How much is enough for 45 year old to FIRE in 2020

[SAPPRO]

My thoughts on rental properties from personal experience and those of my friends:
- The going is good if you can find good tenants for extended stays (2-3 years). The strategy outlined by member SAPPRO would hold in this scenario, albeit the income stated seems to be on the higher side.
- Tenant turnover rate is often more frequent than desired, resulting in recurring expenses in cleaning, painting, finder fee if one chooses to get vetted tenants, squabbles with leaving tenants over damages?
- The depreciation we claim annually lowers the cost basis of the property, and you end up paying considerable capital gain when you sell it, which can offset appreciation, even if partially.
- Dealing with bad tenants is not for the faint hearted. Events like the Covid pandemic only make it worse. Several of my friends have had to take legal action against their tenants for nonpayment of rent, while being able to.
- I had a good run when I had a very good tenant for over 3 years. My experience with the next one was forgettable, bad enough for me to part with the property. I have little appetite to deal with such people. To each his own.

The strategy works well when all things are aligned ? good tenant for extended stay, good rental location, minimal investment, low mortgage rate, little or no HOA, newer house with little maintenance needed. Rental properties with all these attributes are hard to come by.

There are 2 ways of doing these investments - Being a slumlord, buying up multi-unit apartment buildings with its inherent issues or Single family housing meant for vetted tenants. My confidence is based on the experience of doing it over 15 years. Need to have a management company in between since they are better at withholding the deposit for damages.

I am aware of the depreciation recapture but it is down the road well into the future and can be avoided by my kids by doing 1031 exchanges.

Covid Pandemic has allowed some landlords to get mortgage forbearance ( same thing I suggested Trump to do in another thread!) - I am not worried about one-time mega events since government would step in to help.

[techynt]

Only success stories I have heard about good returns in rental properties using SFH is from Austin and Bay area. Both places was just pure timing the hyper growth phase.

I would consider it very high risk, buying a property in bay area right now for 1.5 million for rental.

Leverage can make us go bankrupt if things don't go well for 4-5 years or we happen to be buying in a future Detroit and cannot take 10% loss to exit it quickly and stick to it with hope and prayer.

[SAPPRO]

Can I please know good neighborhoods with few Indian families in FL as I am also considering to move to FL

Desis drive up the house price due to school districts- Don't get a house where Desis are unless you have school going kids - Bring a couple of desi families with you:) - Many times it is only $40 roundtrip to fly from Orlando to NJ/NY on Spirit and Jet Blue- you can make monthly visits if you miss them.

[SAPPRO]

Only success stories I have heard about good returns in rental properties using SFH is from Austin and Bay area. Both places was just pure timing the hyper growth phase.

I would consider it very high risk, buying a property in bay area right now for 1.5 million for rental.

Leverage can make us go bankrupt if things do go well for 4-5 years or we happen to be buying in a future Detroit and cannot take 10% loss to exit it quickly and stick to it with hope and prayer.

How is that every new stock like Nikola is the next Apple and every city is like Detroit ?

[semiretire]

:) What are good locations (Zip codes) to consider FL for early retirement moving

Desis drive up the house price due to school districts- Don't get a house where Desis are unless you have school going kids - Bring a couple of desi families with you:) - Many times it is only $40 roundtrip to fly from Orlando to NJ/NY on Spirit and Jet Blue- you can make monthly visits if you miss them.

[SAPPRO]

:) What are good locations (Zip codes) to consider FL for early retirement moving

The cheapest is the west coast - Ft. Myers / Cape Coral area - I would stay away from the coast due to hurricane evacuations and high home insurance unless you are a beach person.
I chose Orlando / Kissimmee ( 34758) due to the international airport with direct flights to Europe, due to its diversity and obviously lots of things to do - Heck, I could be a greeter at WDW and see lots of smiley faces all day everyday.

[SAPPRO]

Only success stories I have heard about good returns in rental properties using SFH is from Austin and Bay area. Both places was just pure timing the hyper growth phase.

I would consider it very high risk, buying a property in bay area right now for 1.5 million for rental.

Leverage can make us go bankrupt if things do go well for 4-5 years or we happen to be buying in a future Detroit and cannot take 10% loss to exit it quickly and stick to it with hope and prayer.

I would buy 5 properties in Richmond area instead of buying one property for 1.5 Million with 300K down payment in SF. - High investment cost and crazy carrying costs if it is vacant - huge capital gains to boot with possibly at state level

[techynt]

That is why I do not buy single stocks and invest in the index. Diversification is the key which is difficult with RE investment. Possible with REIT but then yields are much lower if risk is low.

And if I see bad signs on the horizon with stocks, I have the option to bail out by taking 10% loss since its highly liquid. Not possible with RE.

Transaction cost is also a bear with RE. One needs to keep aside 10% for selling cost in case market is slow.

If I had the option to invest in 500 different properties in 20 different cities and that would yield 5% or more, I will be all over it.


Keep in mind, with stocks, I have a plan for when thing go 50% down and dividend is cut to zero.

I am only expecting 2% more than inflation from capital gains from stocks over the long run.

How is that every new stock like Nikola is the next Apple and every city is like Detroit ?

[techynt]

You think capital gain will be possible next 2-3 years if a property is bought today. Good luck with that, prices are sky high right now in most locations.

I would buy 5 properties in Richmond area instead of buying one property for 1.5 Million with 300K down payment in SF. - High investment cost and crazy carrying costs if it is vacant - huge capital gains to boot with possibly at state level

[peacenjoy]

Added later: My spouse had the grand idea of retiring to Texas after our retirement. But our kids will be in CA mostly (or atleast till we live) due to their ultra-liberal attitude. They will strongly discourage us going to a Red state like TX in our retirement : )

It is not that bad in the red states as you imagine and especially Texas cities where it is becoming mini India, but I can understand staying close to friends and family is important. I would love to retire in CA especially Bay area for the weather more than anything but for the high costs and taxes. We have lots of relatives in CA and I feel more suffocated with the constant comparisons and show off than the whole red blue divide when I visit there:)