Quote from @Ian Ippolito:
Quote from @Ken M.:
Quote from @Ian Ippolito:
Quote from @Kyle Jenson:
Hello guys, I found this page through the podcast and the book, Rental Property Investing. Like my title says, I am a dentist in the Kansas City area and am looking at real estate to be my retirement plan. I have been reading many books on finances, rentals, and real estate and feel this is an area I can have more "control" over my investment rather than placing it all in my 401k and hoping for the best.
With that said, I am in the position where I will not need a monthly income from my rentals. Just looking for some stability and great ways to build equity. Obviously cash flow would be wonderful, but not necessarily needed. I have listened to a podcasts with other doctors talking about this, Anywhere else I can find info or advice or strategies on similar situations? Thank you all.
Kyle
My father-in-law did this by creating a portfolio that is primarily debt-free single-family rentals in the city he lives in. And I copied that idea for the core of my portfolio (although I also invest in alot of passive deals as well, in the satellite portion for a core-satellite approach).
The idea of debt-free is that if a person is going to retire and has to completely depend on the income, they don't want a severe recession surprising them and causing them to default on the debt and losing the properties.
In a normal world, I would do that as well. We are not in a normal world. Between now and the time you retire, there will be a couple of severe recessions and likely serious inflation. The national debt is approaching $36,000,000,000,000 if the government numbers are to be believed. In addition, the debt of each state is crippling. The US Government and the States have but one way to deal with this, taxes. Or, they can let the system implode and reset.
Property owners are a prime source for collecting revenue. What is the point behind having paid off real estate, if you lose it later in life to oppressive taxes? I buy real estate but I carry debt which is actually tax deductible, my money works for me. I can release my properties without much loss if I have to. Since I focus on cash flow, I already have the benefits afforded to real estate. Divorce is the number one destroyer of wealth. Plan on staying married no matter how rocky it gets, work through it, it's worth it. It isn't having paid off properties that offers security, there are still taxes, insurance, maintenance and management involved. Ask the people in Florida who now have sky high insurance and mandatory unplanned assessments, how much value having a paid off property is. It's properly leveraging (not over leveraging) the asset that pays off.
Ken, Actually both myself and my father-in-law have properties in Florida. So I don't need to "ask people in Florida" about your theories. :)
And you're entitled to your opinion.
In my opinion, the national debt is a medium-term problem. And there are many possible ways that can be resolved and most don't involve hiking up property taxes so high that most people can no longer afford to be a landlord.
But let's assume you're right and this is about to happen.
In the situation you're describing, all the leveraged owners of real estate will be the *first* ones to implode right off the bat (and have to turn over the keys to the bank). Look how many died in the Great Recession which was nothing as severe.
On the other hand, the debt-free ones will be in a much stronger and better position to survive (because they have no debt payments to make). So, you're actually making the argument *against* debt (not for it).
I think you mis-understand debt, risk and the alternatives. If I put all of my eggs in one basket (Florida in this case), paid off property and a hurricane blows everything away, FEMA is nowhere to be found and the insurance companies take years to pay what little claims they actually do pay, I suffer through it in a blown out house. Currently being experienced by plenty of Floridians.
However, if I take my resources and spread it around, I can weather bad times better. That's my point. If I have highly leveraged properties, as long as they cash flow, the bank takes the risk with me. I could lose my Florida house in a hurricane and move into my North Carolina house or my Tennessee property. If my Tennessee property gets hit by a tornado, I can move to my Alabama place. Plus, I get to experience all kind of great people, food and culture in the meanwhile.
