I have enough now to retire in 5 years!

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I have enough now to retire in 5 years!

Ana Hyler
Lincoln, NE · Member since 2008 · 249 posts · 46 votes

We started investing 5 years ago… and we’re really proud of our accomplishments so far. In 5 years we went from being tenants to owning our residence plus 19 rental doors! Both my husband and I still have our full time jobs and also manage all of our properties… final goal….retire early and keep on investing on the side. We have decided to stop buying and concentrate on paying down the debt acquired with real estate. According to my calculations…in 3 to 5 years we should have enough net cash flow to retire. I’m excited about this new focus. The challenge… I’m an entrepreneur and I will have a very hard time staying put and not trying to keep on growing!
I’m excited to share this with all of my BiggerPockets colleagues…as we all have similar goals and aspirations! … Thoughts?
:D

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y

Congrats! You can see the light at the end of the tunnel and it's not a train! (?) Make sure that retirement means more of a fixed income.

I have seen several of my friends retire on rental income, but it doesn't necessarily stay up with the cost of living, since rents can't be increased, in some cases, quickly, rents lag.
Shooting for 20% more than your needs is better than hitting a figure today and saying I can live off that.

And, don't forget maintenance, 15 years into retirement holding older properties may need attention. Just two aspects that retiring investors should address, IMO.

But, congrats, it sounds like you are well on your way, it's a great feeling isn't it? (!)

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  • Ana Hyler
    OP
    Lincoln, NE · Member since 2008 · 249 posts · 46 votes
    12y

    Shaun, I agree.... this is really counting on not an expensive standard of living.... and to be honest...more then retirement....we're looking to be free of debt to explore more opportunities and not be tied down to a place or responsibility.

    As far as current cashflow...we're between $150 to $400 depending on the property.

    0Reply
  • Carl Martin
    Rental Property Investor · La Plata, MD · Member since 2014 · 18 posts · 7 votes
    12y
    Congratulations, that is my dream.
    0Reply
  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by @Ana Hyler:
    Shaun, I agree.... this is really counting on not an expensive standard of living.... and to be honest...more then retirement....we're looking to be free of debt to explore more opportunities and not be tied down to a place or responsibility.
    As far as current cashflow...we're between $150 to $400 depending on the property.

    Well it depends on what you consider expensive and what your actual level of income is.

    Even taking all 25 doors at $150 that is $45K a year (I assume tax free) which isn't amazing but a bit more than a lot of people make (after income tax). If you get them to average that $400 mark (Since they are all leveraged this isn't a big stretch as you start paying a few off) you are up to $120K a year. You aren't buying a private jet but you aren't waiting Mac&Cheese to go on sale to buy 100 boxes to make sure you can eat either.

    Are you self managing the units? If so I'd seriously consider bringing someone in to take over at least some units with the carrot of you want to shed all duties in a couple years so if they do a good job they could be getting the entire portfolio.

    Sounds like you guys are doing an phenomenal job!

    2Reply
  • Ana Hyler
    OP
    Lincoln, NE · Member since 2008 · 249 posts · 46 votes
    12y

    shaun, if $45K was enough...we're already there now... but obviously not, that is why we want to payoff those loans...then... the numbers are different!

    We are slowly starting to look at what will be our options in terms of management delegation... your idea in one we will consider... we're also starting to train one of our kids who is now 21...who has expressed interest in the business. So....there's a lot still to decide, resolve and reach.... my main thing now is debt payment down!

    0Reply
  • William McGowen
    Investor · Lincoln, NE · Member since 2013 · 24 posts · 1 vote
    12y

    I follow a slightly different path. I did follow the Dave Ramsey plan, and it helped me, but with real estate I am willing to have debt, but the deal must make sense, and I have rules about what kind of property I want, and what kinds of profit.

    With 25 properties, and probably a lot of equity, you could try to sell them, (sometimes a package deal to one or more investors,) then use the money (1031 exchange to defer taxes,) to purchase a multi-family, possibly with a management team in place.

    One thing you can take advantage of on multi- family is the cap rate valuation. With a 10% cap rate, every dollar a month in increased income, or reduced expense results in $100 in increased value.

    0Reply
  • Geoff Woods
    Multi-family Investor · Ladera Ranch, CA · Member since 2014 · 14 posts · 8 votes
    12y
    Hey William, Can you go into a little more detail in explaining how with a 10% cap rate, any dollar in rent increase or expense decrease increases the value of the property by $100? What strategies would you recommend to increase rent or decrease expense? Thanks! Geoff
    0Reply
  • William McGowen
    Investor · Lincoln, NE · Member since 2013 · 24 posts · 1 vote
    12y

    Oops, I meant $120.

    Cap rate = Net Operating Income / Price.

    Cap rates are the way apartment buildings (5 units and up,) are valued, based on the income the property produces. For example in Omaha, which is close to me, I was informed (by an Appraiser) that the cap rate is generally 9%. So people are generally willing to pay an amount that results in a 9% return on their property in Omaha.

    Now this is obviously influenced by other factors. An A class property garners a lower cap rate then a D class property, and the cap rate in Omaha will most likely be different then in New York, or Los Angeles areas.

    And obviously you can negotiate anything, so the price isn't guaranteed to be based exactly on that cap rate.

    But based on a cap rate valuation, if you can (intelligently) cut expenses, and increase rents so income increases $100 a month, that is $1,200 a year in increased income, and based on the 10% cap rate valuation, your property is now worth $12,000 more. 9% cap rate would mean it's worth $13,300 more.

    Here's one article that discusses it:

    http://www.biggerpockets.com/articles/924-understanding-value-in-multi-family-units

    0Reply
  • Chad S.
    Rochester, MI · Member since 2014 · 88 posts · 50 votes
    12y
    Originally posted by @Ana Hyler:
    Thanks guys! We continued to purchase properties till last year, we currently own 25 doors. To respond to Chad S. we work in the Lincoln Ne. market and business is good here! That being said...our vacancies are maybe 5% a year... and once a unit gives us notice of Vacancy, we start marketing it for rent and in general it rents right away. We take 2 weeks to do the touchups, change broken blinds fix anything needed and then a through cleaning and carpet wash before the new ones move in. Every once in a while....we have evictions, but thank God...not often (we had 2 in the last year 2 years)...those usually leave the property needing more than 2 weeks turnover. Hope this info helps you guys. I'm more than willing and happy to share all I can!

    Thanks for your response.

    Only a 5% vacancy on 25 doors is great! More money in your pocket.

    0Reply
  • Eric P.
    South Jersey, NJ · Member since 2014 · 154 posts · 50 votes
    11y

    This is such great motivation.  My wife and I are 30 living in over priced North Jersey.  We hope to be home owners this year and start purchasing rental property.  My father is a handyman and plans to retire from his day job in a year or 2 so we've thought about purchasing collegetown property. I know the tenants are hard on the property, but its not uncommon to find a beat up $200k home in this area and have 6 kids living in it for $550 a head.  Having a handyman in my backpocket is the only reason I'd consider going this route.  My wife and I have discussed that we'd love to have 5 properties by 35, and ramp it up to 15 by 40.  The fact that you managed 25 properties in just 8 years gives us a ton of hope!  

    0Reply
  • Mark Masiel
    Lima, Lima · Member since 2014 · 59 posts · 11 votes
    11y
    Congrats! South America is a great place to live though not necessarily cheap. It was when I first lived there 12 years ago but no longer. Cheapest place to retire is probably Florida these days.
    0Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    11y
    Hello Ana, Inspirational success you have made found yourself. You are truly to be commended. You say you went from renting to 25 doors. Could you please elaborate some on your first moves? How did you get in your own home and then how much of a grub stake did you have to buy the first rental property, and what were the details on your first rental purchase? I am very interested to hear how you went from zero to escape velocity. I am sure that would be of interest to many on BP. Thanks.
    0Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    11y
    Hello Ana, Inspirational success you have made found yourself. You are truly to be commended. You say you went from renting to 25 doors. Could you please elaborate some on your first moves? How did you get in your own home and then how much of a grub stake did you have to buy the first rental property, and what were the details on your first rental purchase? I am very interested to hear how you went from zero to escape velocity. I am sure that would be of interest to many on BP. Ana Hyler Thanks.
    0Reply
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