How much do you need to "retire" to real estate?

2 Replies

Curious as to what everyone thinks, just a question for fun...

-What amount would you say that a 30yr married person needs in CASH in order to support a spouse and two children in an average middle class town.  Cash can be used to invest in RE rentals (not fix and flips).  Assume rentals will earn around 8-12% cash-on-cash per year.  Person must buy properties in cash for simplicity of argument.  Income from rentals and savings must cover healthcare costs for spouse and two children (assume infants), a primary residence, 2 modest cars, a modest middle income lifestyle (1 vacation per year, 3k budget). eventual retirement (though assume rental income will continue until death).

@Joe A.   There is no number that will be the same for everybody. Modest middle income lifestyle, for example, is very personal. 

You will also want enough growth in your portfolio to offset inflation, and account for college funds, the explosive growth of healthcare costs, etc. 

My personal take on this is a little different than the average person contemplating a retirement plan. The usual goal is 80% of what income was shortly before retirement. That idea suggests sitting around and waiting to die. To quote my great aunt at age 98 "I'm not sitting around in my rocker waiting for the grim reaper, if he wants me he will have to come find me!" I plan on traveling, and being very active. I am projecting needs of about 200% of my current income. And that is starting in a year or two. Not full retirement, but retirement from the rat race into REI at my own pace, doing the parts I enjoy. But growth is part of the plan, from now until the day I die.

Assuming that all household expense are about $60,000, then $500,000 in real estate, returning 12% annually would do it.  $60K too low?  OK, $1,000,000 in property returning 12%, throwing off $120K in income.

However, in today's market a 12% return is difficult to sustain.  If one were to use leverage, it could be easier.

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