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Taking out a loan to live in an RV to cut living costs

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clicker44
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Taking out a loan to live in an RV to cut living costs  Reply with quote  

Hello Money Talk I am a long time follower but this is my first post. I have learned SO much from this forum, thank you to everyone that has shared their knowledge.

I am in the midst of planning a life change to take a new path towards financial freedom. I am currently:

- 30 years old
- Credit score of 798
- No CC debt
- 55k in student loans @ 6.8% (undergrad + grad school)
- Income of 120k (pre tax)
- No car payment
- No other debts
- Do not own a home or any other assets
- I had a few unsuccessful entrepreneurial endeavors in my 20's and am just getting back on my feet. I am currently paying back my student loans on the IBR (income based repayment) plan, which per my minimum wage base salary is roughly $15 a month (obviously a horrible financial decision, but I just am getting back on my feet and could not afford the $750 a month payments)

I work in the tourism industry selling technology solutions to companies. I am averaging 12K per month in commissions (pre tax) but my wage is very seasonal.

I am currently an "employee" of the company (W-2) although I maintain a base salary of minimum wage and am paid on commissions. The company covers my health insurance and cell phone bill.

I am very successful at my job when I am able to meet clients in person. That being said, I am very motivated to do the following:

- Buy an RV and move my "residence" to South Dakota to alleviate CA state taxes
- Eliminate my rent costs
- Contribute more of my finances to paying off my student loans and saving to buy real estate

I want to buy a very specialized RV called a Sportsmobile. You can see what one is here: http://www.sportsmobile.com/sportsmobile-4x4/. To quickly summarize why I need a Sportsmobile , the vehicle will help me sell my product.

In addition, the Sportsmobile's are very specialized and hold their value much better than a typical RV or automobile. I have been watching the used market for about 2 years now and am very confident that if I were to buy a used one at the right price I would be losing no more than 3% per year in value.

My question for the board is the following:

Would it be a wise financial move to take out a 60k loan to buy the Sportsmobile if I were able to live out of it full time? I have been shopping loans and have found the average to be in between 3% and 4% on a 24 month term.

My plan is to become a contractor with my company (10-99) and then be able to write off the Sportsmobile mileage, loan interest (it has plumbing so is considered a "home" by the IRS), office space, etc etc...

Right now I am getting CRUSHED with taxes as I have no assets and feel like a hamster in a wheel! I think that with the Sportsmobile I could lower my overhead, lower my taxable income, and increase my gross income.

I am VERY nervous to take out a loan, especially on a depreciating "liability". I am justifying it by the fact that it will negate my rent and living expenses and increase my earning potential but still have trepidation.

Any suggestions on if this is a good idea? If so, any tips on the best way to secure the money?

Thank you in advance for any person that takes the time to read this, I appreciate it!
Post Wed Oct 28, 2015 3:43 am
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oldguy
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quote:
paying back my student loans on the IBR (income based repayment) plan, which per my minimum wage base salary is roughly $15 a


The interest on the $55k loan is stacking up at $3740/yr - and you're paying $180/yr?? You are going backwards pretty fast.
Is your degree in a marketable field? Or not so much?

Actually, a part of your plan isn't as silly as silly sounds - but don't combine the motorhome and the 4WD (you'll be getting the worst of both). Get about a 30 foot Winnebago-type motorhome, you'll find them in the retirement parks, it's not uncommon for them to be 10 years old, pristine condition, only 40,000 miles, priced at $10K or $12k. And get a pull-behind jeep, they have a tow feature so that no special carrier or disconnects are needed, just hitch it to the Motorhome and go. That gives you a comfortable home, a vehicle to drive, and the 4WD capability (w/o being encumbered by water tanks, sinks, stoves , reefers, and dishes, banging around & breaking when you 4W.

As for writing off the expenses - remember, you have to spend the money before you can write it off. Ie, when you write off a $20k cost, it lowers your taxes by about $5000. You can't make money by spending $20,000 and getting $5000 back. Altho lots of misguided people seem to try, lol.

I'm retired and wealthy, I never lost money paying taxes - any time I had a $50,000 tax bill it meant that I had made about $250,000 and I had $200k net leftover.

As for the tax schemes, entrepreneurial adventures, yada - if you simply invest $1000/m into the SP500 Index for about 20 years, you'll have close to a million in the account - making a million isn't nearly as hard as people make it.

With your $120k income, I would direct it to $750/m on the $55k loan, that pays it off in about 8 yrs. And invest about $1000/m on the million dollar plan. That leaves you with almost $100k/yr leftover for taxes, food, shelter, jeep, motorhome, fun.
Post Wed Oct 28, 2015 2:13 pm
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clicker44
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Thank you!  Reply with quote  

Thank you for the reply, I really appreciate it. Yes the student loan interest is brutal, I am upping my loan payments back to the $1200 a month I was paying last year to get rid of them ASAP.

Great idea on the motorhome!

Can you elaborate on the writing off of expenses? I am under the impression that if I were to live in an RV and drive it to my sales appointments I could claim mileage, office space, internet, phone, etc etc...

That is very sound advice to be putting the $1k a month into the SP500 index, I wish I had been doing it longer.

Thank you!
Post Wed Oct 28, 2015 8:53 pm
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oldguy
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quote:
I could claim mileage, office space, internet, phone, etc etc...


I think that's correct - but you can't claim the cost of the RV, that is considered to be personal living space, not business. Right now, you can claim your mileage, internet, phone, office equipment (printer, fax, etc). But again, not a big deal - maybe up to a $500/m deduction, that should shave about $100/m off of your taxes.

The $1000/m invested into the SP500 will shave about $250/m off of your taxes if you keep it in a 401k account. That $3000/yr counts up over time Very Happy
Post Wed Oct 28, 2015 10:48 pm
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pdgoldinc
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Motor Home or 5th Wheel and Truck?  Reply with quote  

Hi clicker44, you are quite young to make the decision to buy an RV to go to your sales appointments. I wish I had thought of that when I was your age!
I am now a senior citizen and I live in an RV with my husband and our 3 cats. We had it all, the big houses, the pools, Jacuzzis, they all came with cleaning personnel, gardener and pool-man. You must be single. I am not certain if your wife would like this lifestyle at such a young age, especially if you decide to have children. I don't know if you travel part-time or how often you have these sales appointments. Once you have children and get an RV for pleasure, your kids will love you forever. When our kids were young, we purchased a cabin cruiser and had her slipped at a lake. We spent almost every weekend on the boat and the kids still talk about it, they had their best time of their childhood on the boat. We then got a houseboat and lived there for a few month with our dog and the cats.

If I was you, the first thing I would do: I would incorporate, you can do this very inexpensively. I set up our own corporations which cost me around $75, then you pay a fee yearly to the State where you incorporate, which is not much, I believe it's a little over $100. Once you are incorporated, you can purchase an RV and write it off, you can write off the mileage, meals, overnight fees, etc. There are many write offs, check it out on irs.gov or consult with your accountant if you have one. There are many tax advantages.

We live in a 5th wheel, only paid $12k, it's one of the best on the market, we had paid cash for it but you can finance them up to 100%, depending on lender, interest rates are quite low, I would go with a credit union. You must have a car, I would then trade that into a truck, does not have to be new, I would suggest a Dodge Ram, it's the best truck for pulling because of it's Allison transmission. You can buy the truck in your companies name too and write it off. Then you would need a hitch which is around $200-300, I would get a used one off craigslist in your home town. With 5th wheel and truck, you are all set, you park the 5th wheel and you have the truck to go to your meetings or to run errands, etc.

It is best to have a stationary address for credit reasons, which could be your parents place or a friends place. For future credit it is best to have a steady address.

If you prefer a motor home, make sure the engine, transmission, etc. is good, I would not purchase one which is 10 years old, I would get one a bit newer. Often you can get one with low mileage and if you look around you can get a good deal. We used to have a Fleetwood Revolution LE, a tire cost us $600. Learn a bit about motor homes before you buy one. We pulled a full size truck with two motorcycles on top. You can do this once your children are grown and you just want to travel. In your situation, if you decide to get a motor home, I agree with oldguy, get a Jeep, you will not be sorry. They are the best tow vehicles and run forever.

You seem to like your job, stay with it and grow with the company you're with or if you are an entrepreneur, then open your own company in the future. I have some other ideas for you but we will stay at this for now.

Take some time out between appointments and educate yourself on what I mentioned. Good luck!
Post Sat Oct 31, 2015 5:10 am
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pdgoldinc
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Sportsmobile  Reply with quote  

You would not be happy living in a Sportsmobile, believe me, don't even try it!
Post Sat Oct 31, 2015 5:58 am
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