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Old 01-27-2013, 10:48 AM   #21
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arebelspy's Avatar
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I plan to use real estate to early retire.

As noted above, interest rates are phenomenal right now, I'm locking in all the low interest debt I can.

I don't mind managing at this point, but it's like an extra job - I build management fees into all my numbers, so that I can pay to pass it off at some point.

Even at that point, I'll only consider myself semi-retired, as I'll just be managing the property managers instead of tenants.

At some point I plan to (mostly) exit real estate into a more traditional portfolio of stocks/bonds, but for now the returns are so exceptional that it doesn't make much sense for me to go with a traditional plan in my accumulation phase.

As far as amount of work required, I've found it's about 1 hour per month on average per SFR. That does go in spurts, so the median month is more like 5 minutes (deposit rent that shows up in mail - for me it's check online account to make sure rent is there, because tenants direct deposit into my account), then you'll have 10 hours one month during turnover getting it fixed back up, showing the property to potential tenants, etc. So it averages to 1 hr. per month, but it's more like no time for a long time, then 10 hours in a single week. If multiple properties hit this at the same time, it can take a lot of time at once.

The hourly rate for the property manager, then, is around 50-100/hour. Enough that I do it myself now, not enough that I'll want to do it when fully ER'd.

Some good thoughts in this thread, thanks everyone for sharing.
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Old 01-29-2013, 08:59 PM   #22
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Join Date: Nov 2012
Location: Navarre
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I own 9 units. Two duplexes one quad and one single family home. I second what was said about having an exit strategy. Generally, single family homes are easier to sell than multiplexes, but I make more cash flow off of the multiplexes. Plus, your expenses are less since you only have to travel once to a quadplex and replace one roof for four units.

I use a property manager which allows me to pick which battles I want to tend to. Its nice to be able to tell the property manager to handle it if I am busy or don't feel like dealing with tenants personal problems. I don't think I would purchase rental properties again if I was unable to use a property manager.

I read every real estate book I could get my hands on before making my first purchase. I read somewhere that a 70 gross rent multiplier was the minimum for qualifying a property for purchase. For example, if your rents are 2000 dollars a month you should pay less than 2000 * 70 = 140,000 for the property. I believe I still overpaid for my properties but am still getting about an 8% return on my investment. My loans are at 5% so I don't plan to pay them off anytime soon.

In my area it is very difficult to impossible to find high quality rental properties in great areas with a gross rent multiplier of 70 or less. If you are in a great area with nice homes and professional renters a duplex will cost you about 155,000 but only bring in about 1400 a month total rent. That is a GRM of 110. I have been watching the market for the last ten years. I also have my property manager looking and I have yet to find these low cost, high appreciation, high rent rentals I hear about. Maybe it is just my area.
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Old 01-29-2013, 09:36 PM   #23
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Rental properties are an integral part of our retirement plan. Buying at the right price, finding and keeping good tenants and keeping away from the really bottom end of the market have worked for far.
Budgeting is a skill practised by people who are bad at politics.
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Old 01-30-2013, 10:16 AM   #24
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I'm a real estate investor with 3 SFH's right now and am planning on another 3 in the next couple of years.

There are three bits of typical real estate investment advice I see tossed out a lot that I take issue with. One is the advice to only buy rentals that you yourself would want to live in or in neighborhoods you would want to live in.

I mean, I like my little cottage on my 1 acre lot in my small town. And the idea of moving into one of my rentals in the middle of a bustling downtown area in a nearby city doesn't entice me at all between the close/loud neighbors, tiny yards, endless traffic and street noise. I would never want to live in one of my rentals. But that doesn't mean they're a bad investment property.

And I take issue with the idea that it's hard to sell property. That's only the case if you don't price it right. I buy foreclosures with cash at rock bottom prices and do all the rehab myself, so I could sell all of my properties at less than 50% of current market value and still come out of it with a profit.

And thirdly, not everyone in real estate is leveraged to the hilt. I think that makes a big difference in your chances of success. When you pay cash, getting a tough tenant just means you eat more chicken and beans this month instead of steak and lobster. When you've got massive mortgages to cover, a few bad tenants can bring you to the brink of disaster.
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Old 01-31-2013, 05:30 AM   #25
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Agreed I have 12 ( all single family plus one duplex) and I am about to pay off the second to last mortgage. Most of mine I bought (spaced out purchases every 3 - 4 years) on 5 and 7 year notes. Killer payments but now I'm almost done.

I have a maintenance man who also collects rent and deals with most of the tenants - very lucky to have him.

I bought properties in an area I know like the back of my hand (East Dallas/Lakewood) - it has been on the upswing for a long time, close to downtown with good schools. Now I could sell most of the rentals for tear downs as new homes are being built all over the area. Still I keep them up (several new roofs lately) and have lived in 4 of them. I never paid over $100,000 and several are now worth $200K or more (one is about $350K - may sell that one after moving in for a few years - or may do a 1031 for a small apartment building).

Bought first property in 1983 when I was 25. Been maxing out 401K since 1987. Added Roths several years ago as mortgages were paid. Plan to retire in a year or so, the goal is to pay off the last rental first.
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Old 01-31-2013, 07:06 AM   #26
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Many of ya'll mentioned the 2% rule. In our area rentals are operating more off of 1% since the competition is so great - at least with SF homes. I can see a return of 2% on Multi's, but never on SF homes
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what am i doing wrong?
Old 01-31-2013, 10:35 PM   #27
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what am i doing wrong?

Great advice and forum feedback comments
Im ER since 6 yrs ago.Got a small portfolio of 9 units,mostly condos in different countries.Agent therefore essential to save time and hassle.One beef is the fx charges and occasional tenancy void,but generally happy.No mortgages.Live well means in low tax jurisdiction and so invest/save half income in contingency funds,plus for taxes,insurances,holiday fund etc.
No hands -on gives me plenty of free time.Any good ideas out there?
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Old 01-31-2013, 10:52 PM   #28
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Originally Posted by globaltraveller1205 View Post
.Live well means in low tax jurisdiction and so invest/save half income in contingency funds,plus for taxes,insurances,holiday fund etc.
No hands -on gives me plenty of free time.Any good ideas out there?
I assume you are not a US citizen, as there is no "low tax jurisdiction" for them.
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
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Old 02-01-2013, 12:58 AM   #29
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Ur right,land of the not- so -free comes at a very high cost!

Nothing to say you must remain there tho.

I used to live in hi tax country and got out thankfully;no regrets.

Taxation is the single biggest direct cost anybody has,bar none.
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Old 02-01-2013, 01:06 AM   #30
Confused about dryer sheets
Join Date: Jan 2013
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That means that its the single most powerful thing which negates most people reaching their ER goals.

The solution is multi -faceted,but could go something like this:
1.Start with taking some USD to an overseas bank,in a low/no tax country eg.Singapore.
2.Repeat step one,until its possible to buy a pied a terre outside the US.
3.Repeat step 2,but this time let it out to get income
4.Repeat step 3...
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