If you were retired, what % in real estate?

6 Replies

I've heard of people retiring on real estate. They just have a bunch of rentals. 

Would you be willing to do that? Maybe have a decent sized pool of cash to take care of the occasional roof repair or personal expense, but almost entirely in real estate?

Or is RE just a supplement?

I will retire on rentals alone in the next three years. Retire, though, means something different to everyone. My definition of retirement is having enough income to pay all my bills/expenses without clocking into a W-2.

The rentals require management, which I do myself, and if I want to experience more—say travel the world, or buy a nice car or a giant clawfoot tub for my wife—I have to find more cash to fit those things in the retirement budget.

As for an account that pays for occasional repairs, if you can find it, there are companies who will give you HELOC Sweep accounts on as many as three properties combined. These accounts replace the amortized mortgage loan on three homes and connect directly to your checking. As you run all your income through the checking, the excess is swept into the HELOC at midnight, chipping away at the owed balance on the HELOC. When you write a check for expenses/bills, the money is immediately drafted from the HELOC. As long as you live even 1$ below your means, this allows you to build a net of available funds while paying down your debt.

And you can use the revolving balance on three homes, which tends to be enough for any improvements you'd need to make.

@Jody Sperling I've never heard of a HELOC sweep. That's pretty cool.

If you don't mind me asking, does that mean no 401k/IRA/pension. 100% rentals?

Originally posted by @Alex Silang :

I've heard of people retiring on real estate. They just have a bunch of rentals. 

Would you be willing to do that? Maybe have a decent sized pool of cash to take care of the occasional roof repair or personal expense, but almost entirely in real estate?

Or is RE just a supplement?

 I could retire today on just my rentals, no problem. However I spent most of the 2010s building this portfolio, and most of the 2000s accumulating the cash to build the portfolio, so we're not talking about a lot of the people you see pop up here that think they're going to FIRE in 2 or 3 years off $200/door rentals that are leveraged to the hilt.

Now, I have other streams of income, so I don't have to just rely on the rentals. But yes, I could just retire on those, including the occasional roof or HVAC system. 

I think it depends an awful lot on how you came to be where you are and what real estate has provided you. And also, when you want to retire!

I got into RE for the purpose of supplementing my w-2. It has done that and then some. I have a very healthy 401k which I fully fund each year (thanks to RE) and I also have a pension (that mythical beast). I would hope to retire in another 14 years.

If I keep my buildings I will be partially retired. Each year it becomes easier and easier to manage from a distance... but you are still in the game. This will be a tough call. With that being said, I believe I could sell the buildings a decade from now and put the proceeds into an index fund and use that to supplement my income with a conservative withdraw rate that would exceed my current Net. With my other revenue streams, I would not have to touch this in a down market. But... if you want to make God laugh, tell him what your plans are!

Right now- six years- on I am still very much in the honeymoon phase. I love my buildings, I love the tenants that I placed, and I love having a monthly stream of cash that allows my family to, very comfortably; take trips, save for college, pay for private school and turn down purchases for every other reason except the price.

If I had to rely on just one of those 3 (4 if SS is still around) revenue streams I would feel very exposed and I would not be able to experience all of the things I hope to in retirement.

So no.

BTW, if RE is providing for you and you are doing well I would highly recommend diversifying perhaps throwing some cash into an equity index (VTSAX), especially if you have some years to go. I also do that ;)

Rentals are great! We have always had some and are now comfortably retired on rental income and SSI. Not a bad way to go. Sure, we have other investments too, but they are 'just there' not nearly enough income to retire on.

If it were not for rentals I would be that old guy at the cash register machine at Walmart!