20 Years to $20K/month Passive Income

63 Replies

Originally posted by @Greg P. :
Originally posted by @Kurt K.:
Originally posted by @James Park:

If your stock market portfolio is valued at $3.34M, you can withdraw $133,600/year for 25 years and have nothing left at the end.

This isn't accurate.

I think the inaccuracy is the last statement "nothing left at the end." The numbers seem to be referring to the 4% rule which is the "Safe Withdrawal Rate" for retirement assets ($133k / 4% = $3.34M). The safe rate (a) adjust for inflations and (b) has a very high probability of NOT depleting assets through volatility. So, it's a portfolio that is VERY UNLIKELY to have "nothing left at the end" after 30 years. In fact, in 95% (99%) of back tests there will be assets after 30 years and it should last much longer. Of course, caveat emptor! :)

Exactly, that was what I was referring to. If you withdraw $133,600/yr you'll have nothing left if you had been keeping the money under your mattress. 

In the stock market, it is highly likely that not only will you be able to withdraw the $133k each year, but you'll also be able to withdraw more (in $ amount) each year as your nest egg rises in value.

@Pete T. , no, not yet.  I've sort of fallen off the horse the last half of the year.

@Nicole W., thanks for the tip. I did attend a local REIA a while back, but that particular group of investors wasn't for me. I need to see if I can find another REIA.

@Scott Trench , great point. I looked back at 2014 and I calculated that I've made over $43,000 in contributions to stock market investments - maxed out 401(k), Roth IRA, taxable investments, etc. About $20,000 of this is taxable investments that I would be willing to liquidate and move into real estate.

@Greg P. , any updates on your progress?  I need some motivation!

@Kurt K. , not necessarily.  It's all about sequence of returns.

Originally posted by @Mark S.:

@Kurt K., not necessarily.  It's all about sequence of returns.

Well we can go back and forth all day long because I can just as easily say that the sequence of return risk is "not necessarily" a problem. One doesn't know if it will affect them or not beforehand. However, may allocate your capital differently to mitigate this risk.

My original comment was to the person saying in the stock market one can withdraw 4% of their portfolio for 25 years and will simply have nothing left (4% times 25 = 100%). 

One can run simulations on withdrawal rates and asset allocations. For example, 75% of portfolio in total market index, 25% in bonds yields a 98.2% chance that after 25 years your money will not be gone withdrawing $133,600 on $3.34M.

So yes, there is a small risk that the sequence or returns risk will bite you.

The buy and hold is a good long term strategy but you need to evaluate your portfolio as you build it. You could accumulate 10 rentals with lots of equity and sell or 1031 exchange into one property that gives you the same or better cash flow. Or sell the marginal properties and keep the good ones. Another thing is sometimes the market goes haywire (2003-2005) and you can cash out for a price you never dreamed of. All cash is not a bad position to be in. You can lend your money to other investors at above market rates and generate nice cash flow with minimal work. 

Thanks, Kevin Page . I see your point, although I'm very hesitant to have a large cash position. Heck, every time I see my checking account exceed a certain figure, I immediately find another home for the excess. I think this is part of my problem with having sufficient cash on hand for real estate. I mean, in addition to the purchase, I'll still need to have money in reserves.

@Mark S. I know of many investors/brokers, myself included that were buying properties because interest rates were so low. Why keep it in a bank when we can buy an appreciating asset? Now those assets have lost value and we have to hold them till prices come back to get our money out. Prices go up, prices go down over a period of time. You can buy a property, hold it till prices go up, sell it and then buy it again when prices go down. If I had liquidated more of my holdings, I could have bought them back today for 50% or less of what I paid. Buying at today's prices is probably safe but when they start to go up

@Mark S.  Sorry hit the send by mistake. Buying at today's prices is probably safe but when they start to go up I would think twice about taking money off the table. Another thing is you want to be buying when everyone is selling and selling when everyone is buying. 

Originally posted by @Pete T. :

@Mark S.  dont just look at the numbers- bad areas bring a lot of hidden costs with them.

 I could not agree more with Pete... Know your areas and know your risks is critical for success...


I'll be closing a $345k 12 unit tomorrow and that will put me at just under $10k a month in total principal and interest payments on my 42 units.

I'll continue to build my portfolio, but that's a decent number to think about as far as a monthly income when they're all paid off in 20-25 years. I'm 37 and can definitely see myself having a $250k a year "draw" from my business in my late 50's if not sooner!

(I'll consolidate my smaller properties at some point into more passive NNN commercial or bigger apartment complexes with management so I can enjoy the income.)

I would focus on good areas and be a little flexible on the 1% rule if necessary.  I definitely wouldn't try to hold out for 2%, because that will likely have risks/headaches that lower yield investments should not have.  Since this property will likely have a long holding period, principal pay down and appreciation(rental and price) should be factored into this investment.

Once you probably will have to include Multi-Family properties to reach your goal, but I would start small.

My partner did this in 6 years with 25-50k houses distressed, owner financed. I am following the same model. 

Originally posted by @Joe Pickett:

My partner did this in 6 years with 25-50k houses distressed, owner financed. I am following the same model. 

You're saying he has $240,000 annual net operating income off of 20-25 houses?

I would recommend you start small (Less than 150k). If you are in buy-nd-hold, make sure you have funds portioned for property taxes, maintaining and 1-2 months mortgage payment in case it takes a while to find the right tenant. If you r buying condo's/townhomes, add the association fees too. Find if u can get properties which comes with tenants too. Also, if you're handy, that will save some money. 

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