Hello (again) - RE derailed ER, now back on track (I think!)

[msbearkeley]

Hi all - it's been a couple of years or so since my last post -it was too depressing to visit the forum! We had planned to be FIRE by now, but with the RE market down, we couldn't do it! But, thanks to our good paying jobs, we were able to hang on to our Real Estate investments and believe we may be on track for getting out of the rat race for late 2012! ....as always, any feedback / suggestions on exit strategy / investments would be great! ...a hi back would be great too!

About us: DH and I are DINKS in our 40s, LBYM but are still enjoying life (work more, live more) each day. Would like to have 80k/yr but would be perfectly happy with 40k/yr and living in the Philippines (I'm a dual citizen) or any other remote island where there's a lot of fish to see scuba diving and enough to catch as well....



Our investments:

• 450k in 401k/IRA
• 170k in CD / Tax Free Bonds

Our real estate investments (liquidated amount reflects cap gain; rental income reflects all expenses including vac rate, etc):

• 2 SFHs valued at $250 and $200; if sold, cash at $400k; rental income at 26k/yr
• 3 Quads valued at $275 each; if sold, cash at $150k; rental income (after PITI at 6.25% conventional) at only 5k/yr
• 1/2 of a family lake house; 50k if sold
• Weekend home, 2.5 hrs from work (includes a rental) valued at $700k; if sold, cash at $300k; rental income of $7500/yr
• Primary home in the city (where we work); valued at 475k - 500k; if sold at 500k, clear $250k

Our exit strategy:

• Sell primary home Spring 2011; make weekend home primary (we split time between both now) and rent a small condo in the city for 1 year while we work another year
• Quit our jobs in the summer / Fall of 2012 (before DH turns 46 in Nov is our goal); move to weekend home 100% of the time while we remodel it ourselves (we enjoy home remodeling just as long as we can take our time and do other things like fishing or boating while we wait for things to set or dry)
• Sell weekend home in 2013 and get the home sale exclusion.
• Sell quads once the value returns to our purchase price (if it ever does!)
• Sell or keep the 2 SFH rentals? If we sell, what do we do with the cash to get the income we get now?

If the market increases significantly, we might not need to sell our weekend home and afford to live in it, but highly unlikely based on our calculation (we would need the 80k to stay here). So....our plan is to sell and then move somewhere cheaper:

• Internationally (use the family lake house as our US base)
• Into one of the units in our quads. Not our ideal place to retire, but it can be our home in the US while we travel or
• Living in campgrounds for a year (would be more fun than working another year!)

So.....I am confident that for as long as the tax laws don't change regarding the exlclusion, that we are doing the right thing for the next 2 years. But....what to do with the rest of the RE and if we sold, what to do with the cash to get the income we need is ....that's why I'm glad to be back on this board!

[plex]

That is about $2.6M in expected investment assets, after you sell the first home, quads, and weekend home. Let's say you will need 400k of that set aside for whatever your new living circumstances will be, so $2.2M in investment assets ($66k/year at a very conservative 3% SWR). You will also have $26k/year in rental income. That totals $92k/year in fairly safe income.

I don't think you will have trouble meeting your goal of $80k/year for your budget, as long as you stick to that budget. You will need to but a lot of the money in taxable accounts, and the basics of taxable investing/tax efficiency. You will also need to figure out if your $80k budget is realistic, such as including some fairly high health-care premiums (e.g. $15k/year).