How do I Escape the Rat Race?

Question

I'm 36 great credit one primary home with another rental. I'd like to invest to Escape the rat race, not sink further into it.

Question: Do I rake up enough cash to complete an extension on my home ( we just grew by one more child and could use the space) thereby increasing my property value for a cashout refi of more rentals?

Or

Do I rake up enough cash to buy a vacation property in Mexico renting it out when not in use?

The ladder is adding more years of time to pay off my primary and the second seems to be a manged headache waiting to happen.

I truly can't decide. Any thoughts on how to escape the rat race SOONER rather than later?

Damaso Bautista · Answer

@Jacklin Khalsa

Hey Jacklin,

Please take my response with an open mind.

People always say they want to leave the rat race but continue to live the lifestyle they are accustomed to living.

I would encourage you to take a hard look at your lifestyle now and how your finances look.  Take account for everything in your financial profile.

Now look for a situation that will allow you to leave the rat race.  This is where it gets tricky because most people don't want to or can't do what is needed to do what they say they want to.

Some things that stop people:

Family obligation

They don't want to live in a different geographical area

They don't want to live in a lower priced neighborhood like moving from an A neighborhood to a D neighborhood

They don't want to live in a smaller home  or space then they have now

So I fell like many people say they want to leave the rat race but if they really wanted to they would do whatever it took to do so.

I don't know your specific situation but if you own a home now and have the ability buy another property in Mexico, then I think you may have some moves to get out of the rat race if you really wanted to.

Good luck and I hope to see you out of the race soon.

Brandon Goldsmith · Answer

There is some really good advice that others gave but if you have a HELOC that would put you in a pretty good situation but that the end of the day it is still a primary residence and won't be being paid down by rental income. Mexico is also another viable option and very doable. I would definitely do your research on the financing side if you don't plan to pay with cash as it can be a little bit more difficult for foreigners to obtain, but could be managed easily like any other out of state investment. Best of luck! @Jacklin Khalsa

Mike Lambert · Answer

@Allen Li

Good for you to invest in my country. I hope your investment in doing well.

I don't have a crystal bowl but I totally disagree with you about international travel. All the experts are predicting a huge boom in international travel once Covid is over. People are fed up being locked in their own country and I can confirm that most of my friends can't wait to go overseas. Even before the pandemic, ether was a secular uptrend in international travel in full swing, supported by the rising middle class wealth around the world, the discount airlines and the availability of short-term rentals. The end of the pandemic will only add fuel to the fire.

Did you know that the number of American tourists in Mexico's riviera Maya was is UP 20% compared to last year. So many people I know have been traveling to Mexico (and buying vacation rentals) over the last few months. This, while the pandemic is in full swing.

Also, in the future, you a new exploding market for your overseas/Mexican vacation rental: the digital nomads and work from anywhere crowd. The genie is out of the bottle and it's not going back in anytime soon. Once people discover that they can have a much better lifestyle in Mexico (better weather, no traffic jams, less stress, beach life) at a fraction of the cost, they won't look back. By the way, this thread is about escaping the rat race and this is exactly what it is. Watch out!

Finally, as far as I'm concerned, I don't care about doing some extra tax work to get a profitable investment and/or a nice place where I can spend time. I'll do the extra tax work from a beautiful Mexican beach. :-)

Mike Lambert · Answer

@Jacklin Khalsa

I don't know about your situation so I don't know whether investing in a vacation property in Mexico is suitable for you. If you decide to do it (at some point), feel free to check out the many replies I've written on posts about that topic.

@Gabe Bouldien @Allen Li

I'm not sure why you think that buying a rental in Mexico sounds like pain or could become a nightmare. Many foreigners, including myself, invest there very profitably (and have places to vacation). If it was a nightmare, Americans wouldn't invest in vacation rentals in Mexico in greater numbers every year. One of my contacts at short-term rental data company AirDNA mentioned to me that Mexico is one of the most sought-after destination by their clients. Have you invested in Mexico? Have you done any research on the subject?

Jacklin Khalsa · Answer

@Damaso Bautista you're right,  I see what you're saying. I just need enough time to buy back my freedom to escape the 9-5 grind. I'm comfortable with hard work just not the corporate America, Work until your 70 and MAYBE you can get social security, type of hard work.

That to me is a prison sentence that I'm trying to escape now. With that in mind any educational references or advice is greatly appreciated.

Lane Kawaoka · Answer

I was an engineer in 2007, bought first rental in 2009, got 11 turnkeys in 2015. It took a while but quit my job a few years ago.

Allen L. · Answer

@Mike Lambert Bonjour, no I don't own properties or looked into buying vacation rentals in Mexico. However I own properties in Ontario as well as done a lot of groundwork for buying vacation rentals in France. Filing taxes from the States for Canadian properties is super annoying, and cost add up. I decided against buying in France for a lot of reasons... maybe in another post. I tend to bake in my own economic views, with Covid and possibly higher inflation creeping around the corner, I think international travel won't bounce back for a while.

Damaso Bautista · Answer

@Jacklin Khalsa

I understand and that is what it is like for most people who ask the question "How do I get out of the rat race?"

I feel like the question you are asking is how do I become rich enough or make enough money in real estate, stock market or whatever vehicle you are using to live my current lifestyle so that I can not have to work and leave the rat race.

This is a very different question then the initial one.

Just something to think about.

Jacklin Khalsa · Answer

@Damaso Bautista if we're talking eating beans and rice over steak dinners then I'm already there! This pandemic has been a silver lining as we drastically slowed down on outings,  shopping and even annual vacation.  I'm still content and here.

Am I willing to move from my very comfy and cherished hidden gem of a neighborhood? Heavens Nooooo! Additionally I've just given birth to another baby girl so my familial obligations will be longer than I planned. With that in mind couldn't I live comfortably from residual income? I'd even go as far as Uninstalling my Amazon app to do so.

Jacklin Khalsa · Answer

@Allen Li yes the cost benefit analysis was reviewed.  #1 could get me a higher sweat equity on my primary by which I could then pull out the LTV and place it on a down payment for at least one more property . #2 is just about equivalent buy there comes the challenge of managing a rental out of country.  I own property out of state so I know the headache it could bring on.

I think I should continue to build my portfolio...somehow.

How do I Escape the Rat Race?

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