Greetings from Montana A little background about myself: 47 years old and single, currently doing database management for a CA company while working from home in MT. I've been reading ER for a few years but just joined today.
During the last real estate crash I started looking in detail into becoming a landlord. By the time that I'd committed to pursuing this back in 2011 the best deals had been taken. But costs to build new homes hadn't yet gotten out-of-hand.
So I started making plans to move from my home in silicon valley to MT. I'd get about $200k net from the sale of my home and cashed out all of my 401k to have some cash to put towards rental properties and my own home in MT. Now of course it was a questionable decision to cash out the 401k with all of the taxes/penalties due, but I wasn't going to be able to get the mortgages necessary for the purchases without having that cash up front.
So now I've got two duplexes. One that I built 2 years ago and another that was built about 15 years ago and is in good shape. I'm just finishing my third which should be done in the next 3 - 4 weeks. Each of these places carries a large mortgage, 75% LTV. I plan on this same level of mortgage for the new place as well. Once the new place is done and rented I'll have 6 rentals that will bring in about $3,350/mo net (rent minus mortgages, taxes, insurance, and utilities). Note that this number reflects no costs of repairs/maintenance.
Being a landlord is one side of the retirement plan. The other side is what is best described as fixed income. I've got $600k invested in the U-haul Investor Club with a variety of their offerings that range from 9 to 30 years. For the next 9 years that will bring in $5,346/mo. That number factors in my expected federal taxes on these earnings as well.
I took out a mortgage on my own house as well so I've got $2,545/mo in housing expenses (mortgage, taxes, utilities) and I estimate my other monthly expenses at $1,302/mo (health insurance, vehicle expenses, food, etc.).
I have no 401k, pension, or any other savings or source of income other than my job.
So once I retire I've got $8,696 coming in and certain expenses of $3,847. The $4,849 that remains seems like plenty to cover intermittent rental vacancies, repairs, unforeseen expenses, and income taxes on the rentals. Those taxes will be very low with all of the deductions that can be used against the income. That money also needs to pay for fun stuff, i.e. travel, eating out, etc. I also need to save about $1000/mo of that for the next 9 years as one of my U-Haul investments will conclude 9 years from now and that $1k/mo will be used for the time period of 9-15 years from now. 15 years from now I'll start collecting SS and refinance all of the rental properties just to get cash out which should result in over $900k in cash and thus security from when I'm 62 to at least 92.
The risks to this plan seem to be:
1: U-Haul investments don't pay. For this to happen as I understand it, they would essentially need to go bankrupt. So it's possible, but seems unlikely.
2: The rental market collapses AND home values collapses. Forecasts in my area call for continued growth 5, 10, and 15 years from now. If only values fall, then I'll just continue being a landlord. If rent goes down a little, I'll drop my prices a little and carry on. If rents collapse, I'll just sell to get my equity out then look for a way to invest that money.
Right now my plan is to work just a bit longer to trade in my two vehicles for two new ones and not have any loans on either. I'll have a bunch of mortgages on the rentals and the one on my own home, but no other debts. I plan to only have enough cash (20-30k) to cover major repairs. If I had to get immediate emergency access to more cash, I'd just take money out of a credit card which I could do for $50k or more. I think that's highly unlikely as I've never done such a thing before and plan to have a silver or gold level ACA health plan and thus shouldn't see medical bills of over $10-20k in any given year.
Looking forward, I expect rents to track roughly with inflation. Of course that may not happen but more people believe they'll rise faster than inflation here, so I think a safe guess is that they'll cancel each other out.
Do you see any other risks with the plan? Anything that jumps out as a big concern?
Once I quit, getting another job in my line of work would in all likelihood mean relocating to a major metro area. And once I'm out of work for 6+ months I may not be able to get back into my line of work, just like most folks in any tech business. So if my plan doesn't seem "safe" enough, how much more money do I need to save to make it "safe"? My own answer to this question is that I'll be at that point when I have new vehicles that have no loans on them.
During the last real estate crash I started looking in detail into becoming a landlord. By the time that I'd committed to pursuing this back in 2011 the best deals had been taken. But costs to build new homes hadn't yet gotten out-of-hand.
So I started making plans to move from my home in silicon valley to MT. I'd get about $200k net from the sale of my home and cashed out all of my 401k to have some cash to put towards rental properties and my own home in MT. Now of course it was a questionable decision to cash out the 401k with all of the taxes/penalties due, but I wasn't going to be able to get the mortgages necessary for the purchases without having that cash up front.
So now I've got two duplexes. One that I built 2 years ago and another that was built about 15 years ago and is in good shape. I'm just finishing my third which should be done in the next 3 - 4 weeks. Each of these places carries a large mortgage, 75% LTV. I plan on this same level of mortgage for the new place as well. Once the new place is done and rented I'll have 6 rentals that will bring in about $3,350/mo net (rent minus mortgages, taxes, insurance, and utilities). Note that this number reflects no costs of repairs/maintenance.
Being a landlord is one side of the retirement plan. The other side is what is best described as fixed income. I've got $600k invested in the U-haul Investor Club with a variety of their offerings that range from 9 to 30 years. For the next 9 years that will bring in $5,346/mo. That number factors in my expected federal taxes on these earnings as well.
I took out a mortgage on my own house as well so I've got $2,545/mo in housing expenses (mortgage, taxes, utilities) and I estimate my other monthly expenses at $1,302/mo (health insurance, vehicle expenses, food, etc.).
I have no 401k, pension, or any other savings or source of income other than my job.
So once I retire I've got $8,696 coming in and certain expenses of $3,847. The $4,849 that remains seems like plenty to cover intermittent rental vacancies, repairs, unforeseen expenses, and income taxes on the rentals. Those taxes will be very low with all of the deductions that can be used against the income. That money also needs to pay for fun stuff, i.e. travel, eating out, etc. I also need to save about $1000/mo of that for the next 9 years as one of my U-Haul investments will conclude 9 years from now and that $1k/mo will be used for the time period of 9-15 years from now. 15 years from now I'll start collecting SS and refinance all of the rental properties just to get cash out which should result in over $900k in cash and thus security from when I'm 62 to at least 92.
The risks to this plan seem to be:
1: U-Haul investments don't pay. For this to happen as I understand it, they would essentially need to go bankrupt. So it's possible, but seems unlikely.
2: The rental market collapses AND home values collapses. Forecasts in my area call for continued growth 5, 10, and 15 years from now. If only values fall, then I'll just continue being a landlord. If rent goes down a little, I'll drop my prices a little and carry on. If rents collapse, I'll just sell to get my equity out then look for a way to invest that money.
Right now my plan is to work just a bit longer to trade in my two vehicles for two new ones and not have any loans on either. I'll have a bunch of mortgages on the rentals and the one on my own home, but no other debts. I plan to only have enough cash (20-30k) to cover major repairs. If I had to get immediate emergency access to more cash, I'd just take money out of a credit card which I could do for $50k or more. I think that's highly unlikely as I've never done such a thing before and plan to have a silver or gold level ACA health plan and thus shouldn't see medical bills of over $10-20k in any given year.
Looking forward, I expect rents to track roughly with inflation. Of course that may not happen but more people believe they'll rise faster than inflation here, so I think a safe guess is that they'll cancel each other out.
Do you see any other risks with the plan? Anything that jumps out as a big concern?
Once I quit, getting another job in my line of work would in all likelihood mean relocating to a major metro area. And once I'm out of work for 6+ months I may not be able to get back into my line of work, just like most folks in any tech business. So if my plan doesn't seem "safe" enough, how much more money do I need to save to make it "safe"? My own answer to this question is that I'll be at that point when I have new vehicles that have no loans on them.