How to become a millionaire web developer

http://guyroutledge.co.uk/blog/how-to-become-a-millionaire-web-developer/

by guyroutledge • 12 years ago

45 52 12 years ago

guyroutledge.co.uk

jacquesm4• 12 years ago

So you'll slowly save a million pounds to lose it on a restaurant?

6% returns are not so easy to get by if you want to keep your money liquid. Performance in the past etc, funds can go down just as easy as they can go up.

You forgot to include the payments for those mortgages, upkeep of the buildings, the potential of a housing market crash (not that that would ever happen).

Also, you forgot to correct for inflation. A million pounds in 20 years is not the same as a million pounds today.

If you want to open a restaurant, go work for one today, live, eat, breathe and sleep restaurants for the next 5 years, save every penny you've got and offer to buy out your employer.

All in all, I appreciate your attitude and the effort that went into writing it all up but there are some bad holes in your reasoning and I think that it would be quite risky to follow your advice the way it stands right now, especially in combination.

Best of luck with your plans though, I hope that you will open a restaurant one day.

spacec0wb0y• 12 years ago

Agreed on above. You seem to be treating all rates, prices & predictions as static figures, where in reality they are highly variable. Have you though about potential changes in your own circumstances? Do you or might you have a family/spouse/dependants in the future? You need to make your strategy more agile and adaptive to changes that will occur over the lifetime of it. The property market is volatile, and consider the fact that being a landlord for 4+ properties could eat into your time as a web developer.

goatforce5• 12 years ago

Just a few days ago someone on Reddit opined about the failure rates of food establishments quite eloquently:

"If your goal is to build your ideal cafe, set that. Be aware these are usually called "hobby cafes" and are mostly just a way for the moderately wealthy and idle to fill their time and reinvigorate their need for real employment by pissing money up the wall."

http://www.reddit.com/r/Coffee/comments/26el3b/what_do_you_l...

circlefavshape• 12 years ago

If you want to open a restaurant, go work for one today, live, eat, breathe and sleep restaurants for the next 5 years

You're going to work for 20 years in web dev, then open a restaurant, with no previous experience? Without any idea of whether you'd actually enjoy, or be any good at, running one?

Imagine your article written by a chef or a waiter, whose ambition was to save their earnings for 20 years then open their own web dev shop. Sound like a good idea?

hengheng• 12 years ago

Easy if you choose not to have a family, or a social life spiced up with things that cost money to enjoy. The reason why most people decide to get rich is they enjoy spending money. If you live like a monk, you might as well say goodbye to the concept of prosperity, as there won't be any difference, and in 20 years your plans may well have changed.

buro9• 12 years ago

Personally, I hope he fails. Which sounds selfish but is driven by an anti-selfishness. The housing crisis in the UK is made worse by buy-to-rent schemes taking advantage of the incredibly low interest rates and government supported incentives to reduce the cost of housing.

Buy-to-let housing, as an investment vehicle, is fairly sickening in the UK. It traps the less wealthy into an almost indentured existence, with them spending the majority of their earnings to pay your mortgage and give you your profit. Their lack of future buys yours.

I'm all for people earning wealth, but do it by enriching their lives in some way. As a software dev able to create things that could help provide value for others, isn't that a better way?

edem• 12 years ago

I don't see your point. Those people will rent a flat no matter you offer yours to let or not.

jacquesm4• 12 years ago

Properties bought at above-market values financed with cheap credit (low interest) tend to inflate rental prices.

cliveowen• 12 years ago

Came here for the same exact thing, I was wondering if it's actually legal to take a mortgage on a house and then rent it out to third parties.

jacquesm4• 12 years ago

Almost all property that is rented out is somehow financed. Even big housing developments. The 4:1 leveraging the article details is actually quite mild compared to some schemes out there.

arethuza2• 12 years ago

"I was wondering if it's actually legal to take a mortgage on a house and then rent it out to third parties"

Of course it is legal - why shouldn't it be?

Mind you - you have to tell whoever gives you the mortgage that it's a "Buy to Let" mortgage - but a lot of mortgage providers offer them e.g.

http://www.halifax.co.uk/mortgages/buy-to-let/

gambiting• 12 years ago

Of course it is. A lot of people I know in the UK do it exactly this way. Either get a mortgage to buy and let, or get a mortgage to live in a house, while at the same time letting out a room or two, which ends up paying the cost of mortgage.

yourapostasy2• 12 years ago

It is worse than you were wondering. In the US, and it turns out most Western nations with "modern" banking systems, there is either outright or quasi-governmental support for taxpayer-guaranteed mortgages. The general public, as you, are for the most part completely unaware of this.

A common "business" in the US is to use various "housing assistance" programs to leverage cash for non-owner occupied housing. These debts are dischargeable in bankruptcy. Generally there are limits to about $2M aggregate and/or 7 properties, depending upon how you work the system. A great many of these "investors" are real estate brokers.

Imagine if your government announced software developers could get 3-10% cash down leverage on up to 6-7 $300K simultaneous projects. If you fail, the taxpayer picks up the tab. And you don't even have to go through YC to get it. Just show that someone else sold their similar project for however much you are proposing you get funded for.

One way to reform this system is to simply turn non-owner-occupied housing into non-dischargeable debt, with a 7-year phase-in on all legacy debt, and disgorging such mortgages back into the private market.

pothibo• 12 years ago

Maintenance is a non-trivial cost. And more property you own, more people you need to maintain your property. There's no silver lining in property.

jeffehobbs• 12 years ago

Best of luck. Saving money is always a good idea. Just make sure to have some fun along the way.

apierre• 12 years ago

I stopped reading after counting how much you would save if you'd cut your daily coffee. In 2034, £1 million will be worth way less than today anyway.

marcus_holmes2• 12 years ago

I stopped reading when the ridiculous statement that property will always rise in value and doubles in value every 10 years came up.

Simple (and I mean really simple) mathematics would make it obvious to anyone (who didn't really badly want to believe otherwise) that nothing can continue to rise in price over inflation indefinitely. There will always be a correction at some point.

Especially, nothing can double in price every 10 years consistently and indefinitely.

Sooner or later, the bottom falls out of the market for one reason or another and people get burnt.

dasil003• 12 years ago

If UK properties double again twice in the next 20 years then there's either going to be massive inflation or massive civil unrest.

apostate2• 12 years ago

While I agree with your sentiment about property values, your statement "nothing can continue to rise in price over inflation indefinitely" is not true, unless I'm misunderstanding something.

It is possible for an asset class to have greater returns than inflation (in fact, most do), but with increased risk. While this increased risk does mean 'corrections' will happen, returns for most asset classes (especially equity) are significantly higher than inflation in the long run. A world in which no asset class could outpace inflation would require zero economic growth.

bluedevil2k• 12 years ago

Most people who open restaurants don't have all the required capital in cash, they get a loan from a bank. Then you can pay the loan back slowly over X years from the profit of the restaurant (or, more likely, since something like 90% of restaurants fail in 5 years, the profits from his next job).

sz4kerto2• 12 years ago

This article is full of crap. More precisely, it's full of extremely naive ideas.

invested it in a fund with a 6% return - which is nothing special

There's no (close to) zero-risk investment at the moment that yields 6%.

If you invest in a pension

That's nice, but it's usually only tax-free when you spend it as a pensioner, not as a lump sum when you're 50 years old.

property prices double every 10 years or so

Yeah, they do. Except when not. And you also spend money on maintaining the property.

This is a return of 100% on the initial investment. That sounds a bit better than 6%, right?

OMG, did he just compare a yearly return with a return 'over a few years'?

... and it goes on and on. If you want to have 1M, then first learn the _very fundamentals_ of investing and finance.

By the way, I have an advice: if your dream is to open a restaurant, do it now.

applecore• 12 years ago

A 6% return isn't that special.

Long-term investments shouldn't be zero-risk, since you get compensated for risk with a higher return.

The average "real," or inflation-adjusted, annual returns for U.S. stocks have been about 6% to 8%.

archagon2• 12 years ago

There's no (close to) zero-risk investment at the moment that yields 6%.

Aside from FDIC-insured savings accounts, nothing has close to zero risk. On the other hand, something like Vanguard's VTSAX is fairly safe and is currently doing about 20% YTD: https://personal.vanguard.com/us/funds/snapshot?FundId=0585&...

If we have another financial crisis things are going to suck, but other than that, since this fund tracks the entire stock market, it's pretty stable by design. Mix in some bonds and you should be in good shape. (Note: I am merely repeating advice I've run into on financial advice forums.)

With FDIC-insured savings accounts, the best you can do is around 1%, which doesn't even beat inflation.

sz4kerto2• 12 years ago

The VTSAX index is nice, if you're not unlucky. If you invested into VTSAX in mid-2007, then until today your annual return would be somewhere around 3.5%. Not horrible, but not 6% either. It does not matter that this year it's around 20%.

What I'm saying is that you cannot simply take 6% return as granted -- it's similar to saying that property prices double every 10 years. Yes, usually they do raise, but not all the time.

If we have another financial crisis things are going to suck

We tend to have financial crises in every decade. .com-bust, property crisis, Russian crisis, Black Friday, Japan stockmarket crash... they happen all the time.

US Treasuries are practically zero risk, but obviously there are a lot of other risks - if you store your wealth in USD, then you have FX risk for example as most of your gadgets are produced in other countries like China, etc.

jp555• 12 years ago

A balanced portfolio consisting of REITs, ETFs, & Bonds is easily performing above 7% in Canada.

But the post does seem extremely naive. What it costs to maintain real estate (property tax, maintenance, insurance, etc) makes even typically criminally-high mutual fund fees seem reasonable. Even if owning real estate really floats your boat why wait in fear for the next 2am call to fix a flooded basement when you can get a check every month from a REIT which being a dividend is taxed at less than half the rate of a rent income (which will likely be taxed at your highest marginal rate)?

gremlinsinc2• 12 years ago

also, if you want to open a restaurant or anything for that matter-- DO IT -- even on a small scale -- try a food truck, or vending @ Fairs -- you need validation first to see if your food will even sell, if it sucks, then you're not out nearly as much as if you put out 1mill for a brick and mortar restaurant. -- Try your hand at catering as well maybe?

paulblei• 12 years ago

perfect example of what's wrong with our society. The best part was for me the "property prices double every 10 years" part. Some people never seem to learn

BornInTheUSSR• 12 years ago

I really admire that you are capable of thinking that long term but 20 years is a ridiculously long amount of time. You're on hacker news - what lean approaches can you take to test out ideas for making your dream come true now? Can you open a pop up for a weekend with a landing page to market it? Buy a food truck after saving for 6 months? Take the money you're saving and invest it in yourself, maybe you won't be guaranteed the mil, but at least you will move toward your goals now.

sean-duffy• 12 years ago

After reading this I was interested to read on his about page that in the past he was in the business of exporting "Audis, Aston Martins, Porsche and Japanese performance cars" to the Far East. Unless there's something I'm missing, surely something like that would require an amount of capital comparable with what you'd need to open a restaurant?

sebastianconcpt• 12 years ago

property prices double every 10 years or so

Prices yes, value? no. Try measuring a property value in quantity of gold or oil barrels (or a highly traditional commodity mix) and see an almost flat valuation for most properties.

It's inflation magic baby!

AKA, Governments playing tricks with your currency.

turnip1979• 12 years ago

Interesting point. When I used to make 50K a year, nice houses used to cost 300K. Today, I make x2.5 that amount and houses cost x2.5 that. Definitely not going to be able to afford a nice house in my area :'(

aculver2• 12 years ago

Guy, this plan is like giving public transit directions to Superman. I love that you're lifestyle hacking and I love the dream you're going for, but if you're a web developer, you have a present day super power that is not only in really high demand itself, but you can put it to work for yourself to create derivative works for which there is a substantial demand.

My recommendation is this: If you're currently salaried, find out how to become an independent consultant to free yourself from full-time employment. If you do this wrong, it's worse than full-time employment. If you do it right, you'll make the same amount of money working half as many hours.

From there, identify pain points that still exist across multiple clients or leverage some insight you have into an industry you've worked in to create a business-to-business software-as-a-service product that generates recurring revenue.

It may take a couple years to figure it all out, but I have no doubt you can eventually launch a product that is bringing in the £4166.67 a month you want to save £1,000,000 over 20 years while also doing 20 hours a week in consulting if you still need that to cover your ongoing expenses. (I know a serious lifehacker who has that number down to 5 hours a week with a spouse and two kids, and he doesn't have a SaaS product yet. They're currently driving around the U.S. in an R.V. on a hunt for their perfect town to live in.) That would be on the low end of success in this space. It's also quite likely, you'll make much more in monthly recurring revenue and you can get out of consulting entirely if that's what you want to do.

There are a handful of people who have done this one way or another who are super open and transparent about it, which may be really helpful for you and other people who are interested in doing the same. A couple that come to mind are Patrick McKenzie and recently Josh Pigford. However, if you connect personally with other people who are doing this in chat rooms and such, you'll find that many people are quite open and willing to share numbers, tactics, advice, etc. if they feel it will help someone drum up confidence and help guide them along the way.

I think the first step is transitioning from full-time employment to consulting, because then you can scale your time commitment to people paying you up and down as you need to in order to build your business. And you never have to kick the coffee and wine habit you enjoy... just do another hour of work every two weeks.

chourobin• 12 years ago

Just curious, are you a consultant yourself? If so, could you elaborate what "doing it right" means?

jacquesm4• 12 years ago

Even doing it 'a little bit right' should net you well in excess of 100K 'credits' per year. Doing it right, anywhere from 200K to 350K. Especially if you take the GP at his word and do a bit of product development for yourself.

Mind you, it's not 'free money', it's really hard work.

karmajunkie• 12 years ago

Won't speak for GP, but to me it means:

- charging what you're worth to your client, not what you think you'd pay; (made this mistake for years)

- doing enough networking to keep business coming in. When you've got too much business coming in, see my first point.

- doing enough self promotion to keep business coming in

- learn something new frequently. New language, new toolkit, new mode of hacking (hardware vs software, for example)... Something that keeps you interested and engaged, and keeps you valuable. This is one of the harder ones, and probably the most important to future-proof yourself as you get older and have a family or other obligations. And it's damn hard for me to do if I don't follow #1.

There's a few other threads on HN about this subject that are worth reading, lots of good advice there. I don't always follow my own advice (and the above certainly isn't comprehensive) but I can say I've got a pretty good idea that I know what it takes.

aculver2• 12 years ago

Yes, I was a consultant myself. All IMHO:

The best possible “last job” to have before doing independent consulting is at a consulting firm that doesn’t just do staff augmentation. You'll learn almost everything you need to here that will help you avoid major mistakes in your own business. Don’t do anything shady here (e.g. stealing clients, etc.) and when you’re ready to leave, leave on good terms. (My old boss and I are still friends, we travel together, and he was the first customer for my SaaS product.)

Whether you work for a consulting company or not, you’re ready to leave when you’ve got two contracts from other developer friends who have too much work and want to refer some leads to someone who can help them. One of your initial contracts should be for a long-term engagement, as this helps manage your cash-flow risk. If you’re working for a consulting company, I can’t recommend you work on your own contracts at the same time… but I think you’re in the clear if you’re lining them up and you make a clear break from one to the other.

To leave your company on good terms and potentially gain a valuable source of work, you can offer to contract yourself back to the consulting company you already work for at whatever rate they typically pay outside contractors. (For the consulting company I left, this was $95/hour, which was the lowest rate I was willing to take at the time and only for contracts that were very advantageous to my business, e.g. regular, long-term work.) This can really help them if you were a "rock star" and were keeping important clients very happy.

If your pipeline is a little weak through word of mouth, reach out to consulting companies and agencies to see if they need any help on the deals they’re closing. This is easier for them than hiring new people especially if they’re not sure demand will keep up.

If your first track is a long-term engagement, increase your rate on every new project on the second track by at least $25/hour. You may find that people stop saying yes at a certain point, so maybe you level off there for a bit. However, if you don’t force this rate increase every time you have an opportunity, you’re really selling yourself short. Again, my lowest rate when I started in July 2012 was $95/hour. By the time I stopped taking new consulting clients, I was comfortably charging $200/hour and people were still saying yes at $300/hour.

Schedule three annual vacations right off the bat, one of them within the first few months of consulting and make sure you take it and disconnect. These are the recurring litmus test whether your business is actually optimized for happiness and whether you're really putting family first if you've got one.

Here's my favorite part: If you completely fail at this, it's no big deal. You're going to fall back into a safety net of regular full-time employment where you're still in ridiculous demand. The worse possible outcome for your business is everyone else's definition of success.

archagon2• 12 years ago

I've heard of some people successfully getting into passively buying and renting property. How easy is this to do in reality? By my calculations, it's pretty difficult to break even on mortgage when you're starting out, and that's if you decide to play landlord — which may very well end up being a full-time job! And if you want to live somewhere else, you have to hire somebody to do the landlordy stuff for you, which is even more money down the drain. How do people do it?

tomwalker• 12 years ago

There is no mention of tax on any of the interest gained when calculating the compound gains.

I think he would be extremely lucky to average 6% if he kept it all in savings accounts: http://swanlowpark.co.uk/savingsinterestannual.jsp

Regarding stocks + shares: "For most of the past century, anyone investing for a 30-year period has been rewarded with a return in excess of inflation of between 4pc and 8pc a year if they were sensible about re-investing the dividend income from their holdings." http://www.telegraph.co.uk/finance/comment/tom-stevenson/846... (just from a quick search)

You then take into account management fees, tax, relative currency value etc.

jmstout• 12 years ago

How to become a millionaire web developer?

See web development as more than a means to an end.

hluska• 12 years ago

While I appreciate the writer's dedication, this article contains exceptionally bad advice. Unfortunately, the writer is choosing to use the absolute best case scenario in each of his points. This is dangerous.

Consider his spreadsheet showing his rental income. First, the spreadsheet assumes that 100% of his units will be occupied 100% of the time. Second, he says that most property owners will be looking for a 10% ROI from rental income alone. In practice, a 10% cap rate would be considered exceptional. Some very, very large real estate companies get close to 10% because they can take advantage of economies of scale. But, that is a horrible estimate for planning purposes.

In the real world, investing in rental properties requires either hiring a company to manage a property for you, or doing significant amounts of work yourself. When a tenant decides to throw a big party when they leave, you're on the hook for all the damage they do. And, you won't have access to a steady stream of income for all 12 months of every year - vacancies are extremely common.

If rental properties were as safe as he assumes and truly offered 10% cap rates, there would be too much demand, prices would skyrocket and returns would plummet. The invisible hand is an asshole.

Then, there's his talk about free money from the government. The program he references is for retirement.

If the numbers worked, this plan would be amazing. Alas, they simply don't.

gremlinsinc2• 12 years ago

My path: Become CTO for a startup, join an accelerator, accelerated companies have a 70% chance of success, if company can get to 10 mill and you only have 10% of shares, guess what, you're a millionaire! -- if it fails, rinse and repeat w/ other startups and accelerators.

How to become a millionaire web developer

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