San Jose, CA · Member since 2016 · 17 posts · 6 votes
Hi all,
I could move to another country in a few years selling everything I have in California including principal residence. I would need about $50k per year to be quite comfortable there. I can easily get a job for $25k there so I'm thinking another $25k from investment would be a good strategy.
How much would you calculate is needed to be invested and what strategy would be a "safe" and "reliable" year after year? What kind of diversification would be good? What would be a fair safe return on investment in current cycle? It has to be 90%hands off.
Additional question: the fact that California thinks I should still pay state taxes even though I would live overseas (need to confirm), what state would make sense to move to and invest before leaving for overseas?
Rental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes
7y
@Perig Vennetier, Yes you do need to pay taxes in the US if you are a US citizen or national living abroad. However, you get to deduct any taxes that you paid to the foreign country and of course, real estate losses... For tax purposes, there are people who specialize in setting up a business abroad for you.
Like others have said, returns are contingent upon your risk tolerance. I'd plan on 250k in your real estate investments yielding you 10% to be safe. Your objective now is to underwrite different sponsors that can get you that yield.
CFA · Sanibel, FL · Member since 2016 · 31 posts · 52 votes
7y
I'm sure you've heard of it but the general rule is a 4% withdrawal rate (I'm not a fan of the assumptions behind this, but this is a forum, can't get into details), so that's what you should aim for. You should start to aim for about $600k in assets. This is a very general post so unfortunately, I can only give a very general answer. I would recommend you really sit down with an investment professional, who will talk with your tax professional, and put a plan together. To get a successful investment strategy here would be very difficult to do. Hope this helps!
San Jose, CA · Member since 2016 · 17 posts · 6 votes
7y
Thanks for the response. The 4% rule is mostly for retirement, isn't it?
Here I am more looking at investment strategy. I get it that it's bit hard on a forum like this and I agree that a pro is a good idea. But most may only look at bonds and tell me I need millions at 2% yield. My belief is that the collective intelligence of forums like this one is a great start to get alternate ideas, especially in real estate.
I mean, I see discussions of 10% coc return in these forums. Would getting 4% return be quite safe and realistic with a diversified investment strategy?
Market is much different there. Rates are extremely low. The only thing I see may make sense is buy a house with cash. $1300 rent versus $350k house is 4.4% return if I don't have to pay that every month.
Real Estate Broker · Manchester, NH · Member since 2014 · 630 posts · 420 votes
7y
@Perig Vennetier if you are looking to own real estate back home in the US but receive a very consistent amount of cash flow year over year, I'd encourage you to look more into the commercial side of real estate and purchase a NNN leased investment. This can be a very hands-off type of investment property in which either a building is leased to either a single commercial tenant or multiple commercial tenants, and the tenant is responsible for ALL operating expenses. Many large corporations lease real estate on 10YR, 15YR, 20YR, or longer leases, which locks in their rent payments at a fairly low rate and provides security for you as an investor to own a consistent piece of cash-flowing real estate.
There's a nice BP article put together by one of the members here: https://www.biggerpockets.com/... that hopefully gives you more insight about how this works.
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y
@Perig Vennetier First, my nosy brain can't stop trying to guess the country you are moving to lol, and that you can live in comfortably for 50k per year!
To answer your question, most 100% passive investments in, say Multifamily, offer between 8%-12% CoCR and an opportunity to participate in a liquidity event (REFI or Sale at Disposition [5-7years]).
So, to get about $25,000/year, you will need to invest $312,500 or $208,333 in the front end to get that 8% or 12% respectively.
Now, you can explore more ways closer to your 90% hand off approach by doing it yourself: Buy an apartment building and getting a solid Property Management company to oversee it, an approach I wouldn't advise since you will be an out-of-country investor and there is a learning curve to this Asset Class.
For what is worth, I think you can make something happen here and your goal should be doing something that is 100% handoff.
Market is much different there. Rates are extremely low. The only thing I see may make sense is buy a house with cash. $1300 rent versus $350k house is 4.4% return if I don't have to pay that every month.
$1300 a month on a $350k house? Man that's a terrible return. That's the same kind of rents I'm seeing in San Antonio on houses $200,000 cheaper.. and Texas has no state income tax (which is a reason I'm transitioning into that market).
I could move to another country in a few years selling everything I have in California including principal residence. I would need about $50k per year to be quite comfortable there. I can easily get a job for $25k there so I'm thinking another $25k from investment would be a good strategy.
How much would you calculate is needed to be invested and what strategy would be a "safe" and "reliable" year after year? What kind of diversification would be good? What would be a fair safe return on investment in current cycle? It has to be 90%hands off.
Additional question: the fact that California thinks I should still pay state taxes even though I would live overseas (need to confirm), what state would make sense to move to and invest before leaving for overseas?
Thanks!
Hi @perig vennetier,
There are obviously many different strategies you can use to generate this amount of passive income, the two biggest questions are what are you comfortable investing and what is your risk tolerance.
I am the owner of Onyx Funding, we are a brokerage that connects real estate professionals with capital sources. One way you can generate this income completely passively is by becoming a private lender. You can invest $250K-$300K to professional fix and flippers for example, and generate around 10% return annually (=$25K-$30K). you can do this in many different states and not just CA.
PM or email me if you are interested to learn more.
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
7y
@Perig Vennetier I think you mean to say net income instead of gross
If you subscribe to the 50% expense rule 25,000 gross will only get you 12,500 net which will not meet your total requirement of 50,000 if your salary is 25,000
Or look at it another way if you want 25,000 net then you must achieve 50,000 a year gross or about 4,166 per month gross with no mortgages
@Perig Vennetier First, my nosy brain can't stop trying to guess the country you are moving to lol, and that you can live in comfortably for 50k per year!
To answer your question, most 100% passive investments in, say Multifamily, offer between 8%-12% CoCR and an opportunity to participate in a liquidity event (REFI or Sale at Disposition [5-7years]).
So, to get about $25,000/year, you will need to invest $312,500 or $208,333 in the front end to get that 8% or 12% respectively.
Now, you can explore more ways closer to your 90% hand off approach by doing it yourself: Buy an apartment building and getting a solid Property Management company to oversee it, an approach I wouldn't advise since you will be an out-of-country investor and there is a learning curve to this Asset Class.
For what is worth, I think you can make something happen here and your goal should be doing something that is 100% handoff.
Good luck...
Thanks for the feedback. I don't think owning individual properties, even if managed, would be a good idea being out of the country. When I said 90% I meant that I am OK rebalancing here and there. But that's pretty much it. I should have said 99% hands off!
Realistically, if I can put together a plan that can return 5% cash per year for income and be OK with that if it reduces most of the risks involved to a level I can sleep soundly at, I'd be pretty happy.
Market is much different there. Rates are extremely low. The only thing I see may make sense is buy a house with cash. $1300 rent versus $350k house is 4.4% return if I don't have to pay that every month.
$1300 a month on a $350k house? Man that's a terrible return. That's the same kind of rents I'm seeing in San Antonio on houses $200,000 cheaper.. and Texas has no state income tax (which is a reason I'm transitioning into that market).
Jeff, that was not the point I was trying to make. What I meant was that if I were to buy a house cash I would not have to pay the mortgage or rent of $1,500 per month for the next 15 years. That means that I would be making the equivalent of a 4.4% return for that period of time. Sure it's low but it has zero risk. And keep in mind that I will not be in the USA so the markets are different there.
San Jose, CA · Member since 2016 · 17 posts · 6 votes
7y
Originally posted by @Account Closed:
@Perig Vennetier I think you mean to say net income instead of gross
If you subscribe to the 50% expense rule 25,000 gross will only get you 12,500 net which will not meet your total requirement of 50,000 if your salary is 25,000
Or look at it another way if you want 25,000 net then you must achieve 50,000 a year gross or about 4,166 per month gross with no mortgages
Hi, no I really meant gross. Different country, $50k gross total is the target. The 50% rule doesn't apply quite like that there.
Rental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes
7y
@Perig Vennetier, Yes you do need to pay taxes in the US if you are a US citizen or national living abroad. However, you get to deduct any taxes that you paid to the foreign country and of course, real estate losses... For tax purposes, there are people who specialize in setting up a business abroad for you.
Like others have said, returns are contingent upon your risk tolerance. I'd plan on 250k in your real estate investments yielding you 10% to be safe. Your objective now is to underwrite different sponsors that can get you that yield.