How would you retire/FIRE w 500k cash now?

[Drew Slew]

This is quite open ended but what would you do if you made 140k, fully remote work, just moved to Miami (no income tax), and have 3 properties/dabble in the stock market have about 400-500k cash to use aside from income/rental income?

- 2 out of the 3 properties are rented since over 2yrs, so could use income for new loans possible, about 1500/m net cashflow from the two. 3rd property is primary residence and currently costs about 1500/m so come out even w them. BUT if rented it could cashflow 500/m at least, so 2000/m net cashflow w no job and no place to live..

- save about 5-7k a month from the salary, but would like to quit. so lets say no income soon. 

- have in stocks about 300-400k to play with liquid. 

IDEAS so far, Miami area and NYC/NJ market so far:

1) BRRRR start w a small condo all cash and try out the buy rent rehab strategy to take back initial capital. Even if it fails dont need all capital back, 70-80% is enough to keep buying.

2) Buy 2-3 condos quick w current W2 income that cashflow each 200-300/m, so net casfhlow would be above 2-3k if ALL properties rented, and just trade rest in stocks, dividends. 

[Greg Scott]

With that much cash, look at getting into bigger investments, not condos.  Condos are not smart investments since you do not control a large portion of the expenses.

Consider getting into multiple apartment deals.

[Brian G.]

@Drew Slew my advice *if you are willing to start an active biz where you can juice your returns with available capital and a moderate amount of effort*: look into the Vacation Rental business and learn how to self manage remotely like lots of ppl on BP. Good luck!

[Timothy Lewis]

Originally posted by @Greg Scott:

With that much cash, look at getting into bigger investments, not condos.  Condos are not smart investments since you do not control a large portion of the expenses.

Consider getting into multiple apartment deals.

 I agree. I would keep my job for a little while longer and go for an apartment acquisition 

[Tyler Warne]

Brrrr as primary residences. Rent your current place and then do it again. I would suggest this because your terms will be better and you can arbitrage the interest rate. Live in Brrr - Even better returns than a traditional Brrr. 1 per year. Low risk low cost - after you season it, you can do that again. If you live in it for maybe 2 years you can hold it for another 3 and then sell before you would need to pay taxes on that money too. Just some thoughts of how I would have done my younger years better. 

[Drew Slew]

@Timothy Lewis thanks good idea. You mean like a building acquisition w more than 4 units (so its commercial)? I have a 2 family that i bought back in 2018 as a primary, and now both units are rented, but not a BRRRR. I havent used FHA yet so i could tap into that next year, but the 1 property a year to me seems slow w this cash. Id like to move quicker and w this 3 properties that break even now, acquire a few more to really FIRE and no dependency on a job.

@Tyler Warne thanks a lot for the input. The the primary residence acquisition i believe is slow, can only do it 1x per year i guess. I just bought this condo as a primary in Feb 2021, so have to sit on it, but now am a FL resident so no taxes compared to NJ so thats a plus. You are saying get renovatable BRRRR primary single fam or 2 fam units?

@Brian G. yes the STR is def on my mind, did do some airbnb rentals w my NJ condo, rented a room for 60-80/days but was a HUGE headache for small money. But it could be scaled better, esp here around Miami w condos i guess. Something to look into.

@Greg Scott thanks good advice. Idk why i guess safety and lower prices are what still keep me around condos, but it probably doesnt appreciate as much or can be leveraged HELOC/renovated as SFH or multifamilies.

Overall options:

- FHA for next primary and BRRRR - yearly can switch primary residences like this (but i believe FHA requires W2 income)

- create maybe an LLC and invest in condos for airbnb, lower priced 100-150k 2bedrooms here around Ft Lauderdale/Miami - use that cashflow on tax returns to leverage for other loans and offset W2 income

- buy/BRRRR 1-2 larger multifamily deals while still on W2, than 4-5 properties should enable FIRE all rented out

[JD Martin]

I would go find a job that I really liked and do that. You're really too young to "retire", especially since everything listed is just another form of a job. So I would go find work I was passionate about and do that. If that's flipping houses, then so be it, but unless your profile picture is horribly out of date you've got a whole life ahead of you and that's a long time to not be doing something you're passionate about. 

[Tyler Warne]

Well since you just purchased you will need to wait a year, unless a lender would allow you to purchase another primary in the next year. The next one you could buy a 4 unit as your primary, which would expedite the FIRE - if you did one of those a year on 15 year fixed rates as primary residences you could do pretty well. Sounds like you are making some good moves currently though. 

[Brendan F. Nagle]

@Drew Slew

Buy a portfolio in a rural area. 500k goes farther where I invest. Cash flow over 4K a month doable. And after a few years, refinance out to redeploy the equity.

[Zachary Beach]

@Drew Slew are you wanting a new job or to be totally FIRE?

If you want a new job BRRRR is a great option can get amazing return on money quickly if done correct and it's tax advantages.

If you want total passive find properties with good cashflow after PM preferably in places with appreciation so they also make since 40 years from now. My wife and I have a STR PM company in a great appreciation market that could get 10-20%+ CoC depending on financing plus pay down and tax benefits and long term appreciation.

Getting a second home hack with 10% down lower interest rate than investment properties loan in a vacation rental market that cash flows like crazy has amazing returns. Think buying a 10-12+ cap properties after PM with 90% down 3-4% interest rate. That's 6-9% return for you on the money your borrowing. Or a 64-93% ROI with 0% inflation with just 2+ appreciation that's an extra 20% return per year.

My wife wife and I reached FI with a few LTR's and few STR properties.It has been great we decided to start the management company to help other also get there and to get more properties so that we could hire out the last couple jobs we were still doing actively to manage our STR's.

[Brian G.]

@Drew Slew imo the best VR markets are not in urban areas or large event driven markets but in mature drive to vacation destinations with an outdoor draw: think lakes, oceans, mountains and desert. Sure there is a hassle factor but if you choose the right market/s you can make great money and make it well worth your time. With $500k and no DTI issue you could net $100k/year easily off of 4 properties. It's more active than a LTR biz but the returns are well worth the effort imo. Good luck with your decision!

[Dan Beaulieu]

Keep your job as long as possible man. It’s way easier to build a portfolio and get the best financing possible with a W2 job. I see it all the time with my clients struggling to refinance their brrrr deals. That’s too much income to give up at a young age. 

[Amanda Jacobellis]

@Dan Beaulieu yup I own my own business for over 15 years and it’s almost impossible to count my income with lenders. I am now doing bank statement loans but they are closer to 5% plus points

[Luiz R.]

@Drew Slew

Have you considered buying an established business which cash flows to offset the income loss and allows you to manage through an in place team and do whatever else on the side?

In the area and open to DM.

[Alexander Szikla]

Before officially making the move, I would house hack via FHA in NYC right now. If you can get a 4 unit and a basement, that would be ideal and create major cash flow and equity creation, plus you can not worry about a property manager and boost your yield. Then once you have higher income and a ton of bricks, move to Miami!

Personally, I am very bullish on New York and NYC itself. Sure it suffered due to COVID, but you want to buy when there is distress. I think all the folks who moved away are already getting bored and already coming back. Plus, the vaccine is getting rolled out which will curb the spread tremendously. Now is the time to buy.

Cap rates came all the way down to 3% (or below!) during the "boom" times but COVID has loosened everything up and now 5% can be had in Manhattan, 6%-7% in Brooklyn and even 8% in the Bronx. Nationwide rates hit a low of 2.7% - so there has really never been a better time "spread" wise.

Long term, I think NYC will come back as it always has time and time again. I am also a great believer in investing when there is distress and deploying capital when you can.

If you are looking for yield in the short run, Manhattan may not be for you. However, it is certainly the most attractive it has been in years from a cash flow perspective. If you are seeking out asset accumulation and equity appreciation over the long term then there are certainly fortunes to be made. And there is still plenty of cash flow opportunities in the outer boroughs if you buy right!

[Evan Polaski]

@Drew Slew, I am with JD that you are replacing one headache for another.  You didn't like running an airbnb, it sounds, so why do it again.  You are also talking about some of the most expensive areas to live on the east coast in NYC and Miami.  

Having been a landlord for a decade, and self managing most of that time, creating a portfolio of rentals that support you, and presumably replaces your decent salary is going to take a while and become a lot of work, even if you hire out the management, you will still need quite a few rentals and that is a full time asset manager role, and likely takes a lot more equity than you have.

Also, your 300-400k liquid = 250-340k once you pay your long term capital gains, or less if you are looking at short term gains.  

[Tyler Warne]

I think that you could take any one of these ideas and do pretty well over time. I do think that W-2 income is a big deal (@Dan Beaulieu) for a while, at least until you are making at least that much from your investments. I also think that you may be able to cut back your work or ask for part time or make it more manageable so that you can enjoy it more while still showing the bank that you have the ability to earn. But these next steps are your intention and your life, you will need to deal with this choice and you will reap the fruits or consequences of your choices. Do what makes you happy and know that you can change your mind in the future (a lot easier with a big bank balance). Good luck and the most important choice is to take action!!!

[Drew Slew]

@Evan Polaski true, but its one thing to manage your own business vs someone else's. I wouldnt have any of those capital gains since i moved down to florida for this reason/own here. Plus, ill do a portfolio line of credit to tap that liquid portfolio so lets say 400k u can tap 30% at 2% rate and use that to invest in RE. The question is just in what to maximize cashflow, passive income that can replace a job's income.

@Alexander Szikla are you hungarian? Szikla is a hungarian name, im originally from there too (nickname here on BP). Yea i get NYC, i own in union city and jersey city NJ, im way more bullish on Jersey City as its really the new brooklyn, esp the south parts Greenville where i own, still can get 300-400k 2 family, which is like 1-2M in Brooklyn if im not mistaken. But comes w a lot of issues..

I get the hold on to the W2 income that its easier to get deals w it. im just trying to figure out how to best utilize current resources and build up a solid side business so W2 is not needed. 

[Alexander Szikla]

@Drew Slew - Yes, my father's side is Hungarian. Plenty of Palachinka at my grandparent's growing up! 

And yes, much easier to get financing with a W-2 salary - but keep in mind they also count a portion of the rents as income to help you out!

[Caleb Brown]

I'd look into apartments or syndications. Or scale into BRRR's (SFH or MFH)

[Eric Schultz]

@Drew Slew

Mortgage lenders seem to prefer W2 income over other forms of income because it is “steady”, “predictable” and fits nicely into their underwriting format. Losing the W2 income without having a solid 2-year track record of other consistent streams of income could make financing more challenging in the short term.

So, I’d say hang on to the W2 a little longer and take advantage of the no state income tax to accelerate your capital reserves.

Test drive how it feels without that $5K - $7K of W2 income on your monthly cashflow. Set it aside for a month or two and see how far you get with paying your monthly expenses on other income streams. Spreadsheet projections are one thing, but you’ll get some good feedback on your actual monthly cashflow and see if there is work left to do.

Finally, before you leave that W2 income behind, I would procure some debt tools. Setup a HELOC, personal LOC, business LOC, etc. so you have liquid reserves for not only getting your investing going, but for emergencies as well.

Looks like you are in a great position, but don’t let off the gas too early!

[Sean Senatore]

@Eric Schultz now this is great advice Drew. You hear this....?

[Drew Slew]

Great ideas Eric thanks

[Ofer Eyal]

@Drew Slew, I'd start with getting a strategy. 500K is a lot of money to waste only to learn this painful lesson. What do you want to achieve from investment? Why is it important to you? Before you answer those two questions - the rest doesn't matter.

@Drew Slew