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Old 08-02-2016, 05:53 AM   #21
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I purchased most of my properties in 2005 and 2007. I sailed right through the housing crisis and recession, no sweat. I was surrounded by foreclosure signs. You can keep your leverage; I wanna sleep at night.

You're assuming the people who foreclosed did worse than you. Likely they had far superior ROE year after year beforehand and happily walked away when things went south.


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If rentals cover living expenses, how much in financial assets needed to Fire?
Old 08-02-2016, 06:29 AM   #22
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If rentals cover living expenses, how much in financial assets needed to Fire?

For comparison, look up the Mr. Money Mustache family's budget breakdown. They live on $25,000 - for a family of three! It's not for everyone but no debt, nonexistent income taxes, thoughtful choices and simple living can get a person a long way. Also, as a single person, you can set up any lifestyle you bloody well choose. Good luck and congrats on all you've accumulated.

Here's the most recent one I could find in a hurry: http://www.mrmoneymustache.com/2014/...2013-spending/
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Old 08-02-2016, 06:42 AM   #23
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You're assuming the people who foreclosed did worse than you. Likely they had far superior ROE year after year beforehand and happily walked away when things went south.


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Guys, I'm not making an argument here for which strategy is financially more rewarding. I don't care if keeping leverage has a better financial outcome, the STRESS for me would be overwhelming, but a foreclosure would be even worst. The ethical side of squeezing every ounce of equity out of your investment, with the plan in place to bail if things go bad and leave someone else holding the bag, that's bad karma.

I too have been tempted to pull out a couple hundred grand at these low rates, but I know myself, and I wouldn't be happy with it. I hate making monthly payments as well.
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Old 08-02-2016, 08:38 AM   #24
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I'm absolutely with you on debt. Contrary to all the professional and amateur advice we got, we paid off our main house mortgage the second we could and paid cash for the rental property. It's all about stress levels, not about returns!


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Old 08-02-2016, 09:07 AM   #25
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I'm absolutely with you on debt. Contrary to all the professional and amateur advice we got, we paid off our main house mortgage the second we could and paid cash for the rental property. It's all about stress levels, not about returns!
Also, you have to eat. So, since your properties are leveraged, you have a higher return on equity but much lower cash flow, which means you need to own either more property, or larger, more expensive properties to get the same cash flow. More property equals more tenants, liability, time, risk, stress. And with each passing year, more of your monthly payment goes to principal which is unavailable to you to invest, so you have to eventually refinance to pull that out, incurring loan fees and a new interest rate. Nope, not for me.

To clarify, I'm not saying I wouldn't borrow money to purchase a property. I did in fact do this. But, I paid them off as quick as possible and have no desire to KEEP them leveraged. Keep is the key word here.
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Old 08-02-2016, 12:40 PM   #26
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Not trying to persuade/argue with anybody else's position, but IMHO the reason why real estate works as well as it does for the avg joe is that it allows you to use leverage for relatively cheap rates.

IMHO now is a good time to lever up. I do not see rates going up much nor quickly. If you look at the demographics for the world they are very deflationary.

Having said that I think the governments will not allow deflation to happen no matter what. So my base case is long term stagnation.

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Real estate
Old 08-03-2016, 09:25 AM   #27
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Real estate

There is probably no right or wrong answer. Everyone's situation is different.

I have 30 paid off rentals which bring in roughly $28,000 a month. Total value I'm guessing $3,500,000. Sure, I could finance them and purchase a whole lot more but the hassle, stress, etc....makes it not worth it to me.

I do have another $1,000,000 in investments and a $2,000,000 cash cushion. And I still worry! I worry that I have too much sitting in cash earning so little, too much in real estate, that it will grow and I'll lose a lot to estate taxes. Every time I decide I want to sell when I get a vacant I don't because I get literally over 100 applicants the demand in my area for quality, affordable housing is so high, I have owned for awhile so the costs of selling and after tax amount I'd receive wouldn't make anywhere near the same amount of return I get keeping them as rentals.

I started out financing always putting down at least 20% and making sure they would cash flow from the start. Every mortgage was paid off early. Then I was able to buy a bunch using cash due to having a successful business and taking advantage of the good buys around after the market crash. I do have a couple that will never likely be worth what I paid for them but due to the income they generate will still ultimately be better than losing in the stock market.

For some people, like me, the piece of mind that comes from having no debt is a very treasured thing. As well as the cash flow it produces. I'd definitely recommend using leverage when you need to but for me, once I had enough to know I could be very comfortable, I was happy to do away with hassle and worry that comes with borrowing.
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Old 08-03-2016, 09:45 AM   #28
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There is probably no right or wrong answer. Everyone's situation is different.

I have 30 paid off rentals which bring in roughly $28,000 a month. Total value I'm guessing $3,500,000. Sure, I could finance them and purchase a whole lot more but the hassle, stress, etc....makes it not worth it to me.

I do have another $1,000,000 in investments and a $2,000,000 cash cushion. And I still worry! I worry that I have too much sitting in cash earning so little, too much in real estate, that it will grow and I'll lose a lot to estate taxes. .....
Wow, well done.
Personally I would take $1,000,000 of the cash and put it into some broad etf's and since I'm sure you are nervous about when to do that, simply put in $50K each month on the 2nd Tuesday for the next 20 months.
There is no way you need $2MM as a cash reserve considering how cash flow (+) your rentals are.

The reason you want more in stocks is so that you pay less taxes, as divs are taxed much less than interest.
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Old 08-03-2016, 01:31 PM   #29
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My strategy is to leverage in the accumulation phase of properties. Once I have enough to be satisfied I will start to pay the properties off so that I can have a better cash flow when I retire.


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Old 08-03-2016, 02:55 PM   #30
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My strategy is to leverage in the accumulation phase of properties. Once I have enough to be satisfied I will start to pay the properties off so that I can have a better cash flow when I retire.


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That sounds like a good plan!
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Old 08-03-2016, 03:21 PM   #31
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I absolutely think you have enough to retire. If your expenses are currently less than what your rentals are bringing in, then that 700k will be able to sit quietly and grow until you need to actually withdraw from it. I would go for it if I were you. You can always have some kind of side gig to bring in a few bucks if you feel the need.
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Old 08-03-2016, 04:29 PM   #32
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There is probably no right or wrong answer. Everyone's situation is different.

I have 30 paid off rentals which bring in roughly $28,000 a month. Total value I'm guessing $3,500,000. Sure, I could finance them and purchase a whole lot more but the hassle, stress, etc....makes it not worth it to me.

I do have another $1,000,000 in investments and a $2,000,000 cash cushion. And I still worry! I worry that I have too much sitting in cash earning so little, too much in real estate, that it will grow and I'll lose a lot to estate taxes. Every time I decide I want to sell when I get a vacant I don't because I get literally over 100 applicants the demand in my area for quality, affordable housing is so high, I have owned for awhile so the costs of selling and after tax amount I'd receive wouldn't make anywhere near the same amount of return I get keeping them as rentals.

I started out financing always putting down at least 20% and making sure they would cash flow from the start. Every mortgage was paid off early. Then I was able to buy a bunch using cash due to having a successful business and taking advantage of the good buys around after the market crash. I do have a couple that will never likely be worth what I paid for them but due to the income they generate will still ultimately be better than losing in the stock market.

For some people, like me, the piece of mind that comes from having no debt is a very treasured thing. As well as the cash flow it produces. I'd definitely recommend using leverage when you need to but for me, once I had enough to know I could be very comfortable, I was happy to do away with hassle and worry that comes with borrowing.
Is the $28,000 gross or net?

With that much income, I would probably look at ways to invest some of the cash. However, it's tough to find anything right now that makes sense to invest in. Waiting patiently for the right opportunity seems more appealing than throwing money blindly at the stock market and hoping the bull will still run.
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Old 08-03-2016, 10:40 PM   #33
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There is probably no right or wrong answer. Everyone's situation is different.

I have 30 paid off rentals which bring in roughly $28,000 a month. Total value I'm guessing $3,500,000. Sure, I could finance them and purchase a whole lot more but the hassle, stress, etc....makes it not worth it to me.

I do have another $1,000,000 in investments and a $2,000,000 cash cushion. And I still worry! I worry that I have too much sitting in cash earning so little, too much in real estate, that it will grow and I'll lose a lot to estate taxes. Every time I decide I want to sell when I get a vacant I don't because I get literally over 100 applicants the demand in my area for quality, affordable housing is so high, I have owned for awhile so the costs of selling and after tax amount I'd receive wouldn't make anywhere near the same amount of return I get keeping them as rentals.

I started out financing always putting down at least 20% and making sure they would cash flow from the start. Every mortgage was paid off early. Then I was able to buy a bunch using cash due to having a successful business and taking advantage of the good buys around after the market crash. I do have a couple that will never likely be worth what I paid for them but due to the income they generate will still ultimately be better than losing in the stock market.

For some people, like me, the piece of mind that comes from having no debt is a very treasured thing. As well as the cash flow it produces. I'd definitely recommend using leverage when you need to but for me, once I had enough to know I could be very comfortable, I was happy to do away with hassle and worry that comes with borrowing.
Have you ever had any kind of significant lawsuits? Do you just have a massive general liability policy? That is one of my concerns with real estate vs index funds... litigation. Thanks if you don't mind.
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Old 08-04-2016, 02:07 AM   #34
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I absolutely think you have enough to retire. If your expenses are currently less than what your rentals are bringing in, then that 700k will be able to sit quietly and grow until you need to actually withdraw from it. I would go for it if I were you. You can always have some kind of side gig to bring in a few bucks if you feel the need.
I don't know much about the rental property aspects, but that is what I thought reading the initial post. Besides a possible side gig (beside the rentals), there will be SS down the line and with low living expenses SS should cover a significant chunk of those expenses.
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Old 08-04-2016, 02:34 AM   #35
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Why not consider a part time business or some consulting to go with your rentals and savings? Something flexible, where you can decide to take days off or travel on a whim? You would easily live off cash flow, and continue to save/grow assets. And, if the economy turns against you, you can work longer weeks to make up the loss of income.

If all works well, you could pull the trigger on full retirement in a few years, with less concern about future finances.
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Old 08-04-2016, 07:24 AM   #36
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Is the $28,000 gross or net?

With that much income, I would probably look at ways to invest some of the cash. However, it's tough to find anything right now that makes sense to invest in. Waiting patiently for the right opportunity seems more appealing than throwing money blindly at the stock market and hoping the bull will still run.
That's gross. I do have another $4000 a month income from private loans I've given to others (varying amounts, interest rates and terms....amounts to roughly $20,000 in interest a year, the rest is return of principal)

The $28,000 is gross. I'm guessing net is more like $20,000 a month).

I do save a lot of it, give some away, etc...

I know I have too much in cash most likely most earning just 1% and could do more with it. I guess the real estate gives me more a sense of control and reasonable rate of return.
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Old 08-04-2016, 08:06 AM   #37
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Who are you going to hang out with ? Old people or the park bums ? everyone your age is working or wanting to work as they need the cash, or they are rich jet set and you cannot afford to even travel to where they are currently partying.
That post tho! You win the award for the strangest post ive ever read on here. Since most people his age are working means he should also be working? I dont know too many people who couldnt occupy their time doing hobbies of their choice throughout the day. Do weekends still exist to hang out with friends? What about after THEY are done working? My friends still have a social life after work hours.

If anyone has rentals that cover their expenses what reason is there to punch a clock? If all your expenses are met you have close to 1MM in the bank...why would you want to make someone else money? Go do whatever you want on your terms.
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Old 08-04-2016, 08:18 AM   #38
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I have been struggling with the internal debate of leveraging my real estate further. I sort of like knowing there is cash coming in. So instead of 15 rentals I could have 20 or 30 rentals but for what end game? More stress when there are vacancies because I have mortgage payments to pay. More headaches to possibly increase the inheritance I leave my kids one day? No thanks. I think paid off real estate is good real estate.
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Old 08-04-2016, 08:24 AM   #39
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I have been struggling with the internal debate of leveraging my real estate further. I sort of like knowing there is cash coming in. So instead of 15 rentals I could have 20 or 30 rentals but for what end game? More stress when there are vacancies because I have mortgage payments to pay. More headaches to possibly increase the inheritance I leave my kids one day? No thanks. I think paid off real estate is good real estate.

You dont need more rentals. It the concept of next best alternative. If you can cash out at 5% and put the money somewhere else at 6%, that's the efficient thing to do. Could be stock, bonds, anything.


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Old 08-04-2016, 08:28 AM   #40
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You dont need more rentals. It the concept of next best alternative. If you can cash out at 5% and put the money somewhere else at 6%, that's the efficient thing to do. Could be stock, bonds, anything.


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Ok, you are right I could do something besides real estate, so I take out a mil at 3% and invest in _____ ??

No guarantee of getting more than 3. Sure I might get 7% return... or I might get negative 10%.

Again though I am taking risk to improve my kid's inheritance one day!?
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