Are we on track!

Saving & investing, frugality & simple living. They're all part of the wealth equation.
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Are we on track!

Postby scout » Sun Mar 17, 2013 11:38 am

Hi Everyone!
I was hoping to get some husband and I both LOVE the idea of retiring in our 50's. We are 28 and 30, no kids, own our primary home with 114k principal, and an investment property with about 48k principal. Our monthly take home is about 4k, which after all expenses, leaves us with about 1k left over if we are really careful. Our rental home mortgage, taxes, insurance etc is about $450, renting for $800.
We plan on doing some minor remodeling in our main home this year, using our "left over" cash and hopefully moving into the rental home to redo it which ours is rented out.
Our plan right now is to buy more rental properties, redo them and rent them out or rent out as is. We have about $40k in savings and about $50k combined 401k, IRA etc.
Assuming we actually earn more as we get older. with this plan, is it possible to retire in our 50's??
Any thoughts would be GREAT!!!

Bichon Frise
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Re: Are we on track!

Postby Bichon Frise » Sun Mar 17, 2013 8:54 pm

some would argue owning a bunch of rental properties and managing them is far from their idea of retirement.
Bichon Frise

"If you only have 1 year to live, move to it will seem like an eternity."

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Re: Are we on track!

Postby Tightwad » Mon Mar 18, 2013 11:03 am

Bichon Frise wrote:some would argue owning a bunch of rental properties and managing them is far from their idea of retirement.

I would one of those people. We have two rentals (not my idea!) & neither pays rent worth a damn!

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Re: Are we on track!

Postby Justus » Mon Mar 18, 2013 2:53 pm

Tightwad wrote:
Bichon Frise wrote:some would argue owning a bunch of rental properties and managing them is far from their idea of retirement.

I would one of those people. We have two rentals (not my idea!) & neither pays rent worth a damn!

I'd be one of these people too. I've got great tenants, but I'm finding landlording to be a job, not a passive investment activity.

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Re: Are we on track!

Postby peachy » Mon Mar 18, 2013 3:34 pm

I like my tenants when they leave me alone and pay their rent on time. Our relationship is about 75% like, 25% dislike. But they continue to renew their lease, so the feeling must be mutual. I'm not complaining. :)

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Re: Are we on track!

Postby stannius » Mon Mar 18, 2013 4:55 pm

While I do agree that landlording is not strictly retirement, in the stereotypical "sit on your butt or maybe go fishing" sense. Nevertheless, if it meets your definition of retirement, go for it.

But, you have to start aggressively putting money into both the properties and into other asset classes. What's the velocity of your net worth? How long has it taken to get to where you are already? Have you projected out how much you need to add to savings, investments, and properties every year to get to your "number" in your 50s?

Matthew Clinger
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Re: Are we on track!

Postby Matthew Clinger » Mon Mar 25, 2013 8:11 pm

Here are my thoughts :

There's not enough information to say whether you can retire or not (if real estate is going to be your primary investment tool).

Aside from the money you have and the money coming in, it would be useful to know things like what % of the rental you own and how much is mortgaged. This could lead to a very rough assessment of how much property you might be able to acquire in the future if this is going to be your mode of investing.

Have you been using the "Nuisance Rental Increase"? Basically, it has been found that people will put up with a $20 raise in the monthly charge for the rent of a property rather than move out. However, raising by $50-100 or something like that after several years at the same amount will likely cause them to try finding somewhere else to live. Doing this for 4 years in a row leads to almost an extra thousand in income a year.

Also, if you feel that it becomes too big a hassle to manage properties, I have heard that there are companies that charge somewhere around 6% or so of the rent in order to manage them for you. So it would cost ~$50 or so dollars a month if you wanted someone else to manage it for you currently. You may not wish to do it now, but it is definitely an option once you get to when you want to retire.

Other thoughts:

Conservatively speaking, if you get an extra thousand in income every couple years from your jobs (raises) and index it along with your 1k leftover currently from your take home, then you should be able to retire in ~25 to 30 years. 30 is very conservative, 25 is probably closer to reality. If you happen to be good at picking stocks, you could probably retire in 20 years.

But if you're not good at it and don't know someone you can trust to do it, then index. The majority of people are bad investors. If you don't know how, but want to, do the research beforehand and come up with a strategy based on sound logic where each step leading to the strategy seems to be common sense. Then *STICK WITH THAT STRATEGY*. I have that in caps because many people who create strategies then deviate from those strategies, causing bad performance. Discipline to keep to a strategy even when it is not working in the short-term is needed. That's why indexing is the easy way out. You index and let it sit and it is well-diversified, meaning you worry less. But a good stock strategy will knock years off your wait for retirement.

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