30 With a New Hobby in Real Estate

[srlimoges]

Quote:

Originally Posted by Westernskies So, you spent 10 years in skool, got out and worked two years for the man, and you're already ready to get out... because you just don't like being told what to do. You come here for advice, but don't like what you are being told... And, from your posts you apparently didn't like your teachers telling you how to use grammar and spelling, either. Hmmm.... there is a pattern emerging here, it sounds like you may have issues with ANYONE telling you what you don't want to hear. If you have been out of grad school for two years and have managed to accumulate $1000/month positive income from your rentals, how do you figure you will be ready to pull the plug at 34? At your current rate maybe you can be at $2-3,000/month off 4-6 properties. That's a big maybe...and doesn't leave you with any cash reserves, no equity and dangerously exposed in the event of a RE market downturn. With your grad school education should be able to knock down big bucks for a few years, but you are effectively working to add RE that will net you ~$300/month per house, if everything goes well. You could probably save/invest 10-15X that amount if you applied yourself to a career for a few years instead of working so assiduously to avoid it. I know, this is the ER website, but my take is that you aren't even close to ready, mentally or financially. (Or maybe a spammer playing a one-note RE piano...)

RE: first paragraph - I feel that you haven't read the entire thread as it appears, in my opinion, that you don't understand the main points of this topic.

RE: second paragraph - I plan on semi-retiring on 10 properties at age 34. I accumulate $1500 net per month from wages at corpX. Each new property adds roughly $300+ net per month. Right now I own 3 properties, netting $1000, and earn $1500 from wages totaling a net monthly savings income of $2500. This savings will grow exponentially as new properties are acquired faster that will produce additional income. Also, when a property sells lease purchase I net 10% to 15% from the purchase price (a price I've locked in for the renter already). This increases the downpayment on the next property, lowering the mortgage, and increasing the net profit from rent. The snowball gains inertia.

RE: third paragraph - thanks for the advise, but as noted I feel you haven't read the thread and don't understand my retirement goals.

Apparently I should change my forum name to spammer...

[calmloki]

Quote:

Originally Posted by jayc Where else can you get 100% of your earnings that will work for you tax deferred for the next 30 years? Taking advantage of the maximum 401K contributions is the way to go. That is $16,500 a year. ...

Well, (using made up numbers) the real estate version of that is:

Buy rental for $200k, putting $40k down.
Rent and earn (yeah, IRS says it's unearned income - Hah!) maybe 1% of purchase price after loan payments and expenses, or $2k/year.
On taxes, write off depreciation, at 1/27.5 per year on improvements (say 80% of original purchase price, or $160k). So the $40k down payment is making $2000/year, or 5%, but the tax man says you can write off depreciation of $5818 per year, and that $3818 depreciation amount over and above rental earnings can be written off against other income. When the property is sold you do have to pay taxes on the depreciation that has been taken - or you can 1031 exchange into a more expensive property and keep doing that until your heirs inherit the property at the basis as of date of sale - and start a whole new depreciation schedule!

[Westernskies]

Quote:

Originally Posted by srlimoges RE: first paragraph - I feel that you haven't read the entire thread as it appears, in my opinion, that you don't understand the main points of this topic.

"Asking" for advice and then trying to sell the rest of us on your genius RE scheme as the only way to ER? No, I got the main point of your post, loud and clear.

[srlimoges]

Quote:

Originally Posted by Westernskies "Asking" for advice and then trying to sell the rest of us on your genius RE scheme as the only way to ER? No, I got the main point of your post, loud and clear.

this is more evidence to the point I made above. Please read the thread, not just a post.

[Sarah in SC]

Aye, Dale Carnegie courses were certainly a part of the curriculum.

[Westernskies]

Quote:

Originally Posted by Sarah in SC Aye, Dale Carnegie courses were certainly a part of the curriculum.

More like Dal Carnige...

[Keim]

Quote:

Originally Posted by Westernskies More like Dal Carnige...

Now, now Westernskies. While the OPs spelling isn't perfect, it isn't THAT bad. Eet iz a lut buttur den zum Ize scene.

[Westernskies]

Quote:

Originally Posted by Keim Now, now Westernskies. While the OPs spelling isn't perfect, it isn't THAT bad. Eet iz a lut buttur den zum Ize scene.

(not counting grad school...)

YouTube - seven years of college

[Texas Proud]

Soooo, it sounds like the OP IS working for the man... at say $24K to $30K... (net $1500 per month).... I will agree that if that is all you are making after a college education, then an alternative is needed...

It also doesn't seem like you are spamming like your first post would have indicated.... maybe a troll... we will see if you have more input than just this thread...


Don't get me wrong... RE can be a great investment as others have said... but there are a lot more people who crashed on the rocks than made it through with smooth sailing... I do know that when I was real young, we would not have food on the table if my father was not a slum lord for awhile... but we kids had to do a LOT of work on all the houses...

I also have seen one of my BIL lose everything during the last banking crisis in the 80s... he had over $5 mill in RE... but lost it all... everything... because the market crashed and people just did not lease... he did not have enough cash to pay the mortgage, the S&L went under, the loan was called etc. etc....

It is a high risk way to get rich... just like someone who bought stock on margin... you can make it big or you can lose it all.... I just think you do not see the true risks involved... maybe they will never happen... great... you win... but if they do hit, you can be wiped out... I don't want to play Russian Roulette with my retirement funds...

[Westernskies]

Quote:

Originally Posted by Texas Proud but if they do hit, you can be wiped out... I don't want to play Russian Roulette with my retirement funds...

He's not- he's doing it with borrrowed money- who do you think will left to pick up the tab when the market hiccups and this carefully constructed house of cards falls apart?

[srlimoges]

Quote:

Originally Posted by Texas Proud Soooo, it sounds like the OP IS working for the man... at say $24K to $30K... (net $1500 per month).... I will agree that if that is all you are making after a college education, then an alternative is needed... It also doesn't seem like you are spamming like your first post would have indicated.... maybe a troll... we will see if you have more input than just this thread... Don't get me wrong... RE can be a great investment as others have said... but there are a lot more people who crashed on the rocks than made it through with smooth sailing... I do know that when I was real young, we would not have food on the table if my father was not a slum lord for awhile... but we kids had to do a LOT of work on all the houses... I also have seen one of my BIL lose everything during the last banking crisis in the 80s... he had over $5 mill in RE... but lost it all... everything... because the market crashed and people just did not lease... he did not have enough cash to pay the mortgage, the S&L went under, the loan was called etc. etc.... It is a high risk way to get rich... just like someone who bought stock on margin... you can make it big or you can lose it all.... I just think you do not see the true risks involved... maybe they will never happen... great... you win... but if they do hit, you can be wiped out... I don't want to play Russian Roulette with my retirement funds...

Good points, I agree Texas. But I feel it's just as risky investing in real estate as it is to live a life working where you don't like.

[Westernskies]

Quote:

Originally Posted by srlimoges Good points, I agree Texas. But I feel it's just as risky investing in real estate as it is to live a life working where you don't like.....

....Which is anywhere someone will tell him what he has to do to earn that paycheck, so apparently this real estate venture is the ONLY option to consider.

[ronocnikral]

ahhh....the magic bullet has been found. calling realtor now. dumping entire networth into RE. checking out before 30...

...of course, the "lease to own" property down the block from the in laws is still for sale after...15 years or so. and looks a lot worse than the rental property directly next door. fetches less in "rent" despite being larger...

these RE guys are really good writers...

[Texas Proud]

Quote:

Originally Posted by Westernskies He's not- he's doing it with borrrowed money- who do you think will left to pick up the tab when the market hiccups and this carefully constructed house of cards falls apart?

The one thing I can say is this is a better time to get into RE than it was a few years ago... there are lots of cheap houses around that can produce a good income if you can do it right.


And to your comment.... that was what I kept telling my BIL... that what he was spending was borrowed money... not something he earned.... he kept leveraging one property on another on another etc... never did have true equity in that $5 mill in RE... at least not as much as he thought... and when the S&L crisis came... anything he had went down the drain quickly... like in months... he lost his RE, his construction business, his fabrication business, his equipment rental business... and the IRS was after him... if it wasn't for an IRS screw up and the BK judge forcing them to back down he would have lost more....

[srlimoges]

Westernskies, I'd appreciate it if you would contribute constructively to the thread. Otherwise it's demonstrating how to spam and troll.

I have no problem with you attacking me either, but please send it to me via PM.

[srlimoges]

Quote:

Originally Posted by ronocnikral ahhh....the magic bullet has been found. calling realtor now. dumping entire networth into RE. checking out before 30... ...of course, the "lease to own" property down the block from the in laws is still for sale after...15 years or so. and looks a lot worse than the rental property directly next door. fetches less in "rent" despite being larger... these RE guys are really good writers...

No, not a magic bullet! But lots of hard work. I feel it's a viable option for people looking to retire sooner than 10 years. I've seen several lease purchase strategies, and frankly many are lose win opportunities (for the owner and/or renter). A win win keeps a happy renter/purchaser and landlord.

Of course no investment is risk proof, and lease purchase sits a top the risk spectrum. However, I do believe thorough strategies mitigate potential hazards.

Does anyone know of other low barrier retirement strategies that can create a quick retirement?

[brewer12345]

Quote:

Originally Posted by srlimoges No, not a magic bullet! But lots of hard work. I feel it's a viable option for people looking to retire sooner than 10 years. I've seen several lease purchase strategies, and frankly many are lose win opportunities (for the owner and/or renter). A win win keeps a happy renter/purchaser and landlord. Of course no investment is risk proof, and lease purchase sits a top the risk spectrum. However, I do believe thorough strategies mitigate potential hazards. Does anyone know of other low barrier retirement strategies that can create a quick retirement?

TromboneAl had a recent thread in which he detailed his neighbors' efforts to pursue a low barrier strategy to get to a quick retirement.

[srlimoges]

Quote:

Originally Posted by calmloki Well, (using made up numbers) the real estate version of that is: Buy rental for $200k, putting $40k down. Rent and earn (yeah, IRS says it's unearned income - Hah!) maybe 1% of purchase price after loan payments and expenses, or $2k/year. On taxes, write off depreciation, at 1/27.5 per year on improvements (say 80% of original purchase price, or $160k). So the $40k down payment is making $2000/year, or 5%, but the tax man says you can write off depreciation of $5818 per year, and that $3818 depreciation amount over and above rental earnings can be written off against other income. When the property is sold you do have to pay taxes on the depreciation that has been taken - or you can 1031 exchange into a more expensive property and keep doing that until your heirs inherit the property at the basis as of date of sale - and start a whole new depreciation schedule!

Very true. In fact I feel 1% earnings on purchase price is overly pessimistic. Down payment and fix-up costs divided by net rents very modestly is over 10% earnings, which doesn't include payment on mortgage principal, appreciation (or depreciation), or tax benefits.

[srlimoges]

Quote:

Originally Posted by brewer12345 TromboneAl had a recent thread in which he detailed his neighbors' efforts to pursue a low barrier strategy to get to a quick retirement.

Thanks! I'll PM him.

[bbbamI]

....

heh...