Hi!
First, I want to thank this blog and its community for causing my life to take a complete 180. A couple other things I absolutely couldn't have done without were the 4 Hour Work Week, Millionaire Fastlane, and Biggerpockets.com . Six or seven months ago, I was a miserable, overworked office worker in my mid 20s. I hated literally every aspect of my life, mostly because I was extremely time-poor and the job just plain sucked.
Since then, I started a company based online that now provides passive income with an investment of $50 a month for hosting. I used the funds from this, when it was it the height of its success in Spring, plus the liquidation of the contributions to my retirement accounts (Roth, I've been saving since 18, although my original plan was the traditional deferred-life, retire at 65 BS) to purchase 20 units of real estate. Including my personal residence, I am sitting at about 50% leverage, which I think is rather conservative. I'm also lucky to be in the greatest rental market in the country, with gross monthly rents of 2-3% of the purchase price of my properties. A typical property has gross rents of 3-4 times the PITI payment.
I no longer need to work. I have cut my monthly recurring expenses to $500, not including my personal residence mortgage, which is $900. I have some great plans for personal development and bringing up the areas of my life I neglected while I was a prisoner in a cube. I plan on engaging in financially remunerative activity (but not employment with a boss) in about a year or 2, once I figure out what I want to do. Til then, alot of my time will consist of long term travel. I plan to start in the cheaper areas, such as Southeast Asia, but would like to see Western Europe eventually.
So I would like to hear thoughts on what my financial plan from here on should be. Do I buy more leveraged properties? Deleverage? Invest in stocks/retirement accounts again? I've been employed since I was 15, so not having a job makes me sort of nervous because it's so new. I think with my stats that will seem ridiculous, but I want to ensure I never, ever *have* to work in some awful office again.
Income:
Gross Rent Receipts: $8675/mo
Internet Business: $2600-3600/mo (this varies. Back in Spring, it was hitting ungodly numbers. 50k+. Hopefully this will happen again next Spring, but for now, this income is temporary and icing on the cake, in my mind)
Expenses:
Mortgage: $900
Personal Survival (Food, Gas, Insurance, Utilities, Etc): $500
Travel: ?? This is highly variable. I would guess that if I travel to a new country every month I'll spend $1000ish, but that's alot of traveling and may be excessive.
Rental Property Expenses: $3900 (this includes all mortgages, insurance, utilities, taxes, property mgmt, repairs, vacancy)
Mint says my net worth is approx 700k, with about 1.2 MM of assets. I know rentals are sort of risky, and I've dealt with evictions and such in the past, but I like to assume that most people don't want to lose their home or be sued, I screen adequately, and I have 20 units so I am diversified. I also have LLCs setup with umbrella insurance in the event of an accident/injury on the property.
Of this 700k NW, the only non real estate, non mortgage items are $10k left in my roth IRA in an index fund, a $30,000 student loan at 6.8%, and a paid off car worth $5k. Some cash in a bank account too (I just finished buying property so I am low at the moment).
My first priority is to save a few thousand in my bank account for reserves in the event of some sort of real estate crisis.
After that, I am torn between paying off debt or expanding my budding RE empire. My student loan interest is tax deductible at 6.8%, so an effective rate in the high 4's to mid 5's. My mortgages, except for one, are in the low 4's and tax deductible, so not a whole lot of incentive there. The one exception is a HELOC for $30k that's on a 15 year amortization plan at 6.25%, also tax deductible. Killing this would save me $250 a month in payments, but that's still not a *horrible* interest rate considering the returns I am achieving from plowing money into these properties.
So if I let the low interest rate debt sit, do I just sock away money into a SEP-IRA or something, just like back when I had the office job? Do I just basically pretend like I'm still working for the man, from a savings plan standpoint?
The other cool thing is, I get about $1000/mo in equity paydown from the mortgages, which will continue to increase. I also get appreciation on 1.2 million dollars of assets. Additionally, I can raise rent every year, which goes directly to my bottom line, while the mortgage payments stay roughly the same. Still, I would like to diversify or possibly deleverage, but the rates are just so good I don't know what to do.
Even if I paid off all the mortgages, between property taxes, insurance, etc....I am still looking at a $2k-ish monthly expenditure to keep these houses. So while a $6675 spread is a bit more relaxing than $4775, it's not huge to me.
By the way, I am in my mid-20s, single, male, no dependents, no consumer debt, in a low COL area in the US, and I'm extremely burnt out from corporate america, if any of that affects replies.