Hello from NE Ohio

[Rich Engelhardt]

Hello all!

I'm  a new member here from the NE Ohio market. My wife and I started with our first rental back in 2002 after we had paid off our house. Without the deduction for the house, our taxes about ate us alive. A good friend of mine had faced a similar situation and his tax adviser suggested he invest in real estate. He did and so did we.

Well, one rental turned into two, then into three, then into four.

We took out a home equity loan on our primary residence and used that to finance our first rental. Since we both were working and had money to spare, we continued to pay our "normal"  house payment, along with the new payment for the new note and we threw the monthly rental money towards the equity loan. We managed to pay off the loan by 2005.

We bought our second rental in 2005, after taking out another equity loan on our primary, and again - - paid our "normal" mortgage payment, applied the rental from rental house number one towards the equity loan, made the normal equity loan payment and applied the monthly rent from rental number two towards the equity loan.

In 2006, we bought yet another rental - using an equity loan on rental property two.

That loan we threw the monthly rental money of the unit at.

In 2008, we had paid off the note on rental number two and began throwing more money at the loan for rental three.

In 2009, we bought rental number four and paid off the loan on rental number three later that year.

In August of 2011, I retired from my job as a computer network engineer/database administrator at the age of 59 1/2, and began to withdraw money from my IRA & 401, using the losses on the rentals to offset the taxes on the IRA & 401 distributions.

I had to use trial and error to guess how much to withdraw & be on the safe side as far as taxes go. $40K per year is roughly the "sweet spot" for that if you have 4 rental properties in the state of Ohio. YMMV in other locations & with other sources of joint income.

In 2014, when I turned 62, I began to draw social security. We paid off rental number four in August of 2014.

I had reached my goal, which had been to replace my working income with my retirement income. I was making $57K a year when I retired and my social security income of $21,600 and the combined rental incomes of $35460. totaled up to $57 K and change.

My wife retired in December of 2014 and as part of her retirement she got a one time distribution of $80K in an IRA, in addition to her monthly pension. Since that one time distribution reduced her monthly pension by $600, we decided to buy yet another rental to make up that difference. We again borrowed against our primary and bought rental number five in April of last year.

Anyhow that's a bit about me and a bit about how my wife and I got into the RE business.

We didn't do it to become wealthy, we did it just to generate and ongoing stream of revenue - which it has. By "pre-paying off" our properties, we are pretty much just drawing a monthly pay back of our initial investment over the course of the next 30 years.

It's a bit of a different strategy that, so far, has worked out well for us.