Can I retire like this? (3.2 million net worth)

[retire to nature]

I'm a bit puzzled how you are getting to gain $1m/yr in net worth from rentals unless you are assuming a very high appreciation rate every year - I would not bet on that. I use 3% appreciation in my underwriting. I can't get you gaining $1m/yr with back of the envelope math unless you are assuming around 10%/yr and close to 80% LTV.

I am puzzled here too. Also, I am worried about house crash. It keep saying it isnt bubble, but it starts to say it may be bubble while I read articles. Like the stock in this year, it wont be back quickly like 2020. Thats why I questioning myself to sell all or continue. I was thinking like OP to be OMY to reach 4mil, but getting tired of deciding the selling point. Especially RE can be hard to sell if loss of seller's market.

 

[Magus]

I am puzzled here too. Also, I am worried about house crash. It keep saying it isnt bubble, but it starts to say it may be bubble while I read articles. Like the stock in this year, it wont be back quickly like 2020. Thats why I questioning myself to sell all or continue. I was thinking like OP to be OMY to reach 4mil, but getting tired of deciding the selling point. Especially RE can be hard to sell if loss of seller's market.

With the exception of higher cost (prices and interest rates) virtually everything else is favorable to housing currently, especially compared to 2003-2008.

• 
  Replacement cost is higher than current pricing (ie can't build to lower price)
  Credit scores are close to 800 vs ~640 in prior cycle
  Most borrowers are putting over 20% down vs 0-5% last time and 20% are all cash
  Housing inventory is at record lows
  Incomes are rising quickly
  Pandemic has massively increased demand for good housing and likely will be fairly sticky
  Millennials are finally moving out and buying in droves
  Institutional investors are getting in a big way for the first time.
  >95% of mortgages are fixed and the ones that aren't are 5 & 7 year ARMs vs mostly 1 and negative amort 1 year ARMs last time
  No liar loans vs mostly liar loans

That's not to say there is no risk here, but I put the odds of RE prices dropping from current levels below 10% and 25% chance we go up another 15% in the next 12 months.

 

[retire to nature]

With the exception of higher cost (prices and interest rates) virtually everything else is favorable to housing currently, especially compared to 2003-2008.

• 
  Replacement cost is higher than current pricing (ie can't build to lower price)
  Credit scores are close to 800 vs ~640 in prior cycle
  Most borrowers are putting over 20% down vs 0-5% last time and 20% are all cash
  Housing inventory is at record lows
  Incomes are rising quickly
  Pandemic has massively increased demand for good housing and likely will be fairly sticky
  Millennials are finally moving out and buying in droves
  Institutional investors are getting in a big way for the first time.

That's not to say there is no risk here, but I put the odds of RE prices dropping from current levels below 10% and 25% chance we go up another 15% in the next 12 months.

Good to hear that. I am renewing my SFH contract. Yes, I guess I am OMY mode.

 

[pacergal]

Your "one million liquid cash" could give you $40,000/year if invested and withdrawn at 4%, that could theoretically get you to age 70.
Assuming in the ensuing years, you sell off your properties and invest the proceeds, SS and those proceeds could finance the rest of your life.

You can retire now, have less stress. Invest in Index funds,Stocks/bonds, do not day trade.
Read up on quality investing books , such as John Bogle, etc.

 

[livingalmostlarge]

retire now it's a great time to try a sabbatical. If you hate it or think you are running out of money I bet it would be easy to get another job.

Although I must say since you live so cheap I would be tempted to cash out real estate and really retired on $3m

 

[HarveyS]

I think it is risky to assume $2M in real estate will appreciate $1M/year forever and ever.

 

[kgtest]

My sister had a similar goal/plan/allocation and passed away from Cancer about 6 months ago. You never know when your time will come. Life was rockin and rollin for her until her diagnosis and 2.5 yrs later she was gone, and didn't give a $#it about her rentals or her finances or wealth at all. All she cared about was prolonging time on this earth to spend more time with her 3 kids.

Did the rental stress kill her...no. But it was stress. Now we have inherited that stress and are selling her rentals.

Put your money in the stock market, it will double every 5years and you will still have enough for your wants/needs. You live a cheap life with no kids or spouse.

She too had failed relationships. 2 ex husbands. I remember the second ex was a little against some of her real estate goals, or had different ideas. She had just paid down one of his rental properties and bought him a min-van so that he had a vehicle that could haul kids but also serve as a work vehicle to help manage the things that broke at the rental properties. I think it was a month or so later that she found out he had been driving that mini-van around town cheating on her while grandma watched the kids for him, Kept saying he was going to a movie with a buddy, work obligations etc. Lies. They always come in like a kitten and go out like a lion. That stress definitely didn't help her battle with cancer.

They ended up selling the family home and one of their rentals to cash out the equity just to pay each of their lawyers. Super nasty stuff.

 

[travelover]

It is a major stressor but it’s the price I paid for financial freedom.

But that doesn't mean the OP has to spend the rest of his life stressing over real estate. Sell it and put it in index funds and get on with life. If you reread the original post, all the stress comes from the real estate ownership.

 

[GTP2022]

While everyone comments on the real estate side I would offer something else.

I think you have some emotional issues regarding dating and happiness. Don't think you will early retire and make "dating your hobby" while enjoying it along the way. Consider building a life you enjoy, finding out what makes you tick and look forward to the coming day. If you are trying to date from a position of needing someone to complete you and the only thing you offer is your time you may continue to be less than excited about the results.

Work on yourself my man. Become someone who is attractive to the woman you want to attract. Enjoy your life and then make room for someone special. Or not, and just enjoy your life anyway.

Best of luck.

 

[SeanPizzle]

While everyone comments on the real estate side I would offer something else.

I think you have some emotional issues regarding dating and happiness. Don't think you will early retire and make "dating your hobby" while enjoying it along the way. Consider building a life you enjoy, finding out what makes you tick and look forward to the coming day. If you are trying to date from a position of needing someone to complete you and the only thing you offer is your time you may continue to be less than excited about the results.

Work on yourself my man. Become someone who is attractive to the woman you want to attract. Enjoy your life and then make room for someone special. Or not, and just enjoy your life anyway.

Best of luck.

Came here to say pretty much this. Work on yourself. Find out what you are trying to run away from by moving out of state. Realize that the commonality of all of your failed relationships is you (sorry, if that is harsh). By your description of two full time, two part time, school certs, etc, when did you have time to have a real relationship? Relationships need care and nurturing, they are most successful when made up of two people who are on their own path of growth and dont need someone to "complete them".

I didn't see you mention health insurance in that calculation of 40K. Expect to pay 3 to 6K a year for premiums and more for deductibles, co pays etc. Have you tracked all of your spending for past two or three years? That is where I would start if looking at see if 40K is enough to live on.

 

[euro]

I like real estate and I have a medium sized rental portfolio that I intend to keep longterm. However, in the OP's particular situation where he wants the flexibility of moving around the country or even beyond, AND give the current white hot real estate market, I would STRONGLY consider exploring the sale of the entire portfolio. While that is in progress, educate yourself on constructing a more balanced investment portfolio (can include passive real estate investments). With the limited information on annual expenses that we have been given, it seems to me that a conservatively invested portfolio of $3.2 million should provide him with more than enough income to FIRE.

 

[still_working]

I've never owned investment properties but if I was looking to reduce the stress in my life that would likely be a place I'd start. Things are easy when they go well but incredibly difficult when they don't - as one example I have a friend who had a model tenant for more than ten years until that tenant got divorced; the ex-wife has been a squatter in the house for more than three years. No revenue, same mortgage, and can't sell the property.

At your age it looks like a $2.5M SPIA annuity could pay out $8k+/month, if that's something of interest.

You also might considering taking an 'easy' job, something that you could succeed at without 60+ hour weeks that would provide healthcare and other benefits. Subsidize your lifestyle with your investment income.

 

[Spanky]

While everyone comments on the real estate side I would offer something else.

I think you have some emotional issues regarding dating and happiness. Don't think you will early retire and make "dating your hobby" while enjoying it along the way. Consider building a life you enjoy, finding out what makes you tick and look forward to the coming day. If you are trying to date from a position of needing someone to complete you and the only thing you offer is your time you may continue to be less than excited about the results.

Work on yourself my man. Become someone who is attractive to the woman you want to attract. Enjoy your life and then make room for someone special. Or not, and just enjoy your life anyway.

Best of luck.

I was wondering about the same thing. No one has commented on happiness and dating. It does not matter how successful you are in financial independence if you are not happy about your life. Take some time to contemplate on what would make you happy and the characteristics of your soul mate other than physical appearance.

Good luck.

 

[meleana]

Is this a joke?

 

[remotedesktop]

I would not suggest managing remotely, especially that far. I wouldn't worry about 10 minutes away, but something an hour or less is really ideal, although I do own one about two hours away. You can get better cap rates in the Southeast if you wanted to manage rentals and cash flow better plus much better eviction rules for landlords.

I'm a bit puzzled how you are getting to gain $1m/yr in net worth from rentals unless you are assuming a very high appreciation rate every year - I would not bet on that. I use 3% appreciation in my underwriting. I can't get you gaining $1m/yr with back of the envelope math unless you are assuming around 10%/yr and close to 80% LTV.

Do you not have a decent 401k account as well (didn't see that mentioned)?

Personally, I'd invest most of your cash in index funds, keep some on hand and maybe pay off one property in full to diversify your risk and cash flow profile.

I'm not assuming 1 mil a year appreciation, not all of us live in small town USA. I live in the sixth most expensive housing market in the country. My properties appreciate 1 million a year. Yes there will be down years, but again, I can take out say 6 million after a few year of appreciation and put it in dividend stocks or index funds and live off that for life while waiting for prices to go back up plus I'll still have rental income...

 

[remotedesktop]

I was wondering about the same thing. No one has commented on happiness and dating. It does not matter how successful you are in financial independence if you are not happy about your life. Take some time to contemplate on what would make you happy and the characteristics of your soul mate other than physical appearance.

Good luck.

I think I may have met her just 9 days after my terrible breakup with a terrible woman. Borderline Personality Disorder is a serious mental illness.

 

[Librarian]

A thought

TX property taxes are AWFUL.

DD is in FW & they are like 2.3% (people moan & groan about our 1.7% rate in NE). The market is hot there, tho not like here in Lincoln (less than 200 single family homes on the market in a city of nearly 300K).

Other than that I like FW a lot.

 

[Spanky]

I think I may have met her just 9 days after my terrible breakup with a terrible woman. Borderline Personality Disorder is a serious mental illness.

Cool!

 

[Magus]

I'm not assuming 1 mil a year appreciation, not all of us live in small town USA. I live in the sixth most expensive housing market in the country. My properties appreciate 1 million a year. Yes there will be down years, but again, I can take out say 6 million after a few year of appreciation and put it in dividend stocks or index funds and live off that for life while waiting for prices to go back up plus I'll still have rental income...

Who said anything about small town USA? I live in a top 25 pop city and top 10 growing but am well versed on real estate all over. What % appreciation are you assuming to get to a million a year in appreciation? You do realize the last couple years are highly unusual - we may get one more year of elevated appreciation but we could then have 2-5 years of no appreciation. The long term average is about 3% in the US.

 

[Spanky]

TX property taxes are AWFUL.

DD is in FW & they are like 2.3% (people moan & groan about our 1.7% rate in NE). The market is hot there, tho not like here in Lincoln (less than 200 single family homes on the market in a city of nearly 300K).

Other than that I like FW a lot.

In addition to high property tax, the humidity is hard to bear. I stationed at Lackland AFB many, many years ago. It was hot and muggy. I guess it is better than cold and chilly where we live.