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How do I treat reliable income from rental property?
04-22-2018, 04:06 PM
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#1
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Dryer sheet wannabe
Join Date: Jan 2018
Posts: 22
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How do I treat reliable income from rental property?
I own three buildings, one multi-family and two commercial. Seven tenants total, all relatively long term. The buildings are 100% paid for, no debt. I pull in about $75k in rents and cash flow $52k before taxes. I am diligent about upkeep.
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04-22-2018, 04:08 PM
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#2
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Your question is not clear.
How do you treat it? It's just income. Treat it as you would any other income, in whatever context you are considering.
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04-22-2018, 04:38 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Mar 2014
Location: Dallas
Posts: 1,155
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OP might be thinking in terms of retirement planning. I have two words for you: Nothing is forever. Always have a backup/fall back income.
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04-22-2018, 04:57 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,655
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Diversify
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04-22-2018, 05:49 PM
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#5
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Dryer sheet wannabe
Join Date: Jan 2018
Posts: 22
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Quote:
Originally Posted by joeea
Your question is not clear.
How do you treat it? It's just income. Treat it as you would any other income, in whatever context you are considering.
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Plugging into FIREcalc? A COLA pension? Where would you plug the figure in?
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04-22-2018, 05:52 PM
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#6
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Dryer sheet wannabe
Join Date: Jan 2018
Posts: 22
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Quote:
Originally Posted by Dash man
Diversify
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I also have some limited funds ($200k) in the market, a huge cash reserve ($400k+), a side hustle (dog breeding) and a business from which I currently earn an income. However, I assume that will stop as I would probably sell the business as I approach retirement.
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04-22-2018, 07:04 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 3,804
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Quote:
Originally Posted by GKieffer
Plugging into FIREcalc? A COLA pension? Where would you plug the figure in?
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With my rental income, in firecalc, I reduced the total amount of taxable income by 5% to make up for vacancies. Then I put it in as a COLA'd annuity.
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04-22-2018, 07:54 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: Independence
Posts: 7,297
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No idea. We bring in more than we spend on our rentals, but I am pretty vague when wanting to use FireCalc to give me assurance that all will be well forever. I convert the taxman's TCV to a cash amount, reduce it by 25% for taxes and sale expense, then pretend that is the amount of cash I have to invest. Pretty bogus. Did have a guy looking to do a 1031 exchange call today suggesting he was interested in one of our properties for more than double what we have it valued for. Cool!
User Rodi has some method of valuing rentals in FireCalc and equating them to bonds, but I can't represent that.
__________________
"Be kind whenever possible. It is always possible." Dalai Lama
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04-23-2018, 07:12 PM
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#9
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Full time employment: Posting here.
Join Date: Feb 2018
Location: An Un-Organized Township of Maine
Posts: 801
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One time I re-financed a Multi-Family-Residence and used the cash to buy a farm. We still had it full of tenants, and we thought everything was cool, it was slowly paying off the new mortgage.
But then the recession hit, there were huge lay-offs, and we lost our tenants.
If got ugly.
I suggest that so long as you are out of all debt, stay out of debt. Make repairs as needed, stay up-to-code, and enjoy.
__________________
Retired at 42 and I have been enjoying retirement for 18 years [so far].
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04-23-2018, 08:13 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by pjigar
OP might be thinking in terms of retirement planning. I have two words for you: Nothing is forever. Always have a backup/fall back income.
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As they say around here, "Numbers is hard."
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04-23-2018, 08:24 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Read the info on the Other Income and Spending tab. What your rental income will do is lower your portfolio withdrawal requirements. Select a pension income and put the income from the rentals there.
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04-23-2018, 08:41 PM
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#12
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Full time employment: Posting here.
Join Date: Feb 2018
Location: An Un-Organized Township of Maine
Posts: 801
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Quote:
Originally Posted by Hermit
Read the info on the Other Income and Spending tab. What your rental income will do is lower your portfolio withdrawal requirements. Select a pension income and put the income from the rentals there.
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It seems that I generally see 'portfolio withdrawal' as reducing the size of your portfolio. Is there a real requirement to draw down a portfolio?
__________________
Retired at 42 and I have been enjoying retirement for 18 years [so far].
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04-23-2018, 09:20 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by Offgrid Organic Farmer
It seems that I generally see 'portfolio withdrawal' as reducing the size of your portfolio. Is there a real requirement to draw down a portfolio?
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FireCalc is a tool that basically tells you how much you can safely withdraw from your portfolio each year throughout your retirement. That does not necessarily mean your portfolio will go down over the years. In fact, if you look at the results of the simulation runs, often the portfolio ends up many multiples of what it was at the start of retirement. Those are where you might like to wind up. The runs of most interest are those few runs that indicate those circumstances where you would have run out of money. They are the failures and what everyone here frets endlessly about and often plan spending/withdrawal rates at somewhere around half of what reasonable conservative withdrawal rates could be. For us folks in that boat, we will very likely die very rich.
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04-23-2018, 09:24 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,369
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Quote:
Originally Posted by Offgrid Organic Farmer
It seems that I generally see 'portfolio withdrawal' as reducing the size of your portfolio. Is there a real requirement to draw down a portfolio?
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Only if your spending (cash outflow) exceeds your income (cash inflow).
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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04-24-2018, 06:20 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Mar 2014
Location: Apex and Bradenton
Posts: 1,846
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Quote:
Is there a real requirement to draw down a portfolio?
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It depends on the portfolio. Tax deferred accounts (traditional 401k, IRA) have required minimum distributions (RMDs) after age 70.5. Penalties for not taking them are quite high.
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04-24-2018, 09:21 AM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by latexman
It depends on the portfolio. Tax deferred portfolios (traditional 401k, IRA) have required minimum distributions (RMDs) after age 70.5. Penalties for not taking them are quite high.
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Drawing down the portfolio is not required at 70.5. Moving a required percent of deferred accounts to a taxable account and paying income taxes on the amount moved is.
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