Sustainable Withdrawal Rates For Active Real Estate Investors To Achieve Financial Independence

[Bryan Hancock]

I ran across this study by some professors from Trinity University in San Antonio yesterday:

Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable

How much is enough is a popular topic on BP since many people are looking to make their money work for them to achieve financial independence.  The article above is a great read if this is your goal.

The trouble with the article is that it assumes an asset allocation strictly made up of stocks and bonds and analyzes that over various periods with varying mixes.  Based on this study Table 3 shows a withdrawal rate of 4% seems to be pretty solid over all stated withdrawal periods with at least a 50% allocation to stocks.  

Things get sketchier with higher withdrawal rates and longer payout periods.  Table IV shows that withdrawal rates north of 4% have an incidence of 0 minimums with longer withdrawal periods; those on the order of 25 or 30 years.  This is probably what most people on BP have in mind if their goal is financial freedom.  

I was wondering what people's thoughts are about how this applies to active real estate investors that presumably can achieve higher yields than the blended yields from stocks and bonds that are used to compile the tables in the study.  

A 4% withdrawal rate means you need 25X spending to achieve independence.  That translates to roughly $3M if your goal is to have $10k/month in current dollars purchasing power, which seems to be a pretty common number cited in the financial independence threads.  At 5% withdrawal the number dips to $2.4M and at 6% it is even lower at $2M.  

Any thoughts on what the proper number should be for real estate investors?  Keep in mind that one could semi-retire and choose to work fewer hours doing something else.  Achieving higher yield should have a pretty profound impact on this analysis though.  Investing passively in crowdfunding deals or via your local hard money lender should probably get you at least 10% on your money.  Do you think a 6% or higher withdrawal rate is warranted if this is possible?