For an audio version of this post, please click on the speaker icon (top left).
Welcome to this episode of The Doctor’s Bill (Can You Afford It?).
Wonder if you should buy that big ticket item or not?
Well here’s your chance to have a wealth management expert, Johanna Fox Turner, of Fox & Company Wealth Management analyze your overall finances and make a final verdict on whether or not you can indeed swing for the fences and splurge on yourself or whether you should just walk away.
[Johanna and I have no current financial relationship]
Disclaimer: This is not meant to be a substitute for paid professional advice but only meant to serve as a suggestion/guideline.
The following are the details from our submission form:
Vineyard/Vacation Rental Property (to be bought in 10 years)
How do you plan on paying for this item/experience?
SBA 504 Loan, likely 10-20% down, partially paid for through 1031 exchange from my commercial real estate plan listed below.
On A Happiness Scale of 1-10 (10 Being Happiest), rate what this item/experience will do for you A) Short Term and B) Long Term:
A) 8 at the time of purchase in 2028
B) 10 Long term
Any Children (If so please provide ages)?
One (1 year old)
How Many Years Till Planned Retirement?
16 (or at least hope to be financially independent by then)
What is your total household income?
Effective Tax Rate (State & Federal):
What is your % Annual Savings Rate? (savings/gross income)
41% gross (30% gross towards investing/retirement)
Estimated Annual Living Expenses (Current):
Market Value of Primary Home [For Renter =$ 0]
Additional Real Estate Holdings Equity (Market Value-Debt):
$0 (plan on $120k/yr towards real estate investments for the next 10 years)
Current Liquid Asset Value (Savings, Checking, Etc.):
Retirement Assets (401k/IRA/HSA):
Brokerage Account (Taxable):
Miscellaneous Asset Value (Please elaborate):
$390k (3.25% fixed 30 year)
Student Loan Balance:
Unfunded Future College Costs & Years Left Till Needed:
$12k/yr x 17 years (already included in my current living expenses)
Other Unfunded Goals and Years Remaining (Today’s Dollars):
$100k of our liquid assets has been earmarked for a home renovation in the next year.
Any other pertinent information not addressed?
My plan is to use all my annual tax-advantaged space ($54k for 401k, $11k for backdoor Roths) for index funds and additional retirement savings (~$120k/year) toward commercial real estate over the next 10 years.
My commercial real estate plan is to buy a building (presumably $250-300k toward the 20-25% down) every other year over the next 10 years, so that I’d likely to have around $5 million in properties (not net).
I’m assuming an IRR of 10% on my properties.
My hope is that I’ll be able to 1031 exchange my first commercial property into the vineyard.
At 9-10 years, that initial $200-$250k down payment should result in around $500-600k in equity toward the vineyard.
At that point, I plan to reassess.
I’m hoping the vineyard has three revenue streams (grapes sold to winemakers, wedding venue, vacation rental).
The initial plan is to have the vineyard professionally cared-for and source the grapes to wineries while using the home as a vacation rental when we aren’t staying there.
When I fully retire, I’d love to have winemaking be something to “retire to” and make the wine myself after being properly educated.
I don’t have plans to sell the vineyard because I’m not planning on the vineyard factoring into my retirement income.
I hope that the vineyard only makes enough money to cover its expenses and pay down the mortgage. I’d love to leave it to my son if he developed a passion for wine.
Rather than use the vineyard to support my retirement lifestyle (which frankly I don’t think it will help with), I plan to live off the cashflow from the $5+ million in commercial real estate as well as a 3-4% SWR from an additional 16 years-worth of maxed-out retirement accounts.
My plan B is as follows:
Keep working my full time physician job.
If I buy the vineyard in 10 years, I plan to work in medicine at least an additional 6 years until I’m 50.
If it is a bare plot of land that has to be planted, I fully expect it to be cashflow negative for the first 5 years.
If I were to buy a mature vineyard, I’d expect it to cashflow positively.
Note that I’d be looking to source the grapes to other wineries, especially while working full time as a physician.
I’m only hoping the vineyard is long-term cashflow break-even when including the mortgage.
So does this doctor have what it takes to create his own little Martha’s Vineyard?
Or will the fiscal toll of this venture cause his financial vines to be barren?
Click on the Doctor’s Bill Image and find out the verdict:
After you see the verdict please come back to this page and comment whether you agree or not with the decision (and no cheating by looking at comments first!)
If you would like to submit your own Doctor’s Bill request please fill out the submission form.
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Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
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