All Forum Posts by: Ahmad H.

Hi BP,
Any recommendations for investor-friendly realtors in the Pittsfield MA area? A friend of mine is relocating there and will need help purchasing a property to house-hack.  

Congrats Jerryll! Thanks for posting your journey on BP, you asked the questions on my mind and probably on every new wholesaler's mind. Good luck with the next one!

@Chris McCune I have a well paying job in the engineering field and had access to a good amount of capital at 24, plus I am frugal so getting to 2x my monthly expenses (based on limited 2-year history of income/expenses) wasn't that hard. Great points about LifEx and the unpredictability of the freedom number. I don't have any kids yet, and while I budgeted for one in my current expenses, there is no way of knowing if that is enough. I can't just sit around the house, so I am sure I will be doing something if I leave the 9-5, but I don't want to factor that unknown income in the decision making process.

@Jessica S. I agree but I am also having a hard time figuring out how much savings are needed. 5k/door for RE CapEx seems like a good starting point, what other life expenses should be budgeted for?

@Bill Gulley Your posts always highlight how little I know. Thanks for that dose of humility and constructive pessimism :)

@Leslie Pappas I don't see myself doing option 2 because of worries about health but I am a huge fan of the 1st option. My thinking was to get to 4x my expenses using B&H RE, leave the 9-5, then put all the extra cash flow  into a more retirement-friendly investment vehicle. I can also leverage equity cash-out refis and put that money into stocks/bonds.   

@Jim C. Nice to hear from someone living off rental income for so long. Would you have done anything differently? Do you plan to keep managing your properties as you grow older

@Thomas S. I would also feel pretty good about retiring if I had 2M. How much of a role did RE play in getting to where you are now? Sounds like your IRR from appreciation dominated the cashflow ROI. I am in an area with very limited appreciation.

@Ben Leybovich & @Jay Hinrichs Thanks for sharing your thoughts and experiences. The west coast equity proposal is interesting indeed. I think that's why turn key marketing is rampant there. They prey on those that want to leverage the equity to get more income from the mid west while enjoying the beauty of the west coast. 

@Jay Hinrichs Exactly! But that's not what gets preached. I am now at 2x my monthly expenses and I still feel I am vulnerable if I have a major problem. Trying to figure out that safe multiplier for my area and a general rule that works for most.

@Jay Hinrichs Perhaps I should clarify my question. Lets assume I need 2k per month to do whatever I want to do in retirement and my net income from my rentals (based on 2 year history) is also 2k/month. 

Would you say it is safe to leave my 9-5? 

I fear the what-ifs in this scenario. I haven't had to replace any roofs, boilers, siding, and other high ticket items yet. I put away 5% of all rents towards CapEx but if all roofs go at the same time, the 5% saved so far will not be enough. How detailed should one be in predicting CapEx(expense side) and neighborhood/local trends (income side)?
@Ben Leybovich You say that you don't have to work which is great. What is the ratio of your net rental income to your expenses? I am curious to know if the income far surpasses your expenses or you are just very confident about your expenses and can declare yourself retired with a ratio of 1 to 1.

@Josh Hanna I am on podcast 163 so 53 is a long way back. I might have to revisit that one.

Thanks @Bryan O. for responding.
That's the problem. Variability is one of the most dangerous things to retirement planning. That's why I am noticing a pattern of people doing things on the side when they "retire" using RE. Brandon has BP, Ben Leybovich has CFFU, and others just continue doing things within real estate (PM, flipper, broker, realtor, developer, etc..) to reduce the turbulence.
The concept of retiring quickly using RE has been published in blog posts and mentioned in several podcasts but it is oversimplified for mass media production. Figuring out how much money you spend and then dividing that by the $200/unit to figure out how many units you need ignores the variability associated with the type of property and tenant class. I can project $500/unit on paper buying in a D neighborhood but that doesn't mean it'll help me retire sooner.

I am hoping to hear from someone who has been solely living off their rental income for 10+ years.

 

Hi BP!
I've been heavily investing in RE for 2+ years and I often try to extrapolate the future based on my basic experience. The latest of those extrapolations is to calculate how much net rental income is needed to safely retire. By safely retire I mean <1% chance to have to do anything besides manage your property manager.

Many guidelines exist for retiring with a portfolio of stocks and bonds, from safe withdrawal rates based on simulations, to specific bonds/stocks mixes at every age.  Sadly, limited information exists for folks heavy in RE investments.  

Is it safe to retire when your net rental income = expenses (seems very risky to me) or when it is 2x, 4x (seems like a reasonable bet), or 10x your expenses?
How many years of data do you even need to determine the net rental income of a portfolio to base your calculations on? 
It seems to be a function of type of neighborhood (A,B,C or D), CapEx schedule, macro trends, and other things I do not yet know!

I asked a financial planner about this and while she did not deny the importance of real estate in retirement planning, she could not give any useful data or recommendations. 

How are others planning to retire using RE? 

You've already received great advice. Many newbies only care about the number of units when the end game is achieving your freedom number. Would you rather have 20 quality units or 100 crappy ones to achieve the same number? Buy right in terms of quality and price and don't look back. 

Congrats! Good luck with the rest of the transaction.