Author Topic: Diversification and Real Estate  (Read 1142 times)

bpleshek

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Diversification and Real Estate
« on: August 04, 2016, 07:26:06 AM »
I am probably at the point I could be financially independent, if I totally tighten the belt, but I wanted to run something past everyone.

My retirement strategy is income replacement, rather than capital appreciation.  When I have enough rental properties to replace my income(or at least enough of it), I will quit.  So conceptually, is there anything wrong with having enough income producing property to provide income rather than having a huge nest egg(ie 401k/brokerage account) which is the traditional route(or a mix of both)?  Let's say for instance I have 5 properties that produce $1000/month of rental income.  Forgetting that I might have vacancies for this question how does my $500k in paid off property differ from the $1.5M portfolio withdrawing the mythical 4%(60k/year is 5k/month and 60k/.04 = $1.5M )?

Thanks
Brian 

Other irrelevant info:
I'm 44.
Have ~$50k in 401k from an old job so even at average/poor performance it should double at least twice by the time i'm 65.
I make about $85k/year.  My wife is older than I am and is drawing 1700/mo in disability after withholding.
We are both experienced landlords.  She's owned over 20 properties and I've owned 4 with 50 years combined landlord experience.
Paid off house worth approx $210k(bought foreclosure @$164k).
1 current rental worth approx $120k bringing in $1200/mo.
$160k in cash about to make 2 purchases of approx $65k each of foreclosed properties.  Might cost $30k to renovate both.  I can probably cash flow the closing costs and any small amounts I'm off over the next few months.  These properties are in an area where rents will for for 1000-1400/mo.

tonysemail

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Re: Diversification and Real Estate
« Reply #1 on: August 04, 2016, 06:10:45 PM »
welcome to the forum.

This thread is probably a good place to start -
http://forum.mrmoneymustache.com/real-estate-and-landlording/4-withdrawal-rate-if-investing-in-real-estate/

at least it may give you some new things to ponder

Fishindude

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Re: Diversification and Real Estate
« Reply #2 on: August 05, 2016, 04:59:24 AM »
I would be more comfortable with your real estate strategy than blindly trusting the stock market to generate a return year in and year out.
Good work !