All Forum Posts by: Cal C.

The irony of these responses is pretty high considering I've been pushing @Mindy Jensen pretty hard to do a podcast (singular one on Money or on an entirely new podcast with Mr.1500) on some of these issues.   

I posted that to show how simple it can be to figure out how much you need to retire just on RE. Obviously, most folks will have other streams of income in addition, SS, 401K, or IRA, etc...

Two quick points.  1) Even following JL Collins mantra of buying VTSAX requires you to do some things when you are retired.  To my (Great) surprise I have been finding property managers who have significantly reduced the time I've spent on my rentals.  2) If you are a trinity study follower (where the 4% rule/25X spending largely originated), you might want to look at some of the stuff Karsten (aka Big Ern)  has been doing on Early Retirement Now, particularly the sequence of return risk posts.  

Rent/50%=NOI.

I posted this in the member blogs last week, but wanted to get some more eyeballs on it.

As many of you know, Mister Money Mustache (MMM) wrote a blog post entitled The Shockingly Simple Math Behind Early Retirement that if nothing else gives stock investors a very simple rough estimate to how much money they will need to retire. It translates to basically 25 times expected annual spending. We can argue the issues with that article but whatever flaws it does or does not have it at least gives investors some idea as to their savings target.

There is also a surprisingly simple way to figure out how much real estate (or really, how many single family residences) you need to retire. Assumptions here are that you have paid off the real estate involved, your net operating income (rent-expenses except for mortgage-NOI) is at 50% of rent and rent will keep roughly in line with inflation.

To keep this even more simple we'll use a nice round rent amount, $1,000. Using the 50% rule of thumb, you can quickly see the NOI is $500. 12*$500=$6,000. So simply using that number as a building block quickly gives you a rough estimate of how many paid off single family residences you need to retire providing you know how much you're expected spending is going to be. For example, if your expected spending is $60,000 annually then you need ten mortgage free houses.

However, one of the flaws of the MMM article and the math laid out in the previous paragraph is the disregard for taxes. Taxes are a very important consideration with real estate because of the tax advantages of depreciation. In fact, your taxes may be cut nearly in half because of it. Here is an example: the basis on your rental property is $100,000. You set aside 20% for land value leaving you $80,000 to depreciate over 27.5 years. That gives you $2,909 in depreciation per property. If you have ten similar rental houses then that would effectively reduce your taxable income by $29,090. Assuming that you are paying 20% in combined state and federal income tax then that reduces your tax bill by more than $5,800.

Here is the back of the napkin math.

Rent/50%=ROI

(House cost-land)/27.5=Depreciation

NOI-Depreciation=Taxable Income per house

NOI-(taxable income*tax rate)=After tax income per house

Expected spending/After tax income per house=number of houses needed to retire

I basically quit posting on here a few years ago because I seriously don’t like the current format, but I felt compelled to write this post .  I have a property that has appreciated nicely but needs a good bit of work (~$8,000) to go on the market.  Anyway, I called Zillow to see if they would buy it as is. They gave me an official offer with the caveat they would have to inspect the property.  After ten days they finally sent an inspector out.  Six days later I received a final offer below what I was willing to accept.  I tried to negotiate to no avail. I should add they had planned the closing for 6 December at least seven weeks after I first contacted them.

Since terminating the discussion I have received phone calls soliciting selling some of my properties from random buyers/wholesalers about several of my properties not just the one I offered to Zillow.  Previously to contacting Zillow I had never gotten an unsolicited phone call or text about selling any of my properties.  

Please be aware of this if you plan on contacting Zillow about selling your property.

@Mark Ferguson @j scott Thanks for writing an excellent book.  It was an easy and very informative read.  This book is a must read for buyers/seller and real estate agents/brokers.  

Finally! Great Podcast.  Thanks Jay!

I've basically stopped posting since they downgraded, sorry redesigned, the website, I can't get past the extremely annoying forums page.  But I still listen to the podcasts and would really like to hear @Jay Hinrichs.  BTW does anybody know why @K. Marie left the website after posting more than 6, 100 posts.  It was right after the redesign.  

As illustrated by the near complete lack of response to this thread last week the new design has not been a hit.  Ten days and only two positive responses and those were from individuals deeply involved in the development of the new design.   NO one else except the original poster and two designers HAD A POSITIVE COMMENT, NO ONE.  Even if that thread now gets some positive responses the near total lack of response to this point gives a Loud and Clear message.

Please understand I'm a great admirer of @Joshua Dorkin for starting this site and working his tail off for years to keep it going.  There is no doubt this site has helped thousands of re investors including myself and I (used to?) love it. But...  

There are many things I don't like about the new design.  I can barely stand to be on the newest posts page because any time I move my cursor all kinds of unwanted things occur to include multiple pop-ups of people's mini-profiles, a menu bar at the top which basically blocks the whole page, jump to last post pop-ups, the box for each thread, I could go on, but the thing I dislike the most about the redesign is it (the newest post page) doesn't identify who started a thread.  

Let's face it the majority of people who come to bigger pockets are not real estate investors and never will be.  Yes, they are wannabes and I want them to be RE investors since I think RE investing is a fantastic wealth maker that many many people could succeed at. 

However, with the new design you can't tell if a thread was started by someone who has thousands and thousands of votes because of a deep knowledge of real estate investing or is an absolutely new to re investing two day wonder, meaning someone who posts a few times in a day or two and is never heard from again.  

Let's face it what is more valuable to someone's time, a thread started by @J Scott, @Brian Burke @Joel Owens, @Steve Babiak, or @Will Bernard or someone who is coming here for the first time?  Of course, newbie questions should be answered but do their threads really deserve equality with threads from posters who have  five thousand or more votes?  

Twelve hours later two people have agreed and both of them are BP employees.  

I feel the same.  The new format is much more difficult to use on my PC even with all of the fixes and I almost totally quit looking at it on my Ipad and Iphone.