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Updated about 2 years ago on . Most recent reply

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Dan Williams
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Is this long-term strategy good?

Dan Williams
Posted

Hello All,

Goal:
to provide a fatFIRE lifestyle at a typical retirement age.  Currently, I'm 43 and my retirement age would be 68.  My wife and I own 2 duplexes and 9 SFM for 13 units, we cash flow about $5,500 a month free and clear after mortgages are paid, etc...

Stategy: by age 68 would be to own 20 SFH that each cash flow $2,000 a month completely paid off. In my area, this will ultimately require about $4M - $5M in equity.

Rationale:

* Ultimaely no leverage, less risk, I sleep better at night.

* 20 x $2,000 is 40K after tax, insurance, and expenses more like $25K a month.

* My wife and I self-manage and we can manage about 20 SFH with the help of handymen and service companies. This is our limit for what would allow us to live our lives with some work here and there.

* SFHs are easier to acquire 1 at a time over time.

* Newer B-class properties and tenants are easier to manage and less hassle.

* SFH tenants stay longer. Turnover is our biggest time and money cost.

* Our children can inherit the houses and most likely have an easier time selling them.

My questions are:

* This strategy seems realistic, especially since we already have 13 under our belt, is this strategy realistic?

* Am I making the most of my capital considering time/effort tradeoffs?  I realize one can grow forever using leverage but that increases time, effort, and risk as well.  

* Your thoughts or recommendations?

Thanks for any insight,  I really enjoy hearing from experienced investors that have been in real estate for decades.

Regards,


Dan

Most Popular Reply

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Dan H.
#1 House Hacking Contributor
  • Investor
  • Poway, CA
7,099
Votes |
6,147
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Dan H.
#1 House Hacking Contributor
  • Investor
  • Poway, CA
Replied

I agree with @Joe Villeneuve that the easiest way to get to your goal is to better use leverage.  I am not advocating being over leveraged which can be risky.  I am advocating for a max level of leverage that would not cause you any angst. For each person this is different and it also depends on what other resources you have.  If I could keep my RE at 90% leverage I would not have any angst because of my other resources.  However, if I only had RE as my only resource, I think 80% leverage would be the most I would feel comfortable with.

Here is another thing to consider on this recommended leverage.  While you work a W2 job you can obtain the best loan terms.  After you "retire" (managing 20 properties does not seem retired to me), you cannot obtain loans with as generous terms.  Now is the time to create the leverage even though rates are over double what they were a year ago).

Good luck

  • Dan H.
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