Would appreciate financial advice regarding 1% rule

Question

59 years old with 16 SFHs near Charlotte, NC. No debt (please don't beat me up regarding no use of leverage - I'm an old guy and just don't prefer debt at this point in my life). I do my own PM and set my rents around 10% less than market to retain really good residents. What began as a hobby 8 years ago, allowed me to retire early and cash flow life. My real estate objectives were diversification from financial investments and cash flow. Regarding the 1% rule, I generally turn .7 to .9%. Given that I carry no debt service and do my own PM, is this financially sound?

Thank you.

Terrell Garren · Answer

@Julie Marquez > Thank you Julie. You are in a hot rental market as my son lives in Tacoma and pays $1,900 a month for a SFH that would run around $1,200 here in NC. Please send Pike's Place chowder ASAP!

Thomas S. · Answer

If you own rentals you are not truly retired however in your position, at your age, as long as you are comfortable with your income it is irrelevant as to whether you are maximising your returns or not. Being on the back side of life allows you to not be concerned about your cash since you have no use or need for the money.

In your position the only thing I would do differently would be to sell all the real estate and actually retire. Invested in a income fund you could fully retire and the higher returns would level out the fluctuations in the market. You would not need the additional income so would simply fold it back into your funds.

Linda Moore · Answer

Say you have built up a net worth of $5,000,000 please don't take advice from broke  people saying  it's time to wholesale.. 😂

Maybe you could be priced 5% under fair market.   10% you leaving too much on the table.

You are doing great. People hung Ho on debt probably started after the great recession.

Chris Ayers · Answer

Do you want to trade places? haha  You're doing great.

I would hire a PM and really live free from everything, but that's my preference.

Thomas S. · Answer

"I will leave the SFHs to my kids"

You will need to transition to a PM depending on your health and how long you live.

It should be a very nice addition to your kids retirement funds. The vast majority of second gen will liquidate inherited real estate within a year and likely fully retire if they have not done so already by that time. Do them a favour and split the properties up amoung your children. Assign individual properties to each child. Leaving them as a total group to all children equally has the potential to cause considerable issues amoung your children. Shared inheritance is usually a big mistake.

Julie Marquez · Answer

@Terrell Garren You sound just like my dad. And he's hands on and no debt with his 16 units. He's happy, wealthy, loves his tenants, and will leave a great legacy for his family.

Some folks invest a different way, and you never hear high praises for people in your situation, but kudos to you, you are doing great!

The 1% rule was created when mortgage interest rates were in the double digits, no need to fuss on it now, there are lots more numbers to consider.

Jeremy Z. · Answer

Seems like you are doing just fine. If it were me I might be inclined to consolidate at least a few of the SFR's into multi-family. Typically you get more rental income per dollar spent (at least in my market), plus you would gain some efficiency with multiple units in a single location. Definitely do what suits you best. Keep up the good work!

Max T. · Answer

wouldn't mind being in your shoes. Sounds like you're doing just fine.

Mark Taliercio · Answer

It is financially sound if you are comfortable with the stability of the investment and feel that the return is worth the money invested along with your time.

Take a look at your ROI and make sure you are satisfied with it - managing 16 SFHs could be a handful but it is all about what you enjoy doing.

How much are you cash flowing from the 16 units?

Would appreciate financial advice regarding 1% rule

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