New Member Eligible at 50

[Firesail]

Hi all,
I have a pretty easy but uninspiring and sometimes annoying job. I am eligible for reduced at pension at 50 with 10 years service. I can have it bumped up and end when I am 62. Presumably social Security can take over then. I also get to keep the cheap healthcare but it has a 3k deductible. Its like 150 a month for family.
I got in trap about 14 years ago where i was stuck in a job I hated with out many prospects other than changing industries and taking a big pay cut. I had a mortgage and a house that wouldn't sell. It was then I started thinking of disappearing in my sailboat....
I started learning about real estate investing and eventually found a much better job that I have now. In 2015 I bought a home with VA loan and rented out the one I was living in. I did cash out refi on old address and bought 4 fixer upper townhouses. The next year I took loan against 401K and bought 3 more. Recently I got into buying second homes and have a Cabin in a famous vacation area and a beach house. These are full time AIRBNBs. I am trying to get another before I retire.
These investments are close to replacing my w-2 income. I will still work the real estate and probably keep investing if I can get any more loans with no w-2 job.
One of my dreams is to get a captains license and charter a catamaran where I am the owner. Also wouldn't mind being a fishing guide or travelling in my RV.
Problem is my wife isn't keen on sailing with me because we argue too much. the feeling is pretty mutual. I have a 15 year old daughter and we are very close. She is homeschooled. The other reason my wife can't sail is because she is taking care of her parents who are 83.
Anyway just wanted to share and I am going to read through this forum. I walk a lot and am constantly thinking about what to do with investments and trying to make a good plan for the future. I have been able to work from home some due to pandemic which is nice. I will probably keep the job as long as i am able to work from home some but i see it ending with pandemic.
Any suggestions are most welcome. Net worth is around 1.3M mostly in real estate.

 

[someguy]

Welcome to the forum.

Regarding the 10 (if my count is correct) rentals -- are you confident in the true income/cash flow on these?

What is the break down of your $1.3M net worth? The real estate market is up quite a bit -- I dare say unusually so in "flyover country" -- so you might want to consider how long-term solid that $1.3M number is and also consider diversifying some out of real estate.

Do you plan to fund your daughter's college and if so, have you set aside money for that outside of the $1.3M?

If you have a solid rental income history, you can probably get lenders to consider 90% of that as "normal" income. All the more reason my question about being sure of your true net rental income is important. Lenders definitely won't use Rent - Mortgage as your net income on a property.

Beyond that, you didn't include specifics which might allow more specific advice.

 

[Firesail]

Welcome to the forum.

Regarding the 10 (if my count is correct) rentals -- are you confident in the true income/cash flow on these?

What is the break down of your $1.3M net worth? The real estate market is up quite a bit -- I dare say unusually so in "flyover country" -- so you might want to consider how long-term solid that $1.3M number is and also consider diversifying some out of real estate.

Do you plan to fund your daughter's college and if so, have you set aside money for that outside of the $1.3M?

If you have a solid rental income history, you can probably get lenders to consider 90% of that as "normal" income. All the more reason my question about being sure of your true net rental income is important. Lenders definitely won't use Rent - Mortgage as your net income on a property.

Beyond that, you didn't include specifics which might allow more specific advice.

Someguy thanks for the reply. I have 8 rentals and a personal residence now. I sold 2 when I bought the larger short term rentals.
The breakdown for the real estate equity is Zillow valuation (Zestimate) minus the mortgages for the real estate. Zillow has all my properties totaling 2.6M.
I took 50K out of my 401K for the Covid cares act and put towards one of the short term rentals (STR). I have like 90K in cash/index funds and 160K in 401K so 250K that is not real estate.
The STR rents are pretty good, short term rentals gross 100K or more each per year and should net 50K each or more. These are new purchased Oct 2020 and June 2021.
I have been doing renovations to reduce cash flow for the long term rentals while working. The purpose it to save on taxes now and then later have good income. I think with the pension and all the rents I should have 125K a year, and more if I get the next one.
This post is not so much a retirement post as should I take the pension post. Managing rentals is a bit of a job but allows a lot of freedom.
As far as daughter's college that is a good point. I will pay or help pay within reason. I was hoping to teach her real estate investing and guide her into business for herself but who knows.

I guess my main question is should I take the pension in beginning of March and start sailing and RVing by myself and with family when possible or wait.
Wife is fine to go RVing it is much easier than sailing all over and less stressful. She says she wants to take her parents on a trip but I don't think they want to go.

 

[ut2sua]

OP, looks like you are doing fine.
RVing sounds good to me.
Many here will tell you life is short, so go for it if your numbers work out.
Welcome

 

[RetiredHappy]

If you feel like taking pension now and doing things that you really want to do and the numbers say so, then just do it.

For me, I would probably liquidate / sell half the real estate simply to diversify. If real estate really has a drop and we go into recession, you may be stuck with real estate obligation without enough income to cover expenses.

Regarding sailing, I was married to a serious sailor for many years. His love for sailing was my aversion. When he retired, he wanted to live on his sailboat and sail around the world. We had covered many continents and countries up to that point. In the end, it was the one thing that we could not get past. I kept working and he want sailing. He owns a bunch of rental properties, 2 sailboats and a nice investment account. He is happy in the water and I am happy on land.

 

[Bamaman]

I guess I'm just a little too conservative for my own good when it comes to stepping out there on rental real estate. I had 3 houses 2 years ago @ 12,000 square ft. total, and taxes and insurance was eating me alive. (I sold the biggest house, however.)

With the gov't threatening to greatly increase capital gains taxes, there may be a time coming to cash out some rental real estate. It certainly helps when you're so capable of doing repairs and reconditioning of those properties. Sounds like you're a work dog--while still maintaining a full time job.

Good luck to you.

 

[RetireeRobert]

I am ultra cautious financially. I would wait for the pension. But that is just me.

 

[someguy]

I'm reading a lot between the lines, but it sounds to me like this is a marriage/relationship problem being presented as a financial question.

In your shoes, I'd get my home life and relationships squared away before making any major work/financial decisions.

All that said, I would be nervous with so much NW/income tied to real estate, especially since IMO we are near a peak in that sector.

Someguy thanks for the reply. I have 8 rentals and a personal residence now. I sold 2 when I bought the larger short term rentals.
The breakdown for the real estate equity is Zillow valuation (Zestimate) minus the mortgages for the real estate. Zillow has all my properties totaling 2.6M.
I took 50K out of my 401K for the Covid cares act and put towards one of the short term rentals (STR). I have like 90K in cash/index funds and 160K in 401K so 250K that is not real estate.
The STR rents are pretty good, short term rentals gross 100K or more each per year and should net 50K each or more. These are new purchased Oct 2020 and June 2021.
I have been doing renovations to reduce cash flow for the long term rentals while working. The purpose it to save on taxes now and then later have good income. I think with the pension and all the rents I should have 125K a year, and more if I get the next one.
This post is not so much a retirement post as should I take the pension post. Managing rentals is a bit of a job but allows a lot of freedom.
As far as daughter's college that is a good point. I will pay or help pay within reason. I was hoping to teach her real estate investing and guide her into business for herself but who knows.

I guess my main question is should I take the pension in beginning of March and start sailing and RVing by myself and with family when possible or wait.
Wife is fine to go RVing it is much easier than sailing all over and less stressful. She says she wants to take her parents on a trip but I don't think they want to go.

 

[braumeister]

The breakdown for the real estate equity is Zillow valuation (Zestimate) minus the mortgages for the real estate. Zillow has all my properties totaling 2.6M.

Zillow estimates are frequently unrealistic (on the high side). I would at least look at other estimates (Redfin would be an example) or consult with a good real estate agent to see if I could get better estimates of value.

 

[Aerides]

Zillow estimates are frequently unrealistic (on the high side). I would at least look at other estimates (Redfin would be an example) or consult with a good real estate agent to see if I could get better estimates of value.

Usually, yes, but in today's crazy market, I find most zillow estimates have yet to catch up to reality. Recent home sales in my neighborhood are all 20% above the Z estimate. My home I know I would list for $200k over their number, without blinking.

So, I would not go by zillow for much, and do manual comps on similar sales in the past 1-4 months.

 

[braumeister]

Usually, yes, but in today's crazy market, I find most zillow estimates have yet to catch up to reality. Recent home sales in my neighborhood are all 20% above the Z estimate.

Very dependent on location. Around here recent sales have generally been 20% below Zestimates.

 

[Firesail]

I'm reading a lot between the lines, but it sounds to me like this is a marriage/relationship problem being presented as a financial question.

In your shoes, I'd get my home life and relationships squared away before making any major work/financial decisions.

All that said, I would be nervous with so much NW/income tied to real estate, especially since IMO we are near a peak in that sector.

I will likely do some sailing and traveling alone or with friends. This is a whole new topic...

What do you or others invest in? Stocks will go down if the economy tanks. I do not see real estate going down much any time soon. It is a supply and demand problem. Not enough houses, and not like 2008 great recession which was caused by ill advised lending. I agree it is good to be diversified but this net worth came from real estate entirely.

 

[RetireeRobert]

Zillow estimates are frequently unrealistic (on the high side). I would at least look at other estimates (Redfin would be an example) or consult with a good real estate agent to see if I could get better estimates of value.

+1 for Redfin as opposed to Zillow. Zillow around here has been most often under true value. Redfin seems to have consistently been closer to reality--not too high, not too low.

 

[Koolau]

The recent issues of not being able to evict due to non-payment of rent would be enough to sour me on owning rental real estate. When at the whim of gummint, you are no longer "the boss", you really no longer own your rental business. Imagine trying to sell a rental property with dead-beat tenants already living there. Cha-CHING! NO SALE!

I'm no expert, so you need to do what is right for you.

Also, I agree with someguy that you need to get on the same page with your spouse about what you will do going forward. If mamma ain't happy, nobody is happy. As always, do what you think best as YMMV.

 

[Firesail]

The recent issues of not being able to evict due to non-payment of rent would be enough to sour me on owning rental real estate. When at the whim of gummint, you are no longer "the boss", you really no longer own your rental business. Imagine trying to sell a rental property with dead-beat tenants already living there. Cha-CHING! NO SALE!

I'm no expert, so you need to do what is right for you.

Also, I agree with someguy that you need to get on the same page with your spouse about what you will do going forward. If mamma ain't happy, nobody is happy. As always, do what you think best as YMMV.

Yes I agree luckily here in East Tennessee I haven't had any of the issues from the pandemic. My tenants managed to keep paying but I have high quality tenants with 600+ credit scores. One benefit I did get is I was able to use the cares act from when I had Covid to cash out 100K from my 401K with no penalty. This allowed me to use the money to create cash flow for today while still growing my net worth for retirement. I do not think I will ever actually retire buying real estate ain't exactly a job though. My current decision is whether to take the pension now or wait.

I will say this seems like a high quality forum with lot's of smart and mature people on it. I am glad to be a part of it and will help any way I can.
As far as sailing without the wife I think I am going to have to buy a boat and put in charter to cover the costs and then just sail it part time. Wife can join or not as she is available or wants to. I think if she sees a nice new big boat in the caribbean her whole outlook will change. The boat I have now is an 1984 model.

 

[Koolau]

As far as sailing without the wife I think I am going to have to buy a boat and put in charter to cover the costs and then just sail it part time. Wife can join or not as she is available or wants to. I think if she sees a nice new big boat in the caribbean her whole outlook will change. The boat I have now is an 1984 model.

I sort of went through something like this back in '86. I had always wanted to do a long car trip and DW resisted. I eventually said "I'm going and you are welcome to accompany me." She agreed. We flew to Vancouver to stay with a friend and go to the Worlds Fair. We traveled by bus and ferry to Seattle to see her uncle. We then rented a car and took a drive on Highway 1/101 to San Diego where we attended her small business's annual trade meeting. We slipped across the border to TJ with the trade association - it was safe back then. Then we flew back home. I ended up calling this trip my BC to BC adventure (British Columbia to Baja California).

Sometimes you just have to say "you're in our you're out." Hope it all works out for you.