How I Created an Additional $7,000/Mo. Cash Flow in 4 Years!

250 Replies

@Sean Sullivan . Actually in 2 1/2 years will be there with the $3000 monthly dividends. But, you still pose a great Q. Part of my fear is rising medical costs, as my wife had several surgeries in the past. After my W2 pre tax ins from work, I was still paying $1200 per month and then had co pays and balances of $25,000 in just one year. We are 52 and 50 years old, so what happens the older we get as we cannot get medicare until 65 years old. Also, no one asked me my cash position? I am working on that as when I leave my W2 as a very high earner, this goes away forever. My properties are in solid condition, but what if something were to happen? I still have mortgages although the wonderful cash flow. The bigger issue, well, is how one lives. My wife loves trips and we spend some money. When you ask that Q I realize it is valid. Some people who live on $5000 per month would never understand my concerns. At the end of the day, if I pull the plug at 55, I have 10 years until I can get the government ins, and at least 7 years until SSI. The Q is how much is enough? I guess my high equites and cash flow sound awesome, but I need to build some cash and working to payoff a $94k balance on 1 four plex to eliminate a $1200 mortgage payment.

Or, maybe I am a little goofy and should just quit. Just feels hard for me to walk away now at 52 so I am asking for insight and opinions. I also realize your Q is valid and most of America would think they had hit the lottery with my situation. I had to evict twice and it was spendy in several ways, and I am conservative so I am weighing my options before I make a forever decision leaving a solid position for 31 years. That is my best answer good or bad.

I can understand that. As a busy person and a self starter, it is hard for me to imagine  as you describe yourself that you would retire, curl up in a ball, catch lots of diseases limiting you from travel.  I think that you would find yourself with time & freedom to dedicate to doing other things that could bring you money whether it be more properties, becoming a realtor, developer or something else that wouldn't take up 9-5. Maybe it would take up 9-9 or 4 hours a week but it would provide enough for you to still travel and meet medical expenses.

Instead of adding more properties, another idea would be to go ahead and pay down the mortgages you your property cash flow.  Just live on the W-2 income for now.  

You mentioned your 4-plex $94k mortgage that is costing $1200/mo.  If you applied your current rental income to just that payment, in 7 months, you'd have no more 1200 monthly payment and your rental income would be over 15000. What if you then applied that amount to the next smallest mortgage or the one with the highest rate?

This probably wouldn't be the best option in terms of returns or tax advantages, but it sounds like you're worried about your cash position. Maybe practicing living on the W-2 income alone would help ease your mind along with free-and-clear properties. You could always sell or take HELOC's against those properties now or later as well.

@Sean Sullivan . Okay, I gotta agree with you on that one. My family would be clapping and laughing at your response. Good word! I dont wanna die in a recliner yet. I am just fearful of the permanent W2 jump I think.

@Jason Oberweis . Well stated! I am doing the mortgage payoff this year as you suggested. My wife and I agreed Sunday this was our best option. Less tenant headaches and get same result by eliminating $1200 per month. Thanks for your advice!

@Todd Powell you keep referring back to a $3k monthly dividend on $800k in retirement funds. With your RE experience why not take the time to get a little more education on how to become a private or hard money lender and use that as your seed money. You already know how to analyze properties so you are over half-way there. That money would earn you a minimum $65-80k annually at 8-10% interest vs the paltry 4.5% you are earning now. If you went truly hard money you could double or even triple that. I know a successful HM lender in Dayton, OH that has a similar amount of funds and never has enough money to keep up with loan requests at 12% and 4 points. He sells many of his notes at 10% interest just to free up capital to re-lend. Work another 3 years while learning the ropes and you could take early retirement while still earning $100k plus/yr in interest. 

@Grant Schroeder Hi Grant! Back in 2001, I started with Bank of America with $60k. I then pushed it up higher, and higher, and higher again around $350,000. They were great because they were zero fees, zero appraisal, and used some computer desk top analysis. Of course, the credit and low DTI had to be in line to make it so easy. I used this line to flip from 2001-2009. I took off 7 years flipping, and B of A shut down my non owner HELOCs in 2009 due to economics out there, and that really did not sit well with me as I had perfect history. Eventually, I got a massive $421,000 HELOC from Keybank via their FAMILY AND FRIENDS deal I heard about; 90% LTV, 15 year draw period, free appraisal, and an interest only rate of whatever prime rate is minus -.25%. Solid terms and best I could find!

I have used this line to do massive investing over the last 4 years or so. Its now paid off and my $545,000 is free and clear, debt free!

Last note, One of my 4 plexes in Corvallis I have a $225,000 HELOC through Citizens Bank in Corvallis. That one is higher rate as its a non owner occupied, but also gives some flexibility if I am knee deep in deals. Hope that helps you a little! I also hope you are doing well with your new house, marriage, and engineering job. Are you looking to do any RE investing?

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