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Updated over 8 years ago, 03/11/2016
"Retiring" at 33. Too early?
Good afternoon!
I'm a Realtor and RE investor here in Denver feeling burned out after a 5 year push. I've made decent incomes for the past 5 years (80-120k), and invested more than half of it each year in the best, newest rentals I could find. I'm considering "retiring" and doing something else.
I don't love being a Realtor; the hours in particular are difficult, I often don't feel like I can keep my mind from wandering to clients and pending deals, and I don't feel I've had domain over my own mind, or gotten away from work completely, in more than 3 years. I have 2 young kids that deserve better from me, and I want to give them my full attention.
We're established in a great home we remodeled in Denver with a $1300 mortgage. By the end of 2014 I should have monthly cash flows of about $4,500 after vacancy and expenses. This is roughly equivalent to our monthly cost of living, minus expensive vacations. I have 9 outstanding mortgages, including our principal residence. My wife does not work. As such, I think I could pursue a job with less stress, more coworkers, and more job satisfaction. Regardless of pay, I think we could make a run of it. Retirement should be taken care of with 8 investment properties fully paid off when I am 62, and increases in rent in the meantime will grow our monthly income with inflation.
What am I missing? Am I jumping the gun on this? Does anyone live happily on a similar monthly income? Has anyone "retired" and then regretted it? Is it difficult to get back in the game?
Thanks everyone for your input. How can I help you?
I've been right where you are. Being a real estate agent sucks and I would never want to go back to it. I think that's what I'm hearing from your post.
A few things I would point out:
$4,500 per month is not enough. It doesn't factor in any emergencies, which will happen. You will also get hit with higher health insurance premiums every year, which will make things more difficult. I didn't see how old your kids were, but they only get more expensive. I have two daughters ages 9 and 6. One is in competition dance and the other is on a gymnastics team - VERY EXPENSIVE. They outgrow their clothes really fast too. As your kids get older they will be in more activities. If they need braces, that's expensive too.
I would read the book The 4 Hour Workweek. It has gotten a lot of mixed reviews on this site, but I really enjoyed it. You might get something out of it.
If I were you, I would be LESS of an agent and MORE of an investor. That's what I did and it has worked out. I got tired of buyers and sellers calling me and bothering me. Now, I turn my phone to silent at 4:30. It has made my standard of living a lot better.
Originally posted by @Matthew L.:
I hate the term "retire". Retirement is for people that hate their jobs and have this artificial date 30 years from now that they can leave the job they hate.
Everyone should strive to be financially free so they can pursue whatever interests them; it sounds like you are close to doing that. I doubt, at 33, you are going to never want to do anything considered work again so don't consider yourself "retired". The work you do from now on should be work you love doing. If you don't enjoy being a realtor, don't do it. If you want to spend all your time raising your kids, do it (that's a job IMO). If there are hobbies you love, focus on them and maybe they will turn into a business.
As far as $4,500 a month being enough to live on, I could absolutely live a great life with that. But, I don't have a wife and 2 kids. Only you can decide if that's enough to live on. If it's not, get a part time job doing something you are more interested in to supplement your income instead of letting being a realtor drain you and take away your time to spend with your kids.
This is a great problem to have and I hope to have it someday!
Hit the nail on the head. Retire is a silly term. It's funny I think of other peoples jobs as work, but even though I spend 30-40 hours on RE every week, I don't consider that work. "If you love what you do you'll never work a day in your life."
Go get another phone...use it for only personal calls. When you're off the clock turn the work phone off.
Hire a part timer to handle some of the things you really dislike doing? Even though you're constantly on call you have decent flexibility in reality. I answer to a boss and have a desk I sit in...I was at a point where i've nearly been fired for leaving work to visit a dieing relative in a hospital(quit that job shortly after).
You might be feeling burned out with your current job but unless you have a good plan ahead of you it won't change that much.
Adam, I totally hear you. I was working at the same place for 10 years and got extremely burnt out on my job. I honestly dreaded getting out of bed in the mornings. I knew career wise I did not want to stay where I was, and it really was a dead end job for me. I knew I couldn't look at myself in the mirror in 30 years if I didn't persue a career that made me truly happy. Now, mind you that I am only 27, and most will balk at that, but hey, I had the financial means to quit, so in May of this year I did just that. I decided to take a mini-sabbatical to clear my mind and focus on real estate-- as well as a LENGTHY honey-do list. I am shy of 3 months of being home and believe me, after that much time you will be ready to get back to a job. I really believe that if you have the financial means to take a break, do it! You may step back and find that although your job was stressful and you felt burned out, that all you needed was some time off. Oh and with that honey do list, it never ends, and after a while you'll realize that with all of the hard work, you may as well be getting paid for it!
Good luck!
Joe Kmon
@Adam Haman The stress of the job is somewhat self-induced. The good news is you're a conscientious, high-achiever. The bad news is ... it spills over into your personal life.
A new position/promotion might be the answer, but you really have to spend some time and effort reducing your busy work/less value-add work and the work you don't like.
Like me, it doesn't matter what you choose to spend your time one. It's going to occupy your mind much of the day/night because that's who you are.
In sales, vacations cost double - lost commissions and the cost of the trip. If you were ready to 'retire' then you'd have no problem taking a 2 week vacation today. You might want to aggressively work towards taking multiple long vacations or winters/summers.
I do agree that $4,500 a month right now might work, but it probably won't cover everything down the road. But, this is your life and your job. The beauty of real estate is that you CAN be your own boss. YOU have to set the limits.
I realize that clients think you are there to handle their every wim and wish 24 hours a day. But, honestly, will they lose the house if they do not call you at 7 pm? Will the universe stop functioning if you stop working on Sundays?
By setting firm limits on your work life, you can regain control of your life and keep income coming in. So you lose a couple of clients - those are the type that you can live without anyway. It is those few clients that make our life hell anyway.
There will be a great many more that will respect your choices and admire your dedication to your family. Plus, your family will love you for it and you will be much happier.
As to a vacation, my recommendation is a cruise. Phone calls to and from cruise ships are ridiculously expense. It is a great way to drop off the radar - literally!
Take a long vacation, I "retired" at 45 after working 60+ hours a week for years helping to build an internet company,,I came out of it with enough cash (I thought) to last a lifetime,,however one thing you will find is it cost more to "retire" than to work.
My daughter was born the same year I retired and i spent most of the next 10 years enjoying watching her grow up,,,but I knew I needed, mentally, to be back building a business of some kind.
You have a great base with the $4,500 and have put yourself in a great position for your age,,but besides money, you will miss the 'thrill' of the "hunt",,
Take some time off, figure a new goal (maybe a month long vacation to an exotic place with your family when you hit $7,500 a month in cash flow), and keep it going!!!
Consider this statement: Your life is made up of time.
Time is the substance of life. How you spend yours says everything about you; what's important to you, who you are. You're only given a certain amount and you can never make more or get it back.
With your rental income being close to your monthly expenses, you're in a position that that the vast majority of people will never be in. Owning your own time. Congratulations! You're in the position where YOU get to choose what to do with the most valuable resource, your time, your life. It's freeing but also there is a huge sense of responsibility and some fear and uncertainty. You're entering a chapter in your life where your actions will be driven not by what you HAVE TO do, but what you WANT TO do. Own that.
Anybody that tries to tell you that you're income or lifestyle needs to be at a higher level is silly. Don't listen to them. Only you and your wife decide that. Humans are psychologically wired to feel insecure without more, it doesn't matter what level of wealth we're at. Google "Boston College study Secret Fears of the Super Rich". Contentment is a virtue that enriches us. Paradoxically you'll probably end up making more money by accepting your freedom and power.
The following advice echoes and compiles some of what others have said. I can't tell what you should do, I can only tell you what I would do. Of course your plan will be different but this might stimulate something.
The first thing I would do is figure out how I could put about 4-6 months of living expenses in my emergency fund to have some cushion and liquidity. Maybe you have it already, if not I would sell a property I had equity in (I'm sure many people will disagree, again this is just my conviction). Next, I would take a break from selling real estate, a clean break. Call everybody and offer an apology saying "I need to focus on some other things (or another project) for a while. I can't share the details quite yet." Why not create some intrigue?
I would take 3 or 4 months and I would focus on the following three things;
1) I would make my rental portfolio and personal finances as risk-proof, conservative and passive as possible (even if that meant affecting my cash flow a little). You can never achieve 100% passive but you can leverage managers and automation to hit 98%. You can't 100% risk proof but you can mitigate and plan for contingencies like economic downturns. I would read, ask consultants, whatever but I would treat this first step like my job. I would project my future needs and how much income is required going forward just for increasing living expenses just to have some working numbers for creating more buffer and stability in the future (to plug in to step 3)
2) I would do things I usually don't get to do, golf, take the kids to parks and other fun family things, play basketball at the gym, sit around in my robe watching TV all day, go whitewater rafting, go on a spontaneous road trip, hang out with some old friends. I would literally make a written list of everything that sounds appealing, everything I that felt my busy career deprived me of and keep adding to it every time something popped in my head. The zanier the better; enter an eating contest, go to the handgun range, get a pedicure, whatever the heck you want that brings you life and breaks that paradigm of an agent, which is being and acting like everybody wants and being instantly available for their every whim.
3) I would go to work on dreaming.* What do I want to do with the rest of my life? Do I want to create a legacy of wealth for my kids, do I want to start a passion business that would provide me income and joy every day for the rest of my life, is there a cause I want to help with like easing suffering or injustice in the lives of others, is there a skill I want to learn or type of person I want to become or a dream job to have ....? I would read books on the subject of lifestyle design (like 4 hour work week) and spend some time in the woods or a coffee shop with a notepad, dreaming, sketching, spitballing ideas. What's important to you? What makes you come alive? Have you defined your values, convictions, skills and passions? What are your future financial needs from step 1? Most importantly i would talk to my spouse and watch and listen to my kids.
Then I would go to work making those dreams happen and revisit the process of dreaming and goal setting as needed.
That's what I would do, for what it's worth.
Congratulations and best of luck!
Dave
*On this point I would definitely consider what Joel Owens has to say. Real Estate is such a powerful vehicle for making dreams come true and you have a huge head start with your skills and experience. It's probably freaking buyers that have you burned out! If real estate is a Las Vegas buffet you've been eating the mashed potatoes day in day out for 5 years. There are tons of great strategies to choose from. Now you can choose one (or more) based on your desires, skills and purposes. I'd listen to lots of BP podcasts. Maybe it's duplicating the same thing you did in 5 years but this time in 2. Maybe it's partnering with people to help them do what you already know how to do, which would be super fulfilling. Maybe it's something else.
Originally posted by @Erik Drentlaw:
I am curious how you have generated a cash flow of $4500 a month? Assuming you are leveraging the properties a good deal is about $200 a door. 4500/200 is 23 properties assuming SFR. That is incredibly impressive for five years and roughly $250,000 invested.
Im not doubting you, I am looking to follow a similar path and was hoping you could share how you got there!
Again congrats!
Hi Erik,
Here's a brief overview of our investing career to this point; it's kind of the Tale of 2 Cities, as Denver home values were much lower in 2010 than they are today, and I've been the beneficiary of a nice tail wind during the recovery. That said, I don't think I would ever settle for only $200 per door. It always depends on how you crunch the numbers though; I have been accused of calculating too low on vacancy/repairs, while you may be very conservative!
Lastly, I have to note that being a Realtor is the ONLY was I was able to jump on these properties and secure them. Except for property #1, Every. Single. Home. had multiple offers on the 1st day it was on the market, and my ability to be first in line, present a strong offer and terms, and act on my criteria was instrumental in getting the deal done.
All properties were purchased with 20% down.
#1) 2011 Our first investment was a big leap of faith, buying a large SFR from 1902 that had been split into a duplex for 141k. It was in an up-and-coming part of town, close to a thriving downtown Denver and City Park. As a SFR it has 6 bedrooms, and came to me with a Section 8 tenant on a lease for $1516 per month. The lease was more than double the PITI payment, and was paid by the state automatically on the 1st of each month. Even so, it was SO hard to take the leap of faith and test what I thought was a good deal. This tenant is still in the home today (unfortunately at a similar rent!), but it just keeps chugging along. If next year is a little calmer, I'm considering turning it back into a duplex to bump the monthly rents to around $2000 per month, but I didn't this year as the tenant wanted to stay, I was BUSY, and I knew the home would need 10k of renovations after years of a big family. The value of this home has doubled since 2011(!), and I seem to have one of the largest homes on the block. I'd consider selling it, but I'm waiting for the curb appeal of this block to take a turn for the better.
2) 2012 This was a gigantic duplex in Aurora CO, not far from where I was living at the time. One side is 3/2/1 garage, one side is 2/2/1 garage, with a total of 3000 square feet. The Seller was out of town and had below market rents (total of $1565 for both sides). Somehow it was priced at $155k, which was a steal even when things were relatively cheap in Denver. I was in the home for a showing 20 min after it hit the MLS and had my offer in within the hour asking for a quick signature. We had Seller signatures 3 hours later, and more offers kept pouring in after it was too late. Payment on this one is still only $825, and I've raised the rents to $2100, and the value has nearly doubled. This home is probably the best thing I have ever bought.
3) 2013 This year we refinanced property #1 and took out $50k of equity which we used to purchase and remodel our primary residence in Denver. This tapped our money and energy for most of the year.
4) 2013 At the very end of the year, however, I was able to purchase a 1999 duplex in Greeley CO, both sides have 2 bed/1ba/2 car garage. It's a unique and appealing setup. Purchase price was 175k, rents are $1700. I took a bit lower GRM on this one because the property was newer, in great shape, and the Denver market was already exploding so there wasn't much worth buying imo at the time. I thought this might be my last hurrah for a while.
5) 2014 I had set a goal to have $5k of passive income in 5 years at the outset of 2014. I was then at $2100 or so. A few serendipitous things happened:
--I found a lender who understood what I was doing and would make me multiple loans (up to 10) if I so desired and had sufficient down payment and debt coverage (they only wanted to see 1.2, my properties were closer to 1.8 on average).
--I knew we had made a great buy on our Primary residence, so after a year had elapsed I secured a 130k HELOC as our home had risen from its purchase price of 258k. After we invested $40k in a remodel, it now appraised at 407k! I'd rather be lucky than good.
6) As I was waiting for the HELOC to process, I made a breakthrough with my criteria. I identified a few neighborhoods in Denver/Aurora built in the last 10 years where condos/townhomes (which are appreciating rapidly throughout the whole metro area) were being hobbled by bad appraisals and the legacy of foreclosures had not yet allowed them to return to market rates. I felt this was a temporary situation as a few strong sales would allow these neighborhoods to rise to the prices commanded by similar neighborhoods throughout the metro area that were not similarly afflicted. I didn't love the idea of turning over control to an HOA, but the simplicity of owning/managing these units was attractive to me as well. Duplexes/4plexes and other traditional investments in Denver are so overpriced that they weren't even a consideration at this point.
I bought 4 units with roughly this criteria:
3 bed/2ba/1 garage/built since 2005/ low taxes/$175 HOA/$135k price/$1400 rent.
I signed all 4 new tenants up on 2-year leases since this is a hot rental market, and they are cash flowing an average of $650 per month each.
The HELOC allowed me to make cash offers to cut through the multiple offer scenarios, and then I would refinance into a mortgage immediately. This approach has lots of closing costs, and I would usually use my commission to pay for them. I even took 2 of them "as is" to encourage the Seller to work with me. Because most of these were priced too low, in a development that was artificially low to begin with, each unit generally has $15-35k of forced equity from the beginning, which is great. The developments have continued to appreciate as I had hoped.
7) I now have one last short sale condo under contract for $77k, which is a very low number around here. 2 bed/2 ba/detached garage, built 1980. I'm going to rent it out without the garage (which I will retain for extra appliances/tools/countertops etc). and it should cash flow $500 per month after PITIHOA.
Because most of these units are so new, and many have HOAs, my budget for repairs is lower than many people on the forums experience. I hope this continues. Also, I have had 7 weeks of vacancy TOTAL for all of my properties thus far. I account for 5% vacancy just the same, but so far with my management style, they do not stay empty for long. I hate vacancy and retain tenants like crazy if I can.
Once the math is done (including the last condo I have U/C), I should be able to count on $4,500 per month of cash flow after my average expenses and 5% vacancy. Perhaps a little liberal, I know, but all I can do is extrapolate from my own experience!
In hindsight this has been an incredibly fortunate and successful whirlwind, I feel like I'm waiting for the other shoe to drop in some regards. Whatever I decide to do job-wise for the next few years, I will pursue paying these properties down to combat a little of my unease about being leveraged so much, but at the same time I don't much care if we have a RE correction as I'm in this for the long term and it likely wouldn't have a huge effect on my rental income. After the first 2 properties, I've consciously acquired properties that are newer/nicer/larger than average so that they would appeal in a rental environment with more options, which will likely happen down the road.
Hope this helps Erik! And a big thank you again to all who have shared their experiences and reached out to help a stranger. Best wishes.
@Adam Haman First, congratulations on investing half of your income in acquiring properties while supporting your family- that is a huge accomplishment! I can relate to your story since I've been a Realtor/Broker for 12 years now. It's interesting because when I was about 5 years into being a Realtor I also began to get that burnt-out feeling you describe. Although there were aspects to working with clients that I enjoyed and my income was similar to yours for those formative years, those commission checks often came with a heavy load of stress and anxiety and time away from my family. One day about 6 years ago I actually skipped going to the lake with my family and friends on the 4th of July in order to accommodate showing a house to a young couple I'd been working with for several months who still hadn't found the right house to buy. They ended up bringing their parents to that showing and to my surprise the father was not happy with some of my answers about the zoning or the parcel map boundaries and he ended up undermining my professionalism and berating me in front of his kids. It was a painful experience to have this totally unexpected attack on my character and competency on a day when I could have chosen to be enjoying my family out on the lake. To make the experience sting even more, that couple who I'd sacrificed many nights and weekends for ended up buying a house with a different agent a few days later. Ouch!
For me, sometimes having a really painful experience is actually a good thing. I feel the sting of failure longer than the comfort of success, and for some reason that feeling makes me reevaluate and determine what I truly want and don't want with my life. Allowing myself to re-live the pain of that and other bad experiences has pushed me to carve out a better life for myself because I realized that I didn't want to be subjected to earning a paycheck from trying to convince people to do something or buy something or work with me. My former broker once told me when I had the opportunity to buy one of my first properties, "You are your best client". That phrase has stuck with me since there were many times I tried convincing someone else to buy a property that I thought was a great deal and for whatever reason they often would not pull the trigger. I got tired of trying to convince other people to do things so often and decided that what I wanted more than anything was to be the one personally to decide to buy something or not. That was really a transformative process when I went from serving other clients for a commission to being my own best client and actually taking properties down myself. Gradually, as I've acquired capital and relationships with private lenders, I've transitioned my real estate activities from being a commissioned agent to being the principal in 90% of the transactions I do.
Since you already are buying and holding properties, you've obviously got that part figured out. I think you'll find like I did that having all the transactional experience of being an agent and helping others will actually serve you well if you decide to go more full time with investing. You'll be able to marshal resources easier than others and private lenders will entrust their money more readily to you since they'll have a confidence in you that you know the market better than most other investors. Think about it- you've gained tons of real-life real estate experience by helping others navigate through deals, without having any financial risk. It really is a pretty great way to transition into going bigger with investing and finding a way to transition to supporting your family now from doing more of your own deals which allows you the time freedom you are looking for without having to completely reinvent yourself through a whole new career choice.
For commissions, I now mainly choose to work with higher-dollar clients or people who are really interesting to me. Most of my actual income however is sourced through my personal real estate investing. Actually, I find that I do a better job now with the clients I do choose to work with since now I don't feel the same stress of having to make a deal work with clients. I feel my advice is more balanced since I'm much less attached to the outcome. I really don't need the money that comes to me through commissions- it's more of a bonus at this point. If I decide a client is taking too much time or is going to be too demanding I will simply refer them to another agent and gladly take a referral fee.
Congratulations again, and I wish the best in navigating and choosing the path that is right for you and your family.
Originally posted by @David Fritch:
Consider this statement: Your life is made up of time.
@David Fritch,
I just printed out your response and hung it on the wall of my office to look at regularly. I wish I could do more than give you a Vote, but I thought you should know that, with very few exceptions, your proposal sounds like the road forward for me. Thanks for the kind words, encouragement, and the suggestion of a meaningful, deliberate way forward. Thank you!
@Adam Haman looks like you tried to mention @David Fritch but it didn't work.
Here's the process for your information.
Hit the @ button and begin writing their name. Sometimes you have to get down to the last name before it will pop up below the message body box. It took me a while to figure it out too.
@Adam Haman First of congratulations on get to where you are at now. There are many people out there that would like to be in your position. I'm not going to say anything different then what has already been said but I thought I'd share my current experience with you.
I've spent all the adult years of my life working my *** off and saving money. For what, I had no idea. A few months ago a friend of mine decided to go for his life dream and start a farm. Since I had enough money saved up I decided to take a few months off and help him for two reasons. First, I wanted to see if it was something I could do as a living. Second, I knew even if it wasn't something I wanted to do I needed a break in life so if anything I would benefit from that.
Long story short, I'm moving back home in September and going to get my job back. Why? I've considered the past four months a retirement and I have absolutely loved it! I've been to or am going to a few different baseball stadiums (I love baseball). I'm going to a tennis tournament (I love tennis). I even watched the entire Ken Burns Civil War documentary. All simple pleasures that I've wanted to do but couldn't because I worked all the time. I've never been happier.
Since I now know what retirement can be like I've made a plan on how to get there. That is why I am starting to get into real estate. I know that if I do it right when I actually do retire I'll have an income so I can enjoy myself.
You are in an enviable position so take advantage of it. Take a few months off and do things you and your family have always wanted to do. Take a second honeymoon with your wife. I'd be willing to bet that if you do it right and enjoy yourself it'll be reason enough to come back and build up your portfolio so that $4500 turns into $10-15k or more.
Good luck with everything!
Originally posted by @Adam Haman:
Originally posted by @David Fritch:
Consider this statement: Your life is made up of time.
@David Fritch,
I just printed out your response and hung it on the wall of my office to look at regularly. I wish I could do more than give you a Vote, but I thought you should know that, with very few exceptions, your proposal sounds like the road forward for me. Thanks for the kind words, encouragement, and the suggestion of a meaningful, deliberate way forward. Thank you!
Thank you! I think I think I will reciprocate and put this on my office wall. Very encouraging to me because MY dream is to work full time helping people get to the next level. It pumps up probably more than anything else. I would love to stay in touch and hear more about your adventure!
Adam,
If you are burning out with RE sales. Just take a week to formalize your database of contacts and just market to those. Stop the prospecting at this time and just do a few deals a year instead of the heavy 24 or 50 per year. I am getting into that high end load myself. My partner and I are on track to maintain a new listing every week right now. Sounds like a light load but it sure can keep two guys very busy.
This is a post Brandon Turner himself shared on the FI/ER blog mrmoneymustache.com on this very topic.
http://www.mrmoneymustache.com/2013/03/23/reader-s...
It was funny, I was reading this post and I thought to myself, "I know this guy!" It turns out I kind of do from the podcasts.
@Jay Hinrichs - Great comment.
I have been in real estate since 1995 and have been a real estate agent in the late 90s, left doing that for full time flipping, and now I am back to being an agent - BUT only taking a few clients on here and there and mainly focusing on developing and flipping for my own real estate business. Once real estate is in your blood, you can't get it out.
Definitely take a break from working with clients, focus on building some more rentals and maybe have fun with some flips. Try out new construction and land development. While doing these activities - you will enjoy one or two areas more than others. Then you will know what to focus on the for the next 10 years - even if you only work 10-15 hours a week you will have purpose and have fun improving communities and providing jobs for subs. Plus the kids LOVE visiting homes you are rehabbing or building - kids love construction related stuff. I have had my kids help tear out carpet or demo kitchens - not because I had to but because they had so much fun doing it!
I am an agent as well and I have a different take than everyone else. It sounds like your biggest problem is time and the commitment I takes to be an agent making $100k a year. You dot need to reduce your workload ad find a another job, you need to hire help. Hire an assistant who can do all the crap you don't like doing. Have them get their license and then they can show houses for you and you can take real vacations.
I have ten people on my team now and work less than I ever did even though I make way more money than I ever did by myself.
Make a list of all the things you love doing as an agent. Then a list of all the things you don't like doing. Figure out how you can hire someone to do all the the stuff you don't like. That makes life much more enjoyable and you will make more money because you can focus on the big picture money making activities.
I like Mark's @Mark Ferguson post the best.
Why quit your job completely and make nothing? That 4,500 may do the trick now.
But given that you're going to paying your own health insurance (which isn't getting any cheaper), that seems a little tight. And what happens when you have 2 or 3 vacancies at once and a roof repair? 4,500 is plenty of cushion if thats the business' income. You can build those reserves back up real quick with that being separate. But if you are living off just that income, I don't think thats going to get it done.
And how are you going to add any more rentals if all you're making is 4,500 in rental income? That may be your net profit in your pocket. But thats likely not the amount that is going to get reported and thats what makes it real hard to qualify for additional loans to add any more houses in the future.
Figure out a way to work smarter and not harder and I think Mark hit it on the head.
Get an assistant. Carve out your family time and your personal time that you need. And let the assistant take care of everything else that happens during that time. If they're not as good as you and you lose some of the deals you're getting today, so what?
If you think you can make it on 4,500 from rental income, then you can easily make it on 4,500 from rental income and say 50k from real estate instead of the 80k to 120k you're making now.
That pace should give you a much better work/fun balance but still provide you with the potential to continue to grow your income and net worth.
I think its one thing to want to get out of a job if you just hate the job. Its another to quit working entirely and hope to make it on the rental income that, at that number, seems pretty tight to me.
Get the assistant and set your boundaries. I think you'll enjoy your job a heck of a lot more and then you'll still have the ability to continue adding more properties (and more income) so that you can retire at some point and live the type of lifestyles you really want.
That being said. The idea of golfing every day and just hanging out around home with the family would be awfully appealing to me too so I don't think its wrong to think it or do it. Just not sure its the best long term plan at the number you're at......
I'm surprised my suggestion hasn't popped up yet, but.....is there any compelling reason your wife can't work full or part time for a while to let you scale back a bit and rejuvenate yourself a bit? Or maybe you can both work part time at some of the above suggestions? I'm assuming she doesn't work because she needed to be able to take care of the kids while you were busy burning out. You guys could reverse rolls, now that the kids aren't breast feeding, I assume. That's not saying she has to go get a 9 to 5, unless she wants to, but maybe now that you'd be available to help with the kids, she can help financially.
My hubby just "retired" from the Navy at the ripe old age of 38. Now his status is "trophy husband". No really. ;) In all seriousness, he's my Mr.Fixit for moving my real estate business forward. He's more valuable to me looking for properties, fixing stuff around the house we're renting out, and just BEING there, than a post-retirement job would ever be. Many women look at a return to the work force as a very positive thing. Each family is different, naturally...but I hope you guys have at least discussed the option. :)
Karyn
As everyone has already said:
1. Take a break from work. Take a week or two off to just think, don't take a vacation where you're running around from point A to B. You need time to decompress, think, and read.
2. You're suffering from burn out due to being too good at what you do. Start firing customers, prioritize your niche, and see i you can get some support. The top agents usually have an admin or someone to help shoulder the burden. Also, you need to start training your customers on when and how to contact you and you NEED to set boundaries. A VM with "Hello, sorry I missed your call. Being that Family time is critical to me. From XX-XX I turn off my cellphone. If it's an absolute emergency please call again and you will be able to reach me."
3. 4,500 provide you with little wiggle room for unexpected events. What if the market takes a dump and you cant rent out your properties? Kids get older, expenses increase, and the drama in your life will multiply X fold if you can't provide for your family. If you had 3 times that, I would be comfortable because you could continue investing and saving.
4. Only retiring with rental property is a asset allocation risk. Like I said, if you reach retirement and the homes aren't producing enough for you to live on, you will be in a bad situation. I would suggest you also start saving for a 401k or a IRA (index fund) so you are at least earning a return that is not directly correlated with real estate.
5. If you did retire now, you would drive your wife bat **** crazy because you would be fiddling around the house 24/7 not knowing what to do with yourself because you are not working as much.
6. Then you would be forced out of the house to find a job, and then low and behold you will be back in real estate, talking to me on BP as a depressed real estate guy.
You have good problems my friend, now it's time to start prioritizing. You should pick up a copy of Essentialism: The disciplined pursuit of less.
Thanks for the response and detail. I am very jealous of where you are right now, I have no doubts you will find what makes you happy!
Depends on what makes you happy, man. I put in some hellacious hours in my 20's and early 30's. Was gonna semi retire at 3 mil, got wiped out with 2.5 or so in '07. I was 34.
$4500/mo wouldn't cover my bar tabs, but its all about how you want to live. If you don't like what you're doing try a few flips, you can make your yearly in one (I did last year), but I average about $25k per net. I usually don't put in 40 hour weeks, sometimes way more, but usually less. Hell I pretty much took last summer off.
Read eMyth and 4 hour work week. Excellent reads. You don't really need to 'retire', you just need to pay other people to do the crap you don't like doing. Sounds like you're a go getter, you just need to work smarter. Take on a few good listings a year, hire an assistant, do a flip or two. Take weeks off at a time, wake up late, whatever. You've got the ability to do what you want because you have passive income over your needs. My bills are 10% of my income. Its extraordinarily liberating to know everything is paid for no matter what you do for the day, but that doesn't mean you want to just stop working (or earning money, really) altogether. Not on $4500/mo anyway. I'm in Hawaii right now and I just checked in on 3 different guys working on 3 houses while I'm over here drinking a beer.
BTW, it gets kinda boring being the only one off work during the week. You'll want a little something to occupy you time...
Adam, A lot of us understand how you feel. Being a broker is an emotionally demanding job. Through learning about RE investing I've started to see Broker as my "day job" which I eventually want to retire from to be a full time investor (which I will also want to retire from). Gathering other people's opinions is great, but at the end of the day you have to ask yourself whether you can live the lifestyle you want on the cash flow you have, and what do you do in a worst case emergency scenario?
I've found that when you give yourself some space to breathe, you'll figure out what to do with your time. So even if you "retire" and then find the energy to return to your work or something new, taking that first step out of your rut is the key. Plan for the worst, but never let fear dictate your life or happiness! Good luck and keep us posted.
I'm a Realtor and I was exactly in the point where you are but for me it was 4 years ago. I was SO burned out after working mega hours for about 5 years making a lot of money but I was beginning to hate it, not be able to sleep at night, worried about every deal, working with some clients I didn't like, etc. I talked to my husband (also self-employed) and told him I couldn't take it much longer and I wanted to re-adjust our life (cut expenses!) so we could retire, or at least take off for a whole year.
We spent about 6 months scaling down our lives, sold our property with the mega mortgage and paid cash for a small home (which we later rented out), a fellow agent took care of our rental properties for a small fee, and we bought a one-way ticket to New Zealand, via Fiji. I knew it had to be a clean break because being a Realtor with active clients is impossible to take off for more than 1-2 days at a time. I threw my cellphone away at the airport boarding the plane. The only thing I did was check my email for new business I referred to a fellow agent for 35% referral fees. Along our travels, we met many people, including couples with young kids, doing exactly the same thing.
Being completely out of real estate was so wonderful for several months until I began to miss it. After about 4 months of traveling all over (Asia, Middle East, Europe) I missed making deals, being needed by clients, etc. Our trip ended up being only 5 months but it was enough. Within 1 week of being home I had 2 listings from past clients. Now I only work with clients I like which has cut down my income but improved my enjoyment and free time.
(P.S. Read 4-Hour Work Week)