First time MMM poster, and was posting to get feedback for my ideas and Courses Of Action (COAs) below. Thanks in advance for reading and replying! ;-)
Topic Title: Financially Independent in 5 years cruise along or keep expanding?
Life Situation: Navy Officer on Active Duty in Hawaii, with 5 years left to retire (51 years old upon retirement). Wife and 9 year old son. Just purchased a 5 bd / 3 ba home in Oahu. Purchased for $850k, with 3.75% 30 year fixed mortgage. Home is set up as multifamily: 2 kitchens, 2 sets of washer dryers, etc.
We live in the 3/2 in the front, and rent out the 2/1 in the back for $2100, which almost cuts in half our mortgage of $4300. I have 2 more years on this set of orders, and will try to get follow on orders here in HI for 3 more years then retire. Worst case is we leave for 3 years and then move back, but in the meantime rent out the 3/2.
Gross Salary/Wages: $156k / yr ($13k / mo), but in 5 years after retirement pension is $3,750 / mo.
Pre-tax deductions: IRA: only $5,500, but will start adding $5,500 / yr.
Rental Income: 5 rental properties with monthly income (after property manager fees) as follows:
1) $900
2) $850
3) $1,050
4) $950
5) $850
TOTAL: $4,600 / mo
1 is paid off, 1 more paid off in Feb 2017, and Im accelerating the payments and snowballing payments on all others to be paid off within 5 years (before retirement).
Total monthly income after retirement:
Rentals: $4,600
Pension : $3,750
Rent of house: $2,100
TOTAL: $10,450
After retirement, all debt (cars, credit cards) paid off except primary residence mortgage.
Taxes: currently FL resident, so 0 state tax. This will change after retirement (HI resident: 4%). Federal 15% (rental properties help a lot to reduce taxes).
Current expenses:
car: $9k balance, payments $215/mo, low interest (2%)
credit cards: $45k balance, payments (I pay $2500/mo to pay off quickly), low interest (3%) from balance transfer specials.
Education costs for son: Sons college is paid for by Post 911 GI Bill, which covers all tuition and a housing allowance (area dependent, but here in HI its $3k/mo) for 36 months.
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COA 1: Dont work, and enjoy retirement and the good live in Hawaii going to the beach, hiking, paddleboarding, kayaking, SCUBA diving, etc. Net income $10,450, with mortgage $4,300, so about $6k per month after paying expenses. Plenty to live off of and still save, with the occasional vacation or new car or other big purchases.
COA 2: Before retiring from Active Duty, but after the majority of houses are paid off, take a HELOC or fixed equity line from a property ($150k - $200k), and buy several more rental properties in low cost states (OH or IN). Either buy for cash 2-3 houses and rent out, or take a mortgage and put 20% down and accumulate 4-8 more houses. Continue living off of rental income as in COA 1. Risk is more properties = more things can break and go wrong
and more debt. Upside is more long term wealth creation.
COA 3: Same as COA 2, but take out $500k or so and either buy cash, or mortgages for more investment properties. Also after retirement from the Navy, take another job to earn more income, and use that to pay down debts faster.
Which COA do you guys / gals think I should do? Also, any other additional things I should do? I am also using LLC's for 3 of the properties, so as each LLC is making more $ (after mortgage paid off), I can put 25% of the income into a SEP, which will further reduce taxes.
Thanks all for your input!
EZcurrency