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Old 02-07-2013, 09:19 AM   #41
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... You need to buy right, evict promptly, closely supervise repairs to minimize cost and be prepared to be hands-on and closely manage your rentals, preferably yourself. Presumably, your father had no mortgages on these properties since they were seller financed. Foreclosing, renovating and renting would have given you a nice cashflow providing you managed right.
Sounds like w**k to me. I'd rather be ERed.
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Old 02-07-2013, 10:56 PM   #42
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I'd like to find one if those attorneys. My success with collections is not good.

After I'm retired I think many of my rental property expenses will go down, because then I will have time to do things that I now have to pay others to do...
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Old 02-08-2013, 12:51 PM   #43
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We have a similar plan to rely heavily on rental income, but expect stock/real estate to be closer to 50/50 assets (exc home).

General plan is that our kids (currently in training) can manage houses during our decline and receive stepped up basis when we die.

One thought, while you are still working it may be good to apply for a line of credit. I have a big one I currently use for "cash" purchases then refi so it is effectively zero balance and no cost. If catastrophes strike together, I hope this will give me time so I could sell at the right price rather than at firesale prices. At worst it may cost a couple hundred dollars per year which I consider cheap insurance.
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Old 02-08-2013, 08:56 PM   #44
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Before you ever start real estate investing you need a strategy.

My plan was to buy newer (less maintenance) townhouses (less issues with outdoors issues like mowing/maintenance) in good suburbs (better tenants) and screen them really well.

I've acquired 9 properties over the past 2 years - all with cash. They template out to 8.5-10.5% cash flow but it's actually been a lot more since my vacancy projections, legal budget and repair budget are too high. I buy a $2M landlord liability policy for each.

Best part is I haven't even calculated in the depreciation (for taxes) or the appreciation. With the price increases the past year they have appreciated by over $100k (and I'm a Realtor so I could sell them cheap if I needed to).

I manage them all myself so I do plan on dumping them or hiring a PM firm in 8-12 years (51 now).
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Old 02-09-2013, 05:22 PM   #45
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I cheat. basically plug in a conservative value of my property plus other investments.
I think this gives a reasonable result because:

1.In theory I could liquidate the real estate and invest in equities
2. the rental returns are actually less volatile than stock although returns would be more modest.
3. only way the value of the portfolio can go backwards is if I need to sell and live of capital due to long term vacancies.
If I did something like that, I'd hit failure rates I'd not be comfortable with in FIRECalc, simply because the returns of my real estate holdings are much higher than a traditional SWR.

That is, your point number two "returns would be more modest" doesn't hold true for me.

I agree with Ha's observations, but it is just one thing that bugs me about early retirement with real estate - can't use the various retirement calculators to project anything. All you can do is project your net income based on conservative estimates, build up a cash reserve, and when estimated net return > estimated expenses, you're FI. I guess.

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Old 02-09-2013, 05:41 PM   #46
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Since this I what you do I probably don't need to say this but, make sure you have adequate liability and some form of corporate entity to protect yourself. I had a brief experience as a landlord. I had a duplex and the couple in they lower had a fight. The husband went out and the wife piled all his stuff on the couch and set it on fire. Then she left. Luckily the family upstairs woke up and got out. After the insurance company fixed it I sold out of the landlord business. I can't imagine what it would have been like for me emotionally or financially if that had gone the wrong way.

So for what it's worth find a good attorney and make sure you are as bulletproof as possible.

NMF
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Old 02-09-2013, 08:13 PM   #47
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I agree with Ha's observations, but it is just one thing that bugs me about early retirement with real estate - can't use the various retirement calculators to project anything. All you can do is project your net income based on conservative estimates, build up a cash reserve, and when estimated net return > estimated expenses, you're FI. I guess.

I did FIREcalc and just entered what I project my rental returns are as a recurring pension. Not perfect but my whole goal with the rental income was to create a "pension like" solution that was more stable than other investments .
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Old 02-09-2013, 09:04 PM   #48
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I did FIREcalc and just entered what I project my rental returns are as a recurring pension. Not perfect but my whole goal with the rental income was to create a "pension like" solution that was more stable than other investments .
Yeah, but that's no different than just not entering it and reducing your spending by the same amount, correct?

Either way you aren't modeling the rental returns, just modeling what your equities/bonds portfolio will do to cover the rest of your expenses.
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Old 02-09-2013, 10:14 PM   #49
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I did FIREcalc and just entered what I project my rental returns are as a recurring pension. Not perfect but my whole goal with the rental income was to create a "pension like" solution that was more stable than other investments .

I am pretty much doing the same thing. I am estimating my net per property 300-400/month (counting interest expense but not principal repayment.) Multiplying that by the number of properties and reducing my living expense by that amount.

This model obviously works better for those of us near or in retirement, than young people like arebelspy in the accumulation phase.
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Old 02-10-2013, 04:56 AM   #50
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"4 residential properties"
To me that could turn into almost a full time job.
I have one single family home that rents for $1900 mo. $70k left on mortgage to be paid off in 3.5 yrs. Worth about $325k in today's market.
Paid off our home 10 yrs ago
A bit over $800k in a 401K, Roth IRA & cash ballance pension. Am about the same age (51).
Agree, it is a bit daunting figuring out long term revenue flows that will stand the test of time and inflation. Right now the market scares the heck out of me and am out, earning a whopping .01% on most of the above. But am able to add about $50k a yr to it. So even at .01% I still "feel" OK about it. Getting over 12% last year helps as I sit on the sidelines.
I never thought this would be so hard to figure out. LOL LOL (Finding the perfect mix.)
Yrs ago, I thought I would just put 1/2 in CD's and 1/2 in stocks and bonds. Seemed like the perfect plan not that long ago, and worked for many. Not anymore!
Good luck with your plan, seems like it should work!
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Old 02-10-2013, 06:11 AM   #51
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after 25 years of dealing with tenants that is the last thing i want to do in retirement. we have been selling it all off the last decade .

i don't want any investments that are like a real job.
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