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.