Author Topic: Cashing out stocks for R.E. = faster retirement?  (Read 2934 times)

jondlc24

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Cashing out stocks for R.E. = faster retirement?
« on: January 21, 2017, 11:41:06 PM »
Hey everybody,

My goal is to make a consistent 30k a year in retirement starting at age 30. Instead of waiting till my stock portfolio reaches 750k, wouldn't it be quicker to just sell all my stock holdings at around 400k and buy 4 rental properties in cash valued at around 100k each? The average rent for a single family home in the Tampa Bay area (where I'm located) is typically between 800-1200 dollars. Even if I only charged 650 a month for rent, that'd still put me at over 30k a year. Is there any reason as to why this wouldn't work? Any reason why it wouldn't be faster? All input is much appreciated.

Best Regards,
Jonathan D.

shuffler

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #1 on: January 22, 2017, 12:57:20 AM »
Did you account for vacancy? Taxes? Repairs? A local market downturn destabilizing your income/stash?

There's a sub-forum here for real-estate that you may find useful.

boarder42

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #2 on: January 22, 2017, 04:13:07 AM »
Bigger pockets is best for this. But your general assumption is correct. When you leverage you stache in real estate you will accelerate your fire date when done properly. It's how arebelspy retired at 30ish with his wife on 2 teachers salaries.

SeattleCPA

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #3 on: January 22, 2017, 08:19:55 AM »
There's also another active thread in the real estate MMM forum that's sort of on-point:

http://forum.mrmoneymustache.com/real-estate-and-landlording/is-there-a-4-rule-for-real-estate-retirement-like-there-is-for-stocks/

Brick

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #4 on: January 24, 2017, 03:31:25 PM »
Like boarder42 said, check out BiggerPockets.com -- they've got a podcast, weekly webcasts, blogs, calculators, and their "Ultimate Beginners Guide" (https://www.biggerpockets.com/ubg) to help you define your investing strategy and ensure that you're not missing anything in your calculations (like shuffler pointed out).


arebelspy

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #5 on: January 24, 2017, 03:37:19 PM »
My advice: Don't purchase any real estate until you have enough knowledge to explain the maths behind the answer tho the first post, and when the answer is yes, and when it's no, and when it's maybe, and why.

(And if you're not willing to do that learning, you definitely shouldn't be buying real estate, which takes a lot of specialized knowledge.)

I say this as a big advocate for real estate for early retirement... but ONLY if it's done correctly.  Bad real estate investments will set you way back (like selling low in a crash would if you're invested in equities).

It also sounds like it would behoove you to listen to this podcast I was on, where I compare real estate versus stocks for early retirement:
https://radicalpersonalfinance.com/78/

It should give you a good overview of the pros and cons of each.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Eric

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #6 on: January 24, 2017, 03:46:12 PM »
wouldn't it be quicker to just sell all my stock holdings at around 400k and buy 4 rental properties in cash valued at around 100k each?

Don't forget about taxes.  If you have a $400k jump in income in one year, you're going to owe a bunch.

SeattleCPA

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #7 on: January 24, 2017, 06:01:05 PM »
My advice: Don't purchase any real estate until you have enough knowledge to explain the maths behind the answer tho the first post, and when the answer is yes, and when it's no, and when it's maybe, and why.

(And if you're not willing to do that learning, you definitely shouldn't be buying real estate, which takes a lot of specialized knowledge.)

I say this as a big advocate for real estate for early retirement... but ONLY if it's done correctly.  Bad real estate investments will set you way back (like selling low in a crash would if you're invested in equities).

It also sounds like it would behoove you to listen to this podcast I was on, where I compare real estate versus stocks for early retirement:
https://radicalpersonalfinance.com/78/

It should give you a good overview of the pros and cons of each.  :)

To amplify arebelspy's wise comment, investment genius David Swensen observes in his book "Pioneering Portfolio Management" that in the alternative asset classes (like real estate, private equity, etc), the people who do well do really well... that maybe suggests you really only get rewarded for knowing what you're doing?

Swensen, BTW, shares that the top quartile real estate investor earns like 17% annually while the median investor earns 12% and the bottom quartile earns 8%. That bottom quartile investor probably would do better in stocks.


arebelspy

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #8 on: January 24, 2017, 07:37:27 PM »
To amplify arebelspy's wise comment, investment genius David Swensen observes in his book "Pioneering Portfolio Management" that in the alternative asset classes (like real estate, private equity, etc), the people who do well do really well... that maybe suggests you really only get rewarded for knowing what you're doing?

That totally makes sense and jives with what I've seen.

Quote
Swensen, BTW, shares that the top quartile real estate investor earns like 17% annually while the median investor earns 12% and the bottom quartile earns 8%. That bottom quartile investor probably would do better in stocks.

Does he go into how that's calculated (i.e. what that return does or does not consist of, such as appreciation, tax benefits, etc. and over what time frame) and/or what data sources are used, either in the text itself or in an appendix or footnote/endnote?

What percent of the book would you say is about real estate?  Worth reading?  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

SeattleCPA

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #9 on: January 24, 2017, 07:51:57 PM »
To amplify arebelspy's wise comment, investment genius David Swensen observes in his book "Pioneering Portfolio Management" that in the alternative asset classes (like real estate, private equity, etc), the people who do well do really well... that maybe suggests you really only get rewarded for knowing what you're doing?

That totally makes sense and jives with what I've seen.

Quote
Swensen, BTW, shares that the top quartile real estate investor earns like 17% annually while the median investor earns 12% and the bottom quartile earns 8%. That bottom quartile investor probably would do better in stocks.

Does he go into how that's calculated (i.e. what that return does or does not consist of, such as appreciation, tax benefits, etc. and over what time frame) and/or what data sources are used, either in the text itself or in an appendix or footnote/endnote?

What percent of the book would you say is about real estate?  Worth reading?  :)

Very little of the book is about real estate per se... but it is definitely worth reading if you're serious about being a good investor.

A caution: It's sort of a weird read because it's really written by a guy running a $20B endowment fund (Yale's)  who is writing to other endowment fund managers running "small" $500M endowment funds, etc.

I found a ton of useful, applicable information for individual investors... Especially for people who want have a chunk of their portfolio outside of the "traditional asset" classes that are stocks and bonds.

The other thing is, you're getting inside the head of a guy who's earned like nearly a 25% annual return for nearly three decades...

P.S. If you click my sig link to my blog, this week's post (actually next week's too) shares ideas from Swensen's book.

arebelspy

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #10 on: January 24, 2017, 08:22:15 PM »
If you click my sig link to my blog, this week's post (actually next week's too) shares ideas from Swensen's book.

Neat!  Thanks! (And thanks for the info on the book.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

jondlc24

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Re: Cashing out stocks for R.E. = faster retirement?
« Reply #11 on: February 11, 2017, 04:29:08 PM »
Very useful info here. I'll make sure to continue my research. Thanks everybody!

Best Regards,
Jonathan D.