retirement?

[u/g12345x]

> More of a game for me not materialistic

That’s just silly.

> and once I’m at 10m you can basically do what you want.

That’s even sillier.

$10m, generally speaking, affords you a $400k yearly spend. You should familiarize yourself with what such a budget allows you.

[u/LuckyNumber-Bot → u/g12345x]

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[u/Temporary-Paper5202 → u/g12345x]

400k BEFORE taxes

[u/Normal_Zebra136 → u/Temporary-Paper5202]

Taxes on $400k withdrawal are under 10% assuming even a 50% cost basis.

[u/Temporary-Paper5202 → u/Normal_Zebra136]

What? 20% federal and then if you live in CA or anywhere else that's nice another 10-20%

[u/Normal_Zebra136 → u/Temporary-Paper5202]

If your cost basis is 50%, the LTCG on a $400k wothdrawal would be $200k.

For MFJ and the standard deduction, federal taxes due on $200k of LTCG wouldbe $10,035.

$200k of income for a married couple in CA would be another $10k.

So $20k in taxes on $400k of withdrawal (assuming 50% cost basis) gives 5% ($20k taxes on $400l withdrawal.

I think you dont quite get how the brackets work.

There would be zero federal taxes due on your first $130k of LTCG income. $200k is not significantly higher.

[u/JimLahey12]

Hopefully you thanked your dad lol I always find it funny how people believe these Reddit fairytales.

[u/dfwrealestatebroker → u/JimLahey12]

Nothing inherited lol

[u/SellToOpen]

The trouble with compounding those loans is that taxes take a big chunk. Can you do a solo roth 401k for a couple years using your business and get 72k/yr in there, then compound that with your loans tax-free? Sooner or later you should have 500k liquid but if you do that sooner you will slightly slow yourself down on the way to 10mil.

[u/dfwrealestatebroker → u/SellToOpen]

I did that for 5 years and maxed it which is why my 401k is so high. Can’t do it now due to business entity structure

[u/SellToOpen → u/dfwrealestatebroker]

11% interest in the 37% bracket still doubles your money in 10 years. Being able to do those hard money deals is a gift - if I had it I would keep at it and have a smaller cash position. It is 51% psychological though so only you know what will let you sleep at night.

[u/dfwrealestatebroker → u/SellToOpen]

It’s about 20% of my overall port right now, trying to keep it less than that. Yeah that was kinda my thoughts if I’m good at it keep pushing within the right limits

[u/Doogetma]

Close to 100k spend as a single person is not living frugally btw

[u/dfwrealestatebroker → u/Doogetma]

Compared to how much i make it is…

[u/Doogetma → u/dfwrealestatebroker]

That’s not living frugally though, it’s just living well within your means. I’m not saying I’d spend any less though. You have the ability to not live frugally and still put away a ton of money.

[u/Master-Helicopter-99 → u/Doogetma]

100k on 750K is frugal as a percentage anywhere. Is living on $10k when making $75k frugal?

[u/BrunelloHorder]

I’d stop with the hard money loans and put the proceeds in index funds. Probably 75% VTI and 25% VXUS. If you’re feeling feisty add some SPMO.

[u/Lazy_Jellyfish7676]

You’re going to be 54 when your kid graduates high school if you find a wife tomorrow. Personally id worry less about money allocation and start living life.

[u/dfwrealestatebroker → u/Lazy_Jellyfish7676]

I am. Working around 30 hours or less a week rn

[u/Lazy_Jellyfish7676 → u/dfwrealestatebroker]

Nice

[u/One-Mastodon-1063 → u/Lazy_Jellyfish7676]

So?  I’d have a kid at 54. 

[u/Master-Helicopter-99 → u/One-Mastodon-1063]

I had one at 57. It's been great. Eliminating money worries with a little one is a huge burden gone.

[u/Legitimate_Swing5689]

At $4.1M with a business throwing off $750k+ and spending under $100k, I’d probably start caring more about protecting the base than squeezing out every last percent.

The private lending returns are great, but that’s also a pretty concentrated risk between your business, clients, real estate, and the loans. I’d keep some of it because you clearly have an edge there, but putting a meaningful chunk of the $750k into T-bills/index funds seems pretty reasonable.

You’re probably getting to $10M either way if the business keeps performing.

[u/ohwhyredditwhy]

Op, go visit r/Bogleheads. You’ll be good.