Exit the rate race with multiple income sources
Having invested in real estate income properties since 1999, I survived the bust. Life had become fun with more income than I ever thought likely as a public school teacher. I had single family homes, some condos, and a few small commercial properties when the lending dried up and the consequences of that hit hard. I went through over $100,000 in savings holding on to everything. I was a licensed real estate broker as the need for short sales started and I figured it out earlier. Helping folks get through that process was rewarding in many ways besides the commissions, but I also learned that too many people lost everything when they shouldn't have.
I thought I would get through the tough times and hold all my properties. When buyers reneged on a commercial sale of one of my properties, one that would net me over $600,000, I knew I was cooked. Word was out that the building was sold and my tenants left at renewal time. That was fine with me until I had an empty building sucking down over $5000 per month!
Though I am not a crier, that night I cried but made decisions to sell my personal residences (mistake: I had two!) through the short sale process. I referred to it as "deleveraging." The lenders were some of the "big bad boys" and I got through the process without them questioning my other properties. I moved in the commercial building, creating a living space and an office in 2000 sf (mixed use area) and managed to lease office space in the other 4000 sf for enough to cover the bills.
During the next three years, I paid down debts, curbed my spending, and decided to take opportunities I saw in the market. Some were done inside a self directed IRAs. Others were flipped for cash to pay off other (better properties). Some I sold right away but held the mortgages for long term income streams.
At 60, I have assessed my small teacher pension, have two long term mortgages, two shorter term loans that will be paid off in 5 years, and have income from three rental properties that are free and clear. I sold the commercial building that I lived in while I had the tax advantage of 1/3 of it having been my private residence and paid the capital gains. I have a beautiful new home, am debt free, and still "play" in real estate. Any money made as a real estate broker, I spend with family and friends. I have over $10,000 per month of income without any debt. I have over $150,000 in the highest rate saving account I could find so I can use it for deals. I also have an untapped equity line on my one and only residence for the same purpose. Right now, I am working on a mid century renovation near a river and beach with money from my self-directed IRA.
When I am ready, I will assess my social security and the self-directed IRA for an even more diverse income. $10,000 a month may not be a lot of most people, but I am proud and happy. I pay for meals and drinks when I am out of friends and family. I cover my sister's expenses when we travel. I participate in some charity giving. These things are paid from the $20,000 to $40,000, I make as a RE broker.