All Forum Posts by: John Melenski

Hi Biggerpockets community,

I would like your input on my personal situation and whether real estate investing might be a suitable avenue to achieve my goals.  The reason I'm researching this avenue is despite saving for 5-10 years via conventional retirement vehicles, I've come to the conclusion that without some further active action by myself I won't be able to live the same lifestyle I currently live in retirement. I also want to retire around age 50-55 comfortable, which I would define as 150k/year in a lower cost city, and the retirement plans aren't good until my 60s.

That is my goal, nothing more or nothing less.

About me:

I'm a mid-30s single without kids working in the Pacific Northwest , making around 190k on a W2.

To help you understand my mentality, When I moved here several years back, I did not buy a house which in the appreciation mindset was a mistake.  I currently rent a place for $2700 instead of buying the same place for $800k, and my rational was the back of the napkin math stated the mortgage payment - principal was higher than rent, and continues to be.

I did not consider appreciation, but I guess one shouldn't count on it.  I see other people still buying and renting at these numbers though, so maybe I'm missing something.

I tend to be a do-it-yourself type of guy.  I buy/sell my vehicles on Craigslist, and don't use a dealer.  I replace my own light fixtures and broken appliances.  I rented my property without a PM. 

Current income, investing and retirement strategy:

I currently have a stable job which makes $190k.  Out of this expense, $2500 goes to rent, which ends up being $3000 into housing after all utilities and other related crap and insurance is involved.  Car payment is around $250.  I have minimal to no other expenses.  Usually $2-3k/month takes care of all shopping/groceries/gas/entertainment.

I invest through my works retirement plans. I save annually ~$65k maxing out a Roth IRA/401k/HSA. Given much of this is after-tax income there really isn't much spending money left each month, as take-home is only 6k, and I'm single at the top marginal tax rate. That all gets rolled into SP/500.

However, I have about 100k in a brokerage account. ("rainy day fund").

Real estate experience:

When I was young (early 20s) I lost $60k buying a house and having to sell two years later to move for a job.  I sold that one.

I do still own another  low-value home from my previous city ($~350k) which I was forced to rent out when I moved because I was under-water on the mortgage at the time ($180k). It's come back up but after a couple tenants and a few learning experiences, operations are going well and the capital gains exemption window has expired, so I've left it as a rental even though it's sub-optimal as one (acreage doesn't bring money).

Obviously, I've felt the pain and know there's risks.

Compromises and options

I suspect investing activity would require re-deploying of retirement capital as I'm basically barely paying expenses right now on $6k take-home.    A large contributor to that is the $5k of take-home being deployed to qualified retirement accounts

I do not feel removal of any money from a qualified plan is an appropriate option, even though there's a reasonable amount of money there right now.

Therefore, any gains from rental activities would have to exceed what the S&P 500 is doing, which has treated me well.

Why am I asking though?  It seems housing has a component of "leverage" that has many folks bypassing my savings rate while spending more.

Goals

My goals are 15-20 years from now (mid-50s) to be able to retire early, have fun, while maintaining a lifestyle and income.  I've realized simply having $1-2 million in a 401k doesn't go very far, nor is it accessible until your 60s.

What are your thoughts?  Are rentals a good strategy for me?  If so, which investment strategy are you favoring?

Thanks for your advice.

How do you know they would not pass your criteria other than there outward expressions to you?

They sound annoying, but they haven't done anything other than pay rent and take care of your home to date.  If you want to raise the rent, raise it.

In general, you can simply non-renew if you want them out, say for a remodel.  It just can't be for a protected reason or against local law.