All Forum Posts by: Account Closed

Re: retirement, my plan would be to retire in about 3 years - so my expectation is that I would be very comfortable living on $40k/year in the near future, while I can afterwards increase rents every year based on inflation.

>>1. 10% return - For secure cash flow, you can lend your funds to real estate investment companies for 9-11% for 5-year terms, with 65% LTV. This is a more secure investment (noteholder gets paid off before the equity holder if anything goes wrong.) The checks just arrive in the mailbox. Not exciting, but not sure of your appetite to take on the risk and activity level of real estate investing.

This sounds interesting - would these basically be mortgage-backed bonds?

>>2. 20% return - Invest as a private/hard money lender with trustworthy and established rehabber/flippers that you can find right here on BP. (I'm not one -- a flipper that is, I am trustworthy, at least my dog thinks so:).

20% returns are phenomenal, though even doing this via trusted and established persons, I'd think that you must be taking on much more risk to achieve returns this large. My own tolerance for risk is low, I'd prefer security over possible large gains.

Re: retirement, I haven't made any definite plans at this early stage, though I'd probably be happy living in most areas of the US and have also thought about parts of Europe or possibly other areas. Even in NY my living expenses are quite low so based on how I live, I wouldn't anticipate being restricted much based on the projected $40k/year.

Even after owning $500k in rental property free and clear, I would plan on working for some additional time just to build up a safety net of cash. And even if $40k/year doesn't seem like enough, going back to work to put together some more savings for additional property should be easy to manage.

Thanks for the responses so far. Re: the retirement income, currently my income has been good, though I am a frugal person by nature and really don't spend much. I haven't kept close track of my spending but $2,000/month would really cover a typical month barring any unforeseen expenses, so I would expect to be very comfortable on $40k/year.

Joel: What states did you have in mind regarding higher cap rates? I'm curious though I would like to stay conservative in terms of risk.

I've been thinking of buying rental property for a long time but am just now getting into it more seriously. I've read that 8% is a realistic and fairly conservative cap rate, so it would seem that someone could retire owning $500k in rental property free and clear and live off the income as long as they need (approximately $40,000 per year, while rents could then be adjusted upward for inflation as time goes by). Is this a realistic plan for retirement, and are there any important issues or concerns that I might be missing? I know that there will be repairs needed from time to time of course, and it would seem that a very expensive repair could put a large dent in your income for the year.

Personally, I'm thinking of starting with one apartment building, around $250k, then buying a second at a similar price a year or two after, and have them both professionally managed. I currently have approximately $280k in savings, and if I'm able to keep saving as I have been, I should have $500k in about 3 more years. I don't hate my job, though I would like to retire from it as soon as I am financially able.

Thanks, Dave

Hi - I've been interested in buying rental property for a few years, and lately have been looking into it more seriously (viewing listings, etc.). I just want to make sure that I have a good sense of the risks involved - I've always been conservative with my money and would hate to end up in a position where my property is losing me money. I would plan to buy and hold the property long-term.

The biggest risks seem to be long-term vacancies, which I feel could be basically controlled for by buying a multifamily or apartment building and by focusing on areas with a stable or growing population (where there isn't a large oversupply of housing). Also, potential large expenses would be another risk (tenant destroys an apartment, large repairs, etc.), along with deciding to sell the property shortly after buying, though I don't plan to do this.

Currently I've been focusing on properties in areas that I'm more familiar with, and have been looking at larger multifamilies or apartment buildings in decent areas (not a higher than average crime neighborhood) that are fully or nearly fully rented with around 8%-10% cap rates (from reading other posts, I know I'll have to verify the cap rate myself). This would seem to be a very low risk situation - is that correct?

Additionally I was curious about the stress involved. I would guess that with a good property management company who'll deal with non-payment of rent, repairs, etc., that as the owner, there wouldn't be much to deal with on a day-to-day basis and hence would be a pretty low-stress situation. Am I off base here? I just don't want to get involved in something that's going to keep me up at night.

Thanks