The Man Who Retired at 27

[EscapeVelocity2020]

So the latest post could also be titled 'the man who made his living off of real estate investing'?  I think the FIRE crowd might be over-using the 'retirement' buzz word.  And ultimately, retirement has steadily continued to lose its meaning in this whole era of overpaid unemployment, underemployment, gig economy workers, online jobs, bloggers claiming to be retired while their spouse works, etc...  Funny how everyone seems to want to say they are 'retired' as long as it drives traffic to their blog!

[bbqbonelesswing]

Yeah, this guy is not retired. He's managing a small rental portfolio.

Craig is getting about ten times higher returns, in exchange for some good brainpower, a moderate amount of work and some risk – all multiplied by the magical power of massive leverage with money from banks.

With 10 highly leveraged properties, I'd say he's likely taking on more than "some" risk and putting in more than "a moderate amount of work".

[anni]

No comment on whether he's truly retired or not.... he seems to have about as much of a workload as I want to when I'm 'retired.'

My first and primary response to this post is disappointment at the lack of mask enforcement at this close-quartered speaking engagement. Yikes

[Dicey]

I just scrolled briefly through the article. At first, I thought it was going to be a story about Joe, our very own @arebelspy. Then I scrolled far enough to see the picture. Oh. I think Joe did it better. Maybe if Pete spent any time here he might have interviewed someone with an even more inspiring story.

Thanks for the heads up, @EscapeVelocity2020. It's always nice when Pete posts something new.

[Hotstreak]

No comment on whether he's truly retired or not.... he seems to have about as much of a workload as I want to when I'm 'retired.'

My first and primary response to this post is disappointment at the lack of mask enforcement at this close-quartered speaking engagement. Yikes

The link you post says the virus can travel 1-2km, why does it matter if they are close quarters?  They could be on opposite sides of the city and still transmit the virus! Panic!

[anni]

No comment on whether he's truly retired or not.... he seems to have about as much of a workload as I want to when I'm 'retired.'

My first and primary response to this post is disappointment at the lack of mask enforcement at this close-quartered speaking engagement. Yikes

The link you post says the virus can travel 1-2km, why does it matter if they are close quarters?  They could be on opposite sides of the city and still transmit the virus! Panic!

Agreed.

[SwordGuy]

With 10 highly leveraged properties, I'd say he's likely taking on more than "some" risk and putting in more than "a moderate amount of work".

If he's being the property manager, then yes, that's a real job that takes time.

If he's hiring a property manager and they're decent at their job, he might be working as little as 8 to 40 hours a year.

We have 4 properties and we spend about 8 hours a year on them.   In a bad year I might spend 16 if I go shopping for a new washer/dryer or fridge.

[Hotstreak]

No comment on whether he's truly retired or not.... he seems to have about as much of a workload as I want to when I'm 'retired.'

My first and primary response to this post is disappointment at the lack of mask enforcement at this close-quartered speaking engagement. Yikes

The link you post says the virus can travel 1-2km, why does it matter if they are close quarters?  They could be on opposite sides of the city and still transmit the virus! Panic!

Agreed.

Show one single case of a person catching coronavirus at those distances.

[clarkfan1979]

Yes, this person has leverage. However, a large cash buffer is an easy answer to leverage. I currently have a $40,000 cash buffer. After I complete a cash-out re-fi in 30 days, I will have a $90,000 cash buffer. I like the comparison of the 4% rule of stocks vs. real estate holdings for FIRE. Rental property owners, would you be willing to share some of your numbers? I am not advocating that one is better than the other. It's a personal choice. However, I think it would be helpful to have more than one example for real estate holdings. 

Three properties (4 doors). I self-manage. I spend about 15-35 hours/year on each property, with an average of 25 hours/year. If I paid a property management company 8%, that would be $708/month or $8496/year. This equates to $113/hr., so I do it myself. I make $70/hr. at my day job.

Total Value: 1,800,000
Total Mortgages: 1,180,000
Equity: $620,000

Total Rent: $8,850/month
Total Mortgages: $5,650/month
Vacancy/Repairs: $1,100/month

Cash Flow: $2,100/month or $25,200/year

I have $620,000 of real estate equity, which gets me $25,200/year of cash flow. This is almost identical to the 4% rule because 4% of $620,000 is $24,800. However, I also get $2,000/month in principle pay down and my 3 rentals have averaged 6% to 10% yearly appreciation. I invest in appreciation markets with low cash flow.

[moof]

I guess the counterpoint to the post would be to talk to those who have landlorded and been burned. Maybe look over a long enough period to account for all the related costs, not just cash flow.

A fellow at work just sold his rental house after a nightmare set of tenants left behind unpaid rent, black mold, broken doors, ruined carpets, etc, etc.  He ended up losing more than a years’s rent in repairs and lots of stress.  He decided to cut and run rather than find fresh tenants.

Other folks at work have done the accounting after selling a rental unit and reported frustratingly low returns after accounting for dead beat tenants, taxes, and regular repairs of roofs, siding, paint, etc.  I can’t put numbers to it, but no doubt one needs thick skin and to actually put in real hours as a handyman and contractor to pull a decent profit.

So while it is a potentially lucrative job, I would personally hate being a landlord more than my current job.  Being a landlord comes with different trappings, but is still a job.

[EscapeVelocity2020]

I guess the counterpoint to the post would be to talk to those who have landlorded and been burned. Maybe look over a long enough period to account for all the related costs, not just cash flow.

A fellow at work just sold his rental house after a nightmare set of tenants left behind unpaid rent, black mold, broken doors, ruined carpets, etc, etc.  He ended up losing more than a years’s rent in repairs and lots of stress.  He decided to cut and run rather than find fresh tenants.

Other folks at work have done the accounting after selling a rental unit and reported frustratingly low returns after accounting for dead beat tenants, taxes, and regular repairs of roofs, siding, paint, etc.  I can’t put numbers to it, but no doubt one needs thick skin and to actually put in real hours as a handyman and contractor to pull a decent profit.

So while it is a potentially lucrative job, I would personally hate being a landlord more than my current job.  Being a landlord comes with different trappings, but is still a job.

If you look through the comments, you'll see a lot of these types of examples.  To be really successful with real estate, you have to naturally like to be a ruthless landlord (don't let bad renters move in, take care of bad renters/unemployed or indebted folks/etc. ASAP), raise the rent any chance you get, do a minimum (frugal) amount of maintenance...  It works great for some people, and there are lucky folks that time a market well too, but it's not for everyone.

My main complaint with a lot of these articles is calling people 'retired' all the time.  I'm sure, if we spent enough time with this guy or the former gal example that was in AirBnB (which is probably struggling during this pandemic) - you'd see that they work plenty and are in the process of building FI.  To me, retired is following your interests and having all the money stuff take care of itself (like all those dividends, interest payments, and capital appreciation that keep showing up without me lifting a finger - in fact, not buying and selling outperforms active management!).  All I need to do is enter the right numbers in to Turbo Tax each year.

 

[soccerluvof4]

I guess the counterpoint to the post would be to talk to those who have landlorded and been burned. Maybe look over a long enough period to account for all the related costs, not just cash flow.

A fellow at work just sold his rental house after a nightmare set of tenants left behind unpaid rent, black mold, broken doors, ruined carpets, etc, etc.  He ended up losing more than a years’s rent in repairs and lots of stress.  He decided to cut and run rather than find fresh tenants.

Other folks at work have done the accounting after selling a rental unit and reported frustratingly low returns after accounting for dead beat tenants, taxes, and regular repairs of roofs, siding, paint, etc.  I can’t put numbers to it, but no doubt one needs thick skin and to actually put in real hours as a handyman and contractor to pull a decent profit.

So while it is a potentially lucrative job, I would personally hate being a landlord more than my current job.  Being a landlord comes with different trappings, but is still a job.

If you look through the comments, you'll see a lot of these types of examples.  To be really successful with real estate, you have to naturally like to be a ruthless landlord (don't let bad renters move in, take care of bad renters/unemployed or indebted folks/etc. ASAP), raise the rent any chance you get, do a minimum (frugal) amount of maintenance...  It works great for some people, and there are lucky folks that time a market well too, but it's not for everyone.

My main complaint with a lot of these articles is calling people 'retired' all the time.  I'm sure, if we spent enough time with this guy or the former gal example that was in AirBnB (which is probably struggling during this pandemic) - you'd see that they work plenty and are in the process of building FI.  To me, retired is following your interests and having all the money stuff take care of itself (like all those dividends, interest payments, and capital appreciation that keep showing up without me lifting a finger - in fact, not buying and selling outperforms active management!).  All I need to do is enter the right numbers in to Turbo Tax each year.

 

Yea I agree with the point your making. Retirement is simply not working and living off investments in my view. Not that I have a problem with it in fact I actually wish I had a portfolio of real estate with a property manager and so on. Just never could make it work for me. But the point your making about people saying there retired but working online at home or doing side gigs and so on is stretching the truth of the truly "Retirement" or Early Retirement definition.

[EscapeVelocity2020]

Yea I agree with the point your making. Retirement is simply not working and living off investments in my view. Not that I have a problem with it in fact I actually wish I had a portfolio of real estate with a property manager and so on. Just never could make it work for me. But the point your making about people saying there retired but working online at home or doing side gigs and so on is stretching the truth of the truly "Retirement" or Early Retirement definition.

What they should say is, 'retired from corporate / traditional work'.  Reminds me of a little joke I heard a long time ago, one of our colleagues quit and started a small business and now he sleeps like a baby - he cries himself to sleep every night! 

FIRE is actually a pretty complex mess of different versions of working, so calling everything 'retired' does more harm than good.  I like when people define it more like 'downshifting' or 'having a side hustle' or 'consulting' or whatever actually helps define where they are in terms of 'working'.  I'm still hung up on reserving 'retired' for folks near 65 on medicare and SS benefits (and early retirement meaning you will get to that point without any additional work income) vs. my preferred terms of FI / 'work optional' / 'bon vivants' who are under traditional retirement age but don't need to work to support their lifestyle.

I would not define this particular 27 year old as FI personally, nor would I call him 'retired'.  Maybe, if he wants to live in that van parked at MMM HQ for the rest of his life, but then lead with the idea that this is an ERE-style situation...

[iris lily]

I guess the counterpoint to the post would be to talk to those who have landlorded and been burned. Maybe look over a long enough period to account for all the related costs, not just cash flow.

A fellow at work just sold his rental house after a nightmare set of tenants left behind unpaid rent, black mold, broken doors, ruined carpets, etc, etc.  He ended up losing more than a years’s rent in repairs and lots of stress.  He decided to cut and run rather than find fresh tenants.

Other folks at work have done the accounting after selling a rental unit and reported frustratingly low returns after accounting for dead beat tenants, taxes, and regular repairs of roofs, siding, paint, etc.  I can’t put numbers to it, but no doubt one needs thick skin and to actually put in real hours as a handyman and contractor to pull a decent profit.

So while it is a potentially lucrative job, I would personally hate being a landlord more than my current job.  Being a landlord comes with different trappings, but is still a job.

I never understand or believe, in general, the idea of buying rental units and then paying others to manage them. I simply do not grok where the profit is made in this scenario.

But I am old. I closely observed relatives and even DH, back in the days before we were married, doing ALL of the landlordy things: cleaning and painting after tenants left, renting to tenants, making repairs, etc. No management company involved.

So when a management company does all of that work, what exactly is the property owner providing to the deal? Just the capital? Here in flyover country that does not seem like enough to bring to the table for any profitable business deal.

Look, I know people do make money on these deals. Arebelspy is one of them.It just seems to me that the average person who jumps into this kind of deal isn’t running detailed numbers. Reminds me of people who have small home businesses and they don’t really account for all of that costs associated with this business.