Quote from @Sunny Burns:
Quote from @Steve K.:
Quote from @Sunny Burns:
Quote from @Steve K.:
Congrats on being able to look on the bright side because most people would be panicking in your situation (losing their job with 5 young kids and only 3 properties/ not much income).
I was in your position at around your age but with only one kid. We travelled for around 9 months doing the van life thing then I got bored and starting working again simply in order to have more of a sense of purpose. I also realized that life was a lot more expensive than I had budgeted for, and some big capex issues came up with our properties that would have been too expensive to deal with remotely, and traveling with even just one kid dirt-bag style was not nearly as much fun as it was when I had done it for a few years after college before kids.
A wise relative told me I should have at least $10M in the bank if I really wanted to fully retire that early (with one kid). I laughed at the time because that sounds like a lot of money to a young person who is frugal. But he was serious, and he was right.
Are you accounting for capex in your calculations? I see maintenance but no capex. Also don’t see any vacancy/ loss. These numbers look very optimistic honestly. Even if everything goes well, some years you will still be negative due to capex issues or vacancy/ loss issues that always seem to strike all at once. Budget accordingly! Money will not always flow out of these properties, sometimes it will have to flow in and you will need to draw on your cash reserves.
Also not sure how you’ll be able to live off of $120k/ yr. with a family of 7, especially while traveling. We are a family of 5, we take a few big trips a year but definitely not trying to travel full time, and our annual budget is A LOT more. Not just a little bit. A LOT.
Kids get more and more expensive as they get older, so do properties, and people tend to enjoy a higher-end lifestyle as they get older as well. You may not want to live as frugally as you are now forever. According to my math, you need to be budgeting around $2M bare minimum to get these kids to 18, then 5 college tuitions on top of that. That’s not including your own living expenses, or saving for retirement.
Honestly I wouldn’t quit working in your position unless you have about $10M bare minimum in the bank in a high-interest savings account or invested very conservatively in blue chip stocks/ bonds. $30M would be much more comfortable!
So we've done basically full renovations on each of the units over the last 10 years. Thats why my maintenance which includes capex is a little on the lower side. But I figure $280k over the next 10 years sounds reasonable.
I am not assuming my kids go to college, if they want to go, they can... but I am not doing 529's for them. They each have Roth-IRAs.
As we get older rents will increase, mortgages will start to go away one by one, and we will have access to better cash-flows.
No need to save for retirement, as we essentially are retired at this point, and living off the rental income without having to touch the retirement accounts, as was the point of this post... and we maxed out IRAs and 401k early on, so those have enough basis in them that they don't really need any future contributions to balloon into awesome assets by traditional retirement age.
I don't necessarily want to Die with Zero... but to keep the Golden Handcuffs of my W2 on till I reach $10M sounds like a very unnecessary waste of my life based on fear.
I appreciate your point of view, and I know there are risks involved, just yesterday I met with a roofer to put a new roof on one of my units, but I've checked my historic repair costs, future potential capex projects, and done my best due diligence to move forward towards a life of freedom on my terms.
Here is a closer look at our personal finances if anyone is curious, also we have access to $300k in HELOCs that are unused:
$285 per year for kids activities for 5 kids?
That’s really messed up. Where is food and clothing? Where are birthday presents and birthday parties and Christmas and family vacations? This budget is not even close to being realistic. Not even in the ballpark for raising 5 kids. Dude you are nowhere near being ready to retire. Not even close!
Sure you can afford to take a little time off but retiring means never needing to work again by having your expenses covered for the rest of your life and ideally having some left over to leave to your heirs. You are one capex event like a sewer line replacement, or one bad eviction with vacancy loss and property damage or one medical event in your family away from financial ruin. Am I the only one on here who is going to call this out for what it is? This is total BS. Retiring with 5 kids and only 3 properties that will be lucky to break even over time is not “financial freedom” it’s financial recklessness and borderline child neglect. Sorry, the math just isn’t mathing for you to retire anytime soon. Like not at all.
Steve K why are you so quick to make assumptions and be dismissive? What I've shared is such a small fragment of who we are as a family.
So Kids expenses we have certain weekly, monthly and annual expenses... total is $2,277 for the year, you have to add up the different columns.
That red upper-right box is just our Bills & recurring expenses, separate from our budget...
Our Budget is down below in the bottom right red box.
Sorry for sounding harsh. I bet we would get along well in person, we actually have a lot in common. I took two long breaks from the drudgery of the daily grind in my life: the first was when I lived in a school bus when I was 23-25. It ran off of used vegetable oil that I got for free from restaurants. I lived within a budget of ~$2,500/yr (no health insurance, no alcohol or eating out, rock climbing sponsorships for clothing and gear, dumpster-diving for food and using recycled vegetable oil for fuel and being a total dirtbag and all of that fun stuff). Frankly I was lucky I didn't get hurt or anything and was able to come back from those "wilderness years" and end up being successful.
The second time was when I was your age and had one kid and about 20 rental units or so. We were set up just like you but with one kid and many more properties. I got started by house-hacking like you, expanded into value-add multifamily, did most of the work myself and boot-strapped my way up like you.
So from having a similar background, I just know you are not budgeting enough for these kids and are not even close to being ready to retire on these 3 properties alone. The properties will possibly break even some years but other years you will have to replace big expensive things like roofs, siding, windows, sewer lines, furnaces, water heaters, other mechanicals, appliances, carpets, blinds, flooring, driveways, sidewalks, decks, porches, soffits, bed bugs, tree work, etc. etc. etc. I have had a lot of big expenses that I didn't see coming and so will you. Some of the units you just updated will need that same work all over again sooner than you'd like, so you have to budget for that. Cap ex averages $500/mo per unit in my experience (over time obviously not every month but when I break it down to a monthly budget this is what capex comes to). I don't see where you have accounted for that. There will other black swan events like a tenant issues, vacancy/loss etc, and things like that which can be expensive and I don't see where you have budgeted for that. I think anyone who has owned rentals will look at your numbers and agree they are optimistic. This is my experience, being 10 years past where you are now so I hope you take it as helpful advice from a 10 year older version of yourself, and not just me being a Downer.
Sorry again for the tough love, it's just not wise to think you can retire with 5 kids with no income and only 3 properties that may be cash flow negative certain years and other years will spin off some positive cash flow but nowhere near enough to live on with a family. You can take some time off but you are nowhere near ready to retire permanently and "retiring" now will just set you back IMHO. You need to add some zeros at the end of your budget for example you should be budgeting at least $20k per year per child. I would keep working until you have enough money in the bank to have longterm financial security for your family. Take some time off though! You can afford that and you've earned it.
