Another one of these threads?
andysandp, please stop starting duplicate threads.
Here is the other thread andy started on this:
http://forum.mrmoneymustache.com/welcome-to-the-forum/is-there-a-4-rule-to-retire-on-real-estate/And a previous other thread discussing this:
http://forum.mrmoneymustache.com/real-estate-and-landlording/4-withdrawal-rate-if-investing-in-real-estateAs I wrote in Andy's first thread:
I have a post in there I consider very important to anyone wanting to ER on real estate. Your WR may be less than your cash flow.
In other words, this typical advice:
No. You would retire using RE when your net rents cover all of your living costs.
It would be based on the renal income covering your expenses, property upkeep, the rental market itself and other potential market challenges.
If ALL expenses are accounted for then yes, it is as simple as living off of rents minus expenses.
Is quite dangerous, overly simplified, and in many cases, potentially wrong. Even if your net rents cover all your initial living expenses after covering their own expenses, and always cover their own expenses, your ER could fail.
It's such a widespread notion that when cashflow > expenses, you're financially free.
That just isn't necessarily the case long term, and I don't see ANYONE else talking about it. Because I think they just either haven't thought about it, or don't understand it.
That common advice gets repeated and it makes so much simple sense that people just accept it, and then repeat it themselves.
But it's dangerous, like I said.
Read this:
http://forum.mrmoneymustache.com/real-estate-and-landlording/4-withdrawal-rate-if-investing-in-real-estate/msg1156130/#msg1156130Long-ish for a forum post (with the quoted parts), but it's well worth reading and considering, IMO, for anyone wanting to ER with real estate.
EDIT: I consider it so important I decided to come back and bold and enlarge it to try and catch someone's eye.
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Locking this duplicate thread. Post in one of the two above links if you have more to add.