Does this count as ER?

[Lienlord]

Hello, I'm 53 and have worked as a public school financial administrator for the past 6yrs. I'm vested in the teacher's pension plan and would receive 2% of my highest annual salary for each year I work when I turn 62. So if I leave today it would be 12% (2%x6yrs) at age 62. Not a huge amount, but something.

My wife and I also own a Real Estate investment business which buys/sells houses, manages rentals and does hard money lending. I've been trying to build this business for the past 3 years, and it has been very difficult to do while holding down my W2 job (which is very demanding and stressful). We've also been investing in commercial real estate partnerships for the past 26 years, and receive monthly dividends from these investments.

Currently, my W2 salary represents 25% of my income, but takes 75% of my time. We have always lived on my W2 income and poured the rest into the business. I think I'm ready to give my notice and devote more of my time to building the real estate business, but towards a more passive income direction.

Here's my question...if you take ER but use your time on your own business, is that still considered Early Retirement? I love doing Real Estate Investing, and consider it a hobby like most consider Golf! Haha

I think of Financial Independence is the ability to do what you enjoy. If that happens to increase your income, that's only an added bonus. Right?

 

[HI Bill]

IMHO, if you quit a W2 job, and take up a full-time self-employed job, you're still employed, and just switched careers! This is a bit of a touchy topic here, as many bloggers are making money out of their travel blogs and videos, and claim to be retired. If you're living off your investments, and are still working as a hobby, or to keep busy, you might be considered RE. I'm planning to FIRE next year, and will cease full-time work, not needing any W2 wages, but plan to occasionally write magazine articles and try to get some photos published. In this case, it's more of a hobby, and less of a job, but I won't be relying on the sporadic small amounts of income.

 

[Aerides]

Welcome!

I'm in the "retirement is what you define" camp. There are purists who will say "No! You are not retired! Poppycock!".

If you are doing what you love, and it just happens to bring in money, hey - who cares what it's called? If, however, you had no choice, and depended on it to pay the mortgage and survive, then you'd be stretching even the most forgiving definitions, and I'd consider you happily self-employed, not ER'd.

 

[CaliKid]

Call it whatever you want. If you are happy that's what matters.

To me it sounds like you are still working but who cares what I think.

To ME it's not work if you have property managers on all your rentals, you are not doing flips unless it's purely for fun/hobby, you are not fixing toilets and stuff, etc.... You are just waiting for mailbox money and occasionally making a decision.

Again, to each their own.

Semi-related and not to be a downer but the real estate business has been significantly easier the last 6 or 7 years than it might be over the long turn. I would not use your returns of recent years as something you will always do. It's hard to lose money in real estate right now.

 

[Lienlord]

Call it whatever you want. If you are happy that's what matters.

Semi-related and not to be a downer but the real estate business has been significantly easier the last 6 or 7 years than it might be over the long turn. I would not use your returns of recent years as something you will always do. It's hard to lose money in real estate right now.

Thanks for the input and opinions about what ER means!!

I've been working the past year to make our business more passive, and we're nearly there. As my user name suggests, I'm getting out of the rental/landlord business and taking on the role of the bank/lienlord. I've sold 15 rentals to other investors, existing tenants or new owners. But in each case I've carried the financing for 15 (and a couple of 30) year notes. So I'm making less per month on each property, but without the management headaches and maintenance expense. I've got 4 more properties that will be sold the same way in the next couple of months. So at that point it would be a completely passive income stream if I choose not to continue to find properties to purchase/rehab/owner finance. But I enjoy the game, and look at it like growing a stock portfolio.

So I'm gonna call it ER, because I won't rely on any future deals to be FI.

But I agree with CaliKid, deals are getting harder to find out there too!

 

[Lienlord]

Welcome!

I'm in the "retirement is what you define" camp. There are purists who will say "No! You are not retired! Poppycock!".

If you are doing what you love, and it just happens to bring in money, hey - who cares what it's called? If, however, you had no choice, and depended on it to pay the mortgage and survive, then you'd be stretching even the most forgiving definitions, and I'd consider you happily self-employed, not ER'd.

Thanks for the feedback Aerides!

My sons were discussing my upcoming ER with me and one of them said I need to find a hobby. My other son said, "making money IS his hobby!" Haha

He's right; I love buying/selling/trading on Craigslist, or as my wife calls it, "turning a nickel into six cents!". But like I tell her, that's a 20% profit! Haha!

 

[foxfirev5]

Welcome. However . If you need to ask you're not there yet.

 

[JustCurious]

Here's my question...if you take ER but use your time on your own business, is that still considered Early Retirement?

I have been assigned to review this case by the Internet Retirement Police (IRP) - Early Retirement Forum division. We have gotten so many complaints about people claiming to be retired on this forum while they are still working that we created an IRP-ERF task force that is specifically assigned to review all posts on the early retirement forum for violations of the proper use of the term "retired," and I have concluded that you would not be considered retired.

 

[flintnational]

Welcome to the forum. IMO, FI is the most important part of FIRE. Everything else is a personal choice.

 

[Midpack]

Welcome to the forum. IMO, FI is the most important part of FIRE. Everything else is a personal choice.

+1. It doesn’t matter what anyone else calls it.

 

[marko]

Anyone is most welcome to chime in and participate here but IMO you're only truly retired if you are living on passive income. Investments, SS, pension, family money.

A 'jobby' where maybe you bar tend and make $100 a week can still count as being retired as long as you're doing it for your own entertainment and not to make ends meet. Everyone can use a few extra bucks!

Real estate can count as RE as long as it's not consuming your every day; maybe if you have a management company handle the details. If you're running around each day mowing lawns, fixing toilets or chasing renters, you're not retired.

Just my two cents.

Having said that, I really don't care what people call themselves. If you have a real job that you love and thus "it's not like working", have a party!

 

[marko]

I have been assigned to review this case by the Internet Retirement Police (IRP) - Early Retirement Forum division. We have gotten so many complaints about people claiming to be retired on this forum while they are still working that we created an IRP-ERF task force that is specifically assigned to review all posts on the early retirement forum for violations of the proper use of the term "retired," and I have concluded that you would not be considered retired.

Well then! Looks like it's settled!!!

(cute comment by the way)

 

[Red Badger]

Welcome!

I'm in the "retirement is what you define" camp. There are purists who will say "No! You are not retired! Poppycock!".

If you are doing what you love, and it just happens to bring in money, hey - who cares what it's called? If, however, you had no choice, and depended on it to pay the mortgage and survive, then you'd be stretching even the most forgiving definitions, and I'd consider you happily self-employed, not ER'd.

+1.

Don't worry about the Retirement Police. They can indict, but no power to arrest, convict, sentence, etc. Ditch that soul sucking job and spend your time doing what interests you, provides income, and lets you lead a fuller life. Be retired in your mind until you decide to pursue non-income producing activities.

 

[Lienlord]

i have been assigned to review this case by the internet retirement police (irp) - early retirement forum division. We have gotten so many complaints about people claiming to be retired on this forum while they are still working that we created an irp-erf task force that is specifically assigned to review all posts on the early retirement forum for violations of the proper use of the term "retired," and i have concluded that you would not be considered retired.

RATS...so close! But who am I to argue with the IRP?

 

[CaliKid]

Thanks for the input and opinions about what ER means!!

I've been working the past year to make our business more passive, and we're nearly there. As my user name suggests, I'm getting out of the rental/landlord business and taking on the role of the bank/lienlord. I've sold 15 rentals to other investors, existing tenants or new owners. But in each case I've carried the financing for 15 (and a couple of 30) year notes. So I'm making less per month on each property, but without the management headaches and maintenance expense. I've got 4 more properties that will be sold the same way in the next couple of months. So at that point it would be a completely passive income stream if I choose not to continue to find properties to purchase/rehab/owner finance. But I enjoy the game, and look at it like growing a stock portfolio.

So I'm gonna call it ER, because I won't rely on any future deals to be FI.

But I agree with CaliKid, deals are getting harder to find out there too!

Yes, that sounds like mailbox money and to me that sounds like ER! Congrats.

 

[lhamo]

So what happens to your income stream if there is another real estate crash and the people you are holding the notes for default on the loans? Presumably you have no income from those properties, and can't even rent/sell them until you are able to foreclose? WAAAAY to risky for me, but YMMV...

 

[Mdlerth]

Jumping on the bandwagon

Another vote for what everybody else said: call it what you want. A rose by any other name would smell as sweet.



Perhaps you will find the following anecdote comforting.



I have a friend at w*rk who, inexplicably, has not retired despite a NW north of 10M. However, his BS bucket is beyond sloshing and I predict he will punch out within the year.


This gentleman built his fortune via options trading, on which he spends every bit of 5 hours per day, every day. The data show that he both knows and enjoys what he's doing.



I'm certain that, whenever he exits from Megacorp, he will continue to do his options trading, because that's what he likes to do. It's not because he needs more money; his assets already could fund his humdrum lifestyle many times over.


He'll spend as much of time doing it as he does now, except he'll be doing it during the day instead of in the evening. Is it still passive income if he exerts more effort than waiting by the mailbox for checks? Maybe not.



Will it matter whether we call him "retired" vs "self-employed"? Nope.


Will he be FI and having fun? Unquestionably yes. May it be the same for you.

 

[captain3d]

I will consider myself retired when I can go away for a month or two without having to explain to anyone. Next week is my last week at work as I decided to stop doing it. Not sure what happens next. I don't think money is an issue. We will see.

Phil


Sent from my iPhone using Early Retirement Forum

 

[FlaGator]

Your colleagues in the school system will see you as "retired" even if those who know of your RE business do not.

Ignore labels and definitions from randos on the internet and do what you like.

 

[Lienlord]

So what happens to your income stream if there is another real estate crash and the people you are holding the notes for default on the loans? Presumably you have no income from those properties, and can't even rent/sell them until you are able to foreclose? WAAAAY to risky for me, but YMMV...

That's a good question and a valid concern. I'm not sure a real estate crash would have a significant impact on these properties to cause defaults on the loans. About half of them were purchased by investors who use the cashflow from the rentals to pay the note. Their tenants are Section 8 families, and majority of rent subsidized. So a change in the value of the property wouldn't impact the tenant living there, or the rent being paid. The cashflow wouldn't change for the investor so they'd have no reason to default on their loan. Also, each buyer put a pretty good downpayment (which they would stand to lose in the event of a foreclosure).

The other half of the notes are to former tenants who purchased the house from me. They also put a good downpayment, and their payment is LESS than the rent they were previously paying. So they're thrilled to own their own home for less than they can rent. A potential change in the value of that home won't change their mind (or their need for a place to live).

In any case, my income from these notes are not my only source. We've been investing in commercial partnerships for many years, and receive enough dividends from them to actually live on. In fact, to prepare to RE I had my paychecks direct deposited to a savings account so I'd never see them in our monthly bills payment account. It's been two months so far, and I haven't had the need to touch them (which is comforting).

I appreciate the feedback and these kind of potential scenarios. They definitely make you think things through!

 

[captain3d]

Nice work.


Sent from my iPhone using Early Retirement Forum

 

[brucethebroker]

Welcome.
I am part of the "retired but hobby job" crowd (full disclosure).

My personal definition is: can you live on passive income/SS alone, if the "hobby" income dries up (economic downturn, your illness, etc.". If the answer is yes, than you are FIRE. Many work hobby jobs for the extra income (above and beyond...) or just to have something interesting to do.

I like to take it a step further: do you have the flexibility to turn the hobby job off and on? Can you travel on a whim? If so, you are most likely FIRE.

It's really a personal thing...at the end of the day, who cares if others think you aren't FIRE?

 

[rasberrycpa]

I find the subject of how different people define retirement somewhat interesting so I’ll throw out a personal question on “is this retirement”.

I retired from my job but have joined the Board of Directors of a company for which I am paid on a 1099 basis. I do it not because I *need* the money. But it gives me a nice buffer in my budget which gives me greater peace and security for relatively little time commitment. Is there a ruling from the IRP on this type of scenario?

For the record, I consider myself retired [emoji4]

 

[Totoro]

In the IRP courtroom, intent matters.

Are you doing this primarily because of the financial rewards? You have a part-time job!

You aren't? You are giving back to your community! Or you found a hobby that pays you.

 

[Red Badger]

So what happens to your income stream if there is another real estate crash and the people you are holding the notes for default on the loans? Presumably you have no income from those properties, and can't even rent/sell them until you are able to foreclose? WAAAAY to risky for me, but YMMV...

Beg to differ, but differ I must

IIRC correctly, we had a little real estate dust up around 2008 or so. I think there was a little drag on the markets going on at the same time (~ -40%). Oh, and jobs kinda dried up for a half-dozen years.

For some, it didn't matter whether one was relying on RE, investments, or a job (or all three). The hammers hit all three pretty hard. I think OP's risk in slight to moderate, but very real. Same holds true for people needing a j*b or retired on a modest portfolio and no pensions, etc.

We all land on different places in the "retirement risk" scale. Hell, if my loving DW had her way, I'd be in the salt mines another decade.

I took moderate (my perspective) risk to retire when I did. When a guy about my age died in his cube a few rows down from me, it was time to run for the exits.