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Rental property is a great for FIRE
Old 08-17-2009, 11:16 AM   #1
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Rental property is a great for FIRE

I just read an article on Yahoo that to be safe in retirement you need $2M. Of course it's a "how long is a piece of string" question, but I will ER with only $500k saved as I bought a 2 family house back in 1997. I live downstairs and rent out the 3 bedroom upstairs apartment. The mortgage will be paid off in a couple of years and the house will produce $30k annual income, that's the equivalent of having $750k earning 4%. I'd highly recommend buying a bit of rental property as part of a retirement portfolio, once the mortgage is paid it gives you a lot of financial independence.
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Old 08-17-2009, 12:04 PM   #2
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Being a landlord sounds more like a job than being retired, but I suppose if you have good, stable tenants in a good property it's not too much work.
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Old 08-17-2009, 02:30 PM   #3
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Being a landlord sounds more like a job than being retired, but I suppose if you have good, stable tenants in a good property it's not too much work.
It's not work at all. I live downstairs so I don't worry about the place getting trashed. I have good tenants. At the moment it's a young couple who work locally, but it's also been graduate students etc. The work involves basic maintenance and collecting the rent. I wouldn't want to have more than one apartment to worry about as that does sound like work.
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Old 08-17-2009, 03:40 PM   #4
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I agree, but have opted for a vacation rental (year round location) and over the past 5 years I have received 25%-30% returns (on original investment) and over 100% appreciation. I rented a second property and turned it to a vacation rental (sublet) and while I received $10,000 a year on a $1,500 investment (started it for my wife), she was not that motivated and I did not want the hassle, so dumped it after two years!
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Old 08-17-2009, 05:54 PM   #5
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I agree. bought our first house in '86 for $146k and paid it off a few years ago. and is now worth close to 500k and nets about 24k a year income after taxes, insurance, and the dreaded "MWRA fees" that comes with boston area real estate..We lived there when we first were married, and saved up the downpayment to purchase our primary residence that we live in now
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Old 08-17-2009, 06:50 PM   #6
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Sounds like you have a great thing going.

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Old 08-17-2009, 07:00 PM   #7
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...the house will produce $30k annual income, that's the equivalent of having $750k earning 4%.
I am not knowledgeable about rental rates, but suspect that in my locale the rent is lower than what you are getting. RE prices in your city must also be proportionately higher.
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Old 08-17-2009, 07:10 PM   #8
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In some cases it is. It depends on timing, skill/luck in finding the right location before it booms, willingness to do your own repairs and take calls at 3 AM about a dripping faucet and that kind of thing. Every time I think about rental real estate it seems like we have to do our own repairs and property management to make it cash flow, and my REITs and other stocks have never called me in the middle of the night to fix something.
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Old 08-17-2009, 07:33 PM   #9
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We tend to forget that the advantage of a rental RE is that it is similar to buying equities on margin, yet is much safer if done right. About handling tenant's problems, that would depend on the owner's temperament. I admit that I would not be good at that.

My parents kept their old house as a rental property when they upgraded to a larger one. Over the years the rent paid for the mortgage, and they ended up owning the property. So, it certainly works.
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Old 08-18-2009, 08:46 AM   #10
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My parents kept their old house as a rental property when they upgraded to a larger one. Over the years the rent paid for the mortgage, and they ended up owning the property. So, it certainly works.
I'd never want a rental where I didn't live on the premises. I'm in the Boston area so there are lots of 2-family homes in nice areas that will get good rent. My one bedroom lower unit would go for $1500 a month and the 3 bedroom above goes for $2500 a month. I get a call from my tenants maybe 2 or 3 times a year and as I live in the house I'm right there to unplug the toilet etc.
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Old 08-18-2009, 10:14 AM   #11
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those are excellent rents! is the place de-leaded? I get called 2 or 3 times a year myself, and it's only about 4 miles away so it's worth the hassle to me
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Old 08-18-2009, 10:16 AM   #12
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I would never take such a thing on because I wouldn't want to be tied down by such a property. But I can see how it might work out well for others who do not travel nearly as much.

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Old 08-19-2009, 10:39 AM   #13
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I'd never want a rental where I didn't live on the premises. I'm in the Boston area so there are lots of 2-family homes in nice areas that will get good rent. My one bedroom lower unit would go for $1500 a month and the 3 bedroom above goes for $2500 a month. I get a call from my tenants maybe 2 or 3 times a year and as I live in the house I'm right there to unplug the toilet etc.
My apartment is in a doorman building with "onsite mantainence",and is only 10 blocks away from me. Besides the $1,000 weekly rental fee, I enjoy meeting nice people from around the world. Lima is considered to be one of the three culinary capitols of the world and introducing new clients to some of the hidden restaurant treasures has built up a great repeat business!
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Old 08-19-2009, 11:03 AM   #14
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willingness to do your own repairs and take calls at 3 AM
Haven't had the 3am call in about 20 years ... turn the cell phone OFF at night (nothing that can't wait until morning). And the cell phone is all they have to reach me (along with a POB)

But doing the repairs is real if you plan to make a positive cashflow. Was up to my elbow in raw sewage last month. My primary plumber won't work weekends and my back-up was gone camping for the weekend. So I am the back-up to the back-up ... no way around this one.
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