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Old 07-17-2010, 08:24 AM   #21
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Man plans, God laughs -- ancient Yiddish proverb.

You are smart to be planning for the future at your age; enjoy the journey getting there, too.
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Old 07-17-2010, 07:48 PM   #22
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The best-laid plans o' mice an' men gang aft agley -- ancient Scottish proverb!
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Old 07-18-2010, 01:10 AM   #23
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I think it would be pretty difficult if not impossible for me to try to exceed my income, and be able to ER. But, I CAN get my target SWR of <3% to exceed current spending.

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Old 07-18-2010, 06:45 AM   #24
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It appears you will require some aggressive saving and investing. I just wish to add that in your route to ER, don't forget to reward yourself and make life interesting and enjoy some luxuries. Otherwise, it's a long dry road towards the goal. When people hear about my coming ER, they immedietedly asked me whether I will be travelling a lot, and I then realised that I travel a fair bit for vacations even in my working years which had made the route to ER fun and interesting.
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Old 07-18-2010, 09:45 AM   #25
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The best-laid plans o' mice an' men gang aft agley -- ancient Scottish proverb!
Close, but no cigar. One line by Robbie Burns. The entire poem is here.
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Old 07-18-2010, 09:23 PM   #26
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I assumed that the source was obvious; but thanks for providing the reference for those who are unfamiliar with The Bard.
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Old 07-20-2010, 08:56 AM   #27
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I plan on using the power of leverage in real estate for this. I understand it is not the traditional way everyone is aware of. The fact that everyone assumes you need to save 95% of your salary and pray for a stock market miracle in order to FIRE with more money than you had while working seems like a lack of faith.

I understand that even the best plans have flaws and will need to be reworked but my plan is to acquire several properties over the next few years using creative financng and my own savings. I also plan on hiring a management company to run the daily operations. My research has show they generally chart 10% of rent. I am completely fine with these properties just breaking even. My goal is to build the equity in these properties without paying for it. On the side I will save a part of my income from my "real" job in order to build up more savings for retirement. Of course I'm not stupid enough to believe this is a foolproof plan or that I won't run into many many issues along the way, but it cannot be said that only pure luck will make this work.
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Old 07-20-2010, 09:08 AM   #28
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You're praying for an equivalent miracle if you think by putting yourself 500k-1M (or more) in debt you can ride out the next 20 years until retirement without incident.

I'm not saying its impossible, but in an efficient market (I believe the time frame is long enough to make that assumption) the risks are comparable or equivalent to the stock market with margin over long terms.

Leverage is not a magic word, it is a tool and will not make anyone rich by its own merits. It needs to be used in a plan that accounts for various risks.

I would suggest you rethink your mindset that 95%+ financing (I assume this is what you mean by "creative") is NOT a risky endeavor. Of course, if it works you'll be rich... you'll need to be compensated for all that potential bankruptcy.
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Old 07-20-2010, 11:17 AM   #29
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Yes, if you have two government pensions and only live on 25% of your income today. That's my plan, and it appears to be working...9.5 more years to go!
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Old 07-20-2010, 02:48 PM   #30
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I plan on using the power of leverage in real estate for this. I understand it is not the traditional way everyone is aware of. The fact that everyone assumes you need to save 95% of your salary and pray for a stock market miracle in order to FIRE with more money than you had while working seems like a lack of faith.... My goal is to build the equity in these properties without paying for it.
I suspect that most people on this board are aware of the potential for leveraged real estate speculation to accelerate financial returns. It's just that it is a rather aggressive strategy that (as the past few years have amptly demonstrated) also has the potential for significant losses.

On the other hand, it is my understanding that many American mortgages are made on a non-recourse basis; so perhaps the only real risk you run is a (temporary) hit to your credit rating. In that case, you might as well go for it! Certainly it will be much easier than old-fashioned working and saving.
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Old 07-27-2010, 07:43 AM   #31
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I would say go for it and infact if you are that good just skip the work part of it.
You can start by getting some type of disability payments, law suits and what ever else you can dream up. Many have done it before you and I have met several that get disability payments og more than they ever got for working.
Many did not keep jobs for more than a few weeks a year so it is possible
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Old 07-27-2010, 08:19 AM   #32
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I think your cunning plan is actually pretty good for someone your age! Wish I had done it that early.

But I would consider that handing it off to a property management company may be an oversimplification of the involvement. In my area I was able to purchase several great multifamily properties at cheap prices that were run into the ground by property management cos, losing tens of thousands of dollars annually paid out by the property owner. Even if you find a really good PM, there are still capital improvements/major maintenance projects,etc you will need to consider getting involved with/paying for.
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Old 07-27-2010, 09:27 AM   #33
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Many did not keep jobs for more than a few weeks a year so it is possible
Do you like boats? You could set yourself up as a self-employed fisherman in one of the Atlantic provinces, and simply collect pogey.
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Old 07-28-2010, 08:44 AM   #34
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Has anyone heard of anyone having a really good experience with a property management company?

I don't know anyone who has made significant money in real estate who didn't have to manage the properties themselves.

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I think your cunning plan is actually pretty good for someone your age! Wish I had done it that early.

But I would consider that handing it off to a property management company may be an oversimplification of the involvement. In my area I was able to purchase several great multifamily properties at cheap prices that were run into the ground by property management cos, losing tens of thousands of dollars annually paid out by the property owner. Even if you find a really good PM, there are still capital improvements/major maintenance projects,etc you will need to consider getting involved with/paying for.
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Old 07-29-2010, 01:48 AM   #35
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Has anyone heard of anyone having a really good experience with a property management company?

I don't know anyone who has made significant money in real estate who didn't have to manage the properties themselves.
My parents owned & self managed a rental until a few years ago, but they are getting up in years and the building they owned was clear across town from where they live. I think they had done several tax-free exchanges from when they started to the last building they self-managed, and the capital gains tax hit would have been substantial if they had simply sold it when they didn't want to self-manage any more, so they did one last exchange and hired a management company. I'll ask them for their words of wisdom on the matter.
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Old 07-29-2010, 09:45 AM   #36
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Just 22

Remember that the original poster is just 22 years old and not at a set salary for life. Retiring on 2 to 2.5x your current salary is possible if you increase your future earnings and save a substantial portion of them by avoiding lifestyle creep. My first job I was making around XX,000/yr at 22 years old. 10 years later I am making 3.5x that much. So 2x or more of my original salary would certainly be possible by 40 if I continue to increase my income and avoid spending more. The lifestyle creep is the biggest enemy.
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Old 07-31-2010, 09:46 PM   #37
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My mom replied to my email asking about the management company. Her answer is, they are generally satisfied with the management company and feel they are getting their money's worth. The managers take care of maintenance, repairs, renting vacant units (I know one of their frustrations with self-management was driving half an hour each way to show the apartment and having he prospective tenant not show up). OTOH, they are not (at the moment) making pots of money on the deal—it's about at break-even. Profit was supposed to come from the continuing appreciation of the property (and rising rents as a result?), but not happening in the current market.

So, I think Hamlet's original statement
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I don't know anyone who has made significant money in real estate who didn't have to manage the properties themselves.
hits the nail on the head.
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Old 08-02-2010, 11:14 AM   #38
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I think your cunning plan is actually pretty good for someone your age! Wish I had done it that early.

But I would consider that handing it off to a property management company may be an oversimplification of the involvement. In my area I was able to purchase several great multifamily properties at cheap prices that were run into the ground by property management cos, losing tens of thousands of dollars annually paid out by the property owner. Even if you find a really good PM, there are still capital improvements/major maintenance projects,etc you will need to consider getting involved with/paying for.
Thanks for an actual response instead an attack of my character like I've received from several people here just for asking insight into my plan.

I'd like to over time collect several multifamily units. It sounds like you do the same and are very involved in the rental world. Can I ask what you think of using it to build wealth over 20-25 years? Do you manage rentals full time or do you maintain another job? I by no means am looking to "get rich quick." I have just been doing a lot of reading on how 'buy and hold' can be a very effective way to build more wealth than anyone could save out of their paycheck. I'm not necessarily even looking for a profit at the end of the month, just enough to pay all the bills and save some for emergencies, I just want the equity in the building.

Thanks!
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Old 08-02-2010, 06:15 PM   #39
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Thanks for an actual response instead an attack of my character like I've received from several people here just for asking insight into my plan.

I'd like to over time collect several multifamily units. It sounds like you do the same and are very involved in the rental world. Can I ask what you think of using it to build wealth over 20-25 years? Do you manage rentals full time or do you maintain another job? I by no means am looking to "get rich quick." I have just been doing a lot of reading on how 'buy and hold' can be a very effective way to build more wealth than anyone could save out of their paycheck. I'm not necessarily even looking for a profit at the end of the month, just enough to pay all the bills and save some for emergencies, I just want the equity in the building.

Thanks!
OP - that is kind of you to ask. In my situation it has been exciting, hard work, but extremely rewarding & made a lot of money as well, which is a good thing.

However, a lot depends on the area you are in, the economy, the landlord tenant laws, etc. as well as the cost of multifamily bldgs. So do your homework for your own situation. Additionally handling rentals is an eye opener and many people don't have the patience or aptitude for it, so best to start small and see how you like the experience before plunging in big time.

I actually started out as an insurance executive for mega corp and got involved with purchasing a house that I fixed up & rented out. I liked the experience & bought a few more over time. When the houses appreciated, I rolled them over via 1031 to larger multifamily properties. Having a full time job & managing the rentals was a lot of hard work, but eventually I was able to leave Mega Corp & manage the buildings full time with a small but efficient staff of workers (resident managers, painters, cleaners, maintenance, etc.) I try to take care of my staff with bonuses & other benefits...its like family. I also try to take good care of my tenants, no matter how difficult they may be. I am not always perfect at this, but I just do my best.

I purchased my first multifamily bldg 13 years ago and I am in contract to sell it & 2 others right now. Plus I have P & S offers coming in on 2 other even larger properties (not sure if they will fly, but nice to think about...) If they are all closed deals, I will be pretty much ESR by the end of the year -- YEE HAW!!

So I would say in a good economic area with reasonable LL/Tenant Laws, you might be able to retire in less than 20-25 years as I am doing. But I don't have a crystal ball to predict either for your particular circumstance or choices. I do a lot of deals by my "gut" feeling. Right now if I was younger & just starting out in my area, I'd go for the Multis. In fact, I am not alone in this anticipation, one of the offers coming in is from a Foreign Overseas buyer who just wants to "Park" their money here for a while & they are targeting the purchase of Apartments in our area. The rental market here is getting better every day and rents are creeping up again. I have a good feeling that there is a lot of cash flow and appreciation ahead for investors in our area.

Hope this helps!

PS: in my area we get cash flow income as well as appreciation. I targeted properties that were middle market (not ghettos, not hi end fancy areas) and they made a better income for me than working for mega corp by a long shot. Appreciation was the cherry on top of the Sundae, I did not require it, but it just happened and it was good....
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Old 08-02-2010, 09:37 PM   #40
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Thanks for an actual response instead an attack of my character like I've received from several people here just for asking insight into my plan.

I'd like to over time collect several multifamily units. It sounds like you do the same and are very involved in the rental world. Can I ask what you think of using it to build wealth over 20-25 years? Do you manage rentals full time or do you maintain another job? I by no means am looking to "get rich quick." I have just been doing a lot of reading on how 'buy and hold' can be a very effective way to build more wealth than anyone could save out of their paycheck. I'm not necessarily even looking for a profit at the end of the month, just enough to pay all the bills and save some for emergencies, I just want the equity in the building.

Thanks!

I believe you will need to put 20% down on investment property. Assuming your average rental property costs $100,000.... how long will it take you to save the $20,000 down payment? Multifamily units May cost more. That may give you an idea of how fast you can accumulate properties. Anything less than 20% will require PMI. Also, a 10% management fee is not trivial. It may be the difference between having a positive cash flow.

Keep in mind that you will need to have enough cash on hand to cover not only the occasional expenses, but also the occasional vacancies. For instance, what if the A/C unit goes out in the middle of summer ($5,000)? Your Tenants will expect that to be fixed within a matter of days. What if you have foundation problems? You need to understand that over the course of the investment (at least 15 years), problems (i.e. costs) will arise from time-to-time. You must be able to absorb them, or else you will lose your equity to foreclosure. Thus, you need to factor in those funds when calculating yield. Property taxes and insurance must also be accounted for.

My point is that leveraging real-estate can be very risky, and like others have said.... there is no free lunch. I am close to your age (25), and have also considered real-estate. Just make sure you truly understand the risks before jumping in with both feet. A good friend of mine lost 3 properties last year. It was his nest egg, and it was painful to watch.
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