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29, Rental Property Focused
Old 09-11-2014, 08:57 AM   #1
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29, Rental Property Focused

HI All,
Long time lurker, finally joined.

29 and wife is 27, one young child, less than a year

Personal Assets
Combined Retirement: 240k
Cash/Emergency Fund: 70k
Primary Residence: 450k home, owe 350k
529 funded and college should be taken care of
Wife carries medical for us

Current Living Expenses around 70k/ year

Combined Compensation from day jobs: 140k

Real Estate Portfolio
Cash reserves of 1 year expenses
2.7 million in rental property, 1.5 in debt
Grossing 450k year in rents, Net 130k-150k after all expenes, capex and debt service. Also reducing debt by 5k a month and will increase with amortization.
*Full time office manager and contract all maintenance. Very involved in day to day while at day job

The majority of our NW has come from real estate and that's my focus. We live in an excellent rental market and have been on a buying spree since the economic downturn in 2008, slowing down now that prices are rising. Buying less, but what purchased at a discount is continuing to increase in value.

At a crossroads in my career. I turn in an above average performance each year but I am an entrepreneur stuck in a day job. On the flip side, the day job and forced me to build a very efficient management model for our portfolio and I am pretty self sufficient doing both currently. However, I don't really invest a ton of time in corporate career development as I don't have the time an Don't want the additional responsibility of a promotion to be honest.

Looking forward to reading these forums closer and welcome any and all feedback from other folks who have used alternate investments as their exit strategy.
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Old 09-11-2014, 09:16 AM   #2
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Welcome from another RE guy, where RE more readily evokes real estate than retire early. You have a remarkable return given the time you have had the properties and the added office manager/full maintenance drag. We were buying heavily in a prior downturn but didn't have much in the way of assets to work with, so our progress was slower and I imagine our places are less attractive and marketable. That being the case, our exit strategy hasn't really worked well. On the good side, the rents continue to pile up in the bank, but I imagine it would be nice to have zero rental responsibility.

Or maybe not. I wonder if landlord types like those responsibilities and would miss the small emergencies that must be solved.

Anyway, awesome achievement at a dewy young age and what, if any, are your exit strategies?
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Old 09-11-2014, 10:18 AM   #3
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Similar situation, age, etc. here. (With significantly less R/E though).

I just left mega-corp to be an entrepreneur and have the rentals as backup to cover expenses.

I'm a month in with a startup - jury is still out on how successful this will be.

Lesson learned - don't stick around in a job you're not 100% committed to when there is something else that you're passionate about that you can take a swing at.
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Old 09-11-2014, 10:35 AM   #4
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You have certainly done well with your rental properties and getting a nice positive cash flow along with building equity in them.

Since your wife carries the med ins and you do not really like your job, why not try the entrepreneurial route and become a full time real estate manager/investor? Can you do the maintenance yourself vs contracting it out like now? Are you disciplined enough to utilize your time efficiently (seems like you are)? Can you get by with an irregular income stream that varies some?

It sounds as you want to stop the current day job and maybe you want some assurance before making the move?
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Old 09-11-2014, 11:08 AM   #5
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Quote:
I am an entrepreneur stuck in a day job
I am in the same boat, but my rentals generate even more profitability... I am finding I do not have the time to devote to work either. Work gets in the way of a lot of things. Not much longer though.
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Old 09-11-2014, 09:23 PM   #6
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Quote:
Originally Posted by FFby35 View Post
HI All,
At a crossroads in my career. I turn in an above average performance each year but I am an entrepreneur stuck in a day job. On the flip side, the day job and forced me to build a very efficient management model for our portfolio and I am pretty self sufficient doing both currently. However, I don't really invest a ton of time in corporate career development as I don't have the time an Don't want the additional responsibility of a promotion to be honest.

Looking forward to reading these forums closer and welcome any and all feedback from other folks who have used alternate investments as their exit strategy.
One bit of advice - understand what it is exactly that makes you identify yourself as "an entrepreneur stuck in a day job".

Far too often, people romanticize the concept of being an entrepreneur and don't truly grasp the 'being married to the company' aspect, where EVERYTHING is ultimately your responsibility. Often, they have certain talents that they enjoy, and merely assume that being an entrepreneur will be the pinnacle in fulfillment of those passions (when in fact it could have 'safely' been enjoyed working for someone else).

It can be no small task to build up a business to the point of replacing your current income. Consider long and hard the question of "would I truly be happier being an entrepreneur and devoting countless hours in building the business, taking 5-10 years to reach the income I currently have.....or, would I be far happier reaching financial independence in, perhaps, 5 years at my current job, then having freedom to do anything - or nothing at all?"

Have you analyzed your current occupation from all angles? Is there a way to view things that would open up a different aspect or perspective that could suddenly unleash the joy that you've been looking for?
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Old 09-12-2014, 02:15 PM   #7
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Originally Posted by FFby35 View Post
At a crossroads in my career. I turn in an above average performance each year but I am an entrepreneur stuck in a day job.

Welcome to the forum. Why do you say you're "stuck" in a day job?

Your rentals already net much more than your living expenses. Maybe I'm missing something, but if you don't like your day job, don't your rentals already provide enough financial freedom for you to quit?


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Old 10-17-2014, 08:51 AM   #8
Confused about dryer sheets
 
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Thanks for all the thoughtful replies. Ive tried to respoind to each below. Really enjoy reading the forums in my spare time.


Quote:
Originally Posted by rb35 View Post
Welcome to the forum. Why do you say you're "stuck" in a day job?

Your rentals already net much more than your living expenses. Maybe I'm missing something, but if you don't like your day job, don't your rentals already provide enough financial freedom for you to quit?


Sent from my iPhone using Early Retirement Forum
My biggest hang up is leaving the security of a day job. I read alot about OMY on this forum specific to retiring. I know my situation is different but i still have the same thoughts.

Quote:
Originally Posted by MooreBonds View Post
One bit of advice - understand what it is exactly that makes you identify yourself as "an entrepreneur stuck in a day job".

Far too often, people romanticize the concept of being an entrepreneur and don't truly grasp the 'being married to the company' aspect, where EVERYTHING is ultimately your responsibility. Often, they have certain talents that they enjoy, and merely assume that being an entrepreneur will be the pinnacle in fulfillment of those passions (when in fact it could have 'safely' been enjoyed working for someone else).

It can be no small task to build up a business to the point of replacing your current income. Consider long and hard the question of "would I truly be happier being an entrepreneur and devoting countless hours in building the business, taking 5-10 years to reach the income I currently have.....or, would I be far happier reaching financial independence in, perhaps, 5 years at my current job, then having freedom to do anything - or nothing at all?"

Have you analyzed your current occupation from all angles? Is there a way to view things that would open up a different aspect or perspective that could suddenly unleash the joy that you've been looking for?

Great thoughts here, although I am already "married" to the business and the foundation is built. Their is no angle in the corporate world that would allow me to enjoy my job, its just not in me.

I do think alot about if I stayed in the corporate world another 5 years, I would truely be set at that point. Its a big decision to weigh. I do plan to continue to grind it out and take it month by month and see how things are going. I think wants kid (s) get older, its going to be even tougher to dedicate the time it takes to do both.

Quote:
Originally Posted by Senator View Post
I am in the same boat, but my rentals generate even more profitability... I am finding I do not have the time to devote to work either. Work gets in the way of a lot of things. Not much longer though.
Thats awesome! Its always refreshing to hear success stories from other investors out their grinding away, no business suits in this business, just a landlord and pickup!

Quote:
Originally Posted by 38Chevy454 View Post

Since your wife carries the med ins and you do not really like your job, why not try the entrepreneurial route and become a full time real estate manager/investor? Can you do the maintenance yourself vs contracting it out like now? Are you disciplined enough to utilize your time efficiently (seems like you are)? Can you get by with an irregular income stream that varies some?

It sounds as you want to stop the current day job and maybe you want some assurance before making the move?
Quite a few things to think about here.

I could potentially do some of the grunt work myself but I prefer to work on growth, strategy and running the company vs. doing the work

I think having a full time job and and running a company forces me to be a good time manager, its the stress of doing two things at once that wears me out.

I definately squirm when thinking about living off rentals even though I make more than enough. I think this is probably self imposed vs. actual reality.

Quote:
Originally Posted by Papa bear View Post
Lesson learned - don't stick around in a job you're not 100% committed to when there is something else that you're passionate about that you can take a swing at.
Thanks for the kind words and I completely agree with your statement above.



Quote:
Originally Posted by calmloki View Post
Anyway, awesome achievement at a dewy young age and what, if any, are your exit strategies?

My thoughts around exit strategy are two fold really. I plan to renovate and sell off of single family houses as they turn when i feel like the market may be peaking. I have always tried to buy properties that I believe will always have homeowner demand. I have a long term view on multi families and will continue to add more as opportunities arise.

In fact, I just put another 12 unit under contract since writing this post a few weeks ago!
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Old 10-17-2014, 03:58 PM   #9
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Awesome...way on your way to FIRE...

Personally, I would target the mortgage pay down on those properties you were looking at selling in the short term.
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Old 10-21-2014, 12:03 AM   #10
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I too have thought about how much is enough. As a real estate investor significant unexpected expenses arise for nowhere. Luckily insurance covers environmental risk but market risk always looms.

If you don't mind me asking what's the dscr of your entire portfolio?

I ask because this is how I'm planning on mitigating market risk to retire my wife early. My metrics are this -- dscr of 2, and monthly cashflow 3 times personal monthly expenses. Right now our monthly expenses are 4K so we are shooting for net rental income of 12k with a debt servicing ratio of 2.

Edit - I ran rough math from your numbers above and it appears your dscr is about 1.5 (and could higher). So if your able to reduce monthly payments by 6k your dscr would be 2.
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Old 10-21-2014, 12:49 AM   #11
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Retired now. But had similar situation to yours. Worked for big Tech. Co.
Had rentals. As, the years went by, Rental income passed my work income.

Interesting, psychological note. When I "had" to work, at times work was
stressful.

But, once I reached "financial independence", work no longer stressful.
Knowing, I could leave or change jobs, or talk back, with out the worry
made working for large corporation "fun".
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Old 10-24-2014, 08:28 AM   #12
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I too have thought about how much is enough. As a real estate investor significant unexpected expenses arise for nowhere. Luckily insurance covers environmental risk but market risk always looms.

If you don't mind me asking what's the dscr of your entire portfolio?

I ask because this is how I'm planning on mitigating market risk to retire my wife early. My metrics are this -- dscr of 2, and monthly cashflow 3 times personal monthly expenses. Right now our monthly expenses are 4K so we are shooting for net rental income of 12k with a debt servicing ratio of 2.

Edit - I ran rough math from your numbers above and it appears your dscr is about 1.5 (and could higher). So if your able to reduce monthly payments by 6k your dscr would be 2.
The net that I estimated in my initial intro includes debt service.

The DSCR across all holdings is current >3. I do believe that risk management becomes more and more critical as your grow, buying positive cash flow properties is absolutely critical.
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