Strategy to replace income?

Question

How would you invest if your goal wasn't necessarily a certain ROI but simply to replace your income in a few years? My partner and I drive a Semi truck as a team. Because of this we have very little living expenses. We don't keep a house because when we do take time off we choose to visit friends/ family or we use short term rentals in a place we'd like to visit. That makes most of our income expendable.

So my question for you guys is what do I need to keep in mind if our goal is not necessarily a certain % return but to replace our income so we can come off the road in a few years and live off of the income from rentals?

Moises R Cosme · Answer

I suggest the following two potential models

1. Buy a 3 family with FHA loan (you will need 3.5% down payment, 6 months of mortgage payments in your bank accounts over and above your down payment and closing costs), use one of the units as your home base, after 2 years, you can move out and buy another 3 family & qualify again as a first time home buyer & do the same thing...  You can essentially follow this model over and over.

2. Buy dumpy houses, you are looking for houses that you can purchase for about 50% of what they would be worth if they were all fixed up.  Invest up to 35% of your purchase price to renovate the property, once you complete the renovation refinance your original loan into a fixed rate standard mortgage and rent the place out.

As long as you manage the total money you put into the property to make it so that when you are done with the project it will be worth enough that you can take out your initial cash investment and have a mortgage that is 75% of the fair market value of the property you will be able to repeat this process as well.

Here is an example:  44 Blanchard St. Gardner, MA

Purchase price:                 $140,000

Renovation expense:          $46,500

Fair Market Value (after rehab): $259,999

75% of $259,999 is $194,999.25, that means that I can go to the bank and get a fixed rate loan on the property for $194,999.25.  I have $186,500 invested in the project, I can get all of my money back.  I can now rent the house out for $1800 per month with a mortgage payment of roughly $1200.  I can now take the money and buy another house.

I hope this helps.

Mary M. · Answer

First, what is your goal income wise? This number is critical.  my suggestion is to save every single penny that you can - to replace your income you will need to save a large sum, but its doable... so make a plan and stick to it!

i am going on the assumption that you wont be able to personally work on any property until you are retired, so multi family might be a good option.   Suggest you find someone who can help you lay the path for your success    @Bill F    is someone who has laid out similar in other posts.  (I cant tag him for some reason...)

Theresa Harris · Answer

I do long term rentals.  As you are driving around the country, you get to know different towns.  Find some where you might like to settle down eventually or have as your home base.  Then look at places with a secondary suite.  You could buy a place now as your primary residence, live in the suite whether that is a smaller basement suite, carriage house above the detached garage and rent out the main house.

To replace your entire income, depending on how much that is, it will take a lot of rentals or more time.  I have rentals and my plan is to pay them off within the next 9 years and then use that income (plus my pension) to live off of.  Depending on what I want to do, during my retirement I may then start selling them off.

Kenneth Garrett · Answer

@James Mitchell

My goal is to replace my income and provide generational wealth for my family.  I use the BRRRR mostly, but not all the time.  I like to get my money back out in less than two years as a goal.  Once that is done the CoC is infinity.  If you want to scale to replace your income that’s great.  Everyone’s goal is different.  Some want to quit there job while others are looking to supplement there income or replace it in retirement.  The great think about REI is it’s your plan.

James Mitchell · Answer

@Mary Mitchell

Yeah I won't be able to work on any property and I'm leaning toward small multifamily (2-4 units) to start. On the upside, if I decide to start in my hometown my dad is a general contractor and will handle that end.

If we focused my SO and I could probably save around 150k a year as we are newly debt free.

If we could find two 2 to 4 unit properties we could probably qualify to buy one each under a 3.5% FHA mortgage.

Brian G. · Answer

@James Mitchell launch a str biz. It’s a little more work and it’s more active but you can juice your returns and increase your income more quickly. The challenge is you need capital to acquire properties.

Strategy to replace income?

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