Hello

I am planning on leaving my day job, not for a while, 3/3/23... I turn 46 on 3/4/24... Want to leave at 45.. To the one that left day job to do ll full time, what do you suggest? My thoughts.. Wife is stay at home mom..

1- i am going to max out 401k an put 100% of net pay into a seperate accout an not spend a dime.. More than likely throw into sp500 or a nasdaq index fund

2- I have to get health insurance quote to get idea....but i plan on taking 1500 a month out of rentals to put into seperate account as well...( since insurance will be a new cost an want to put that aside as if i am paying it now) will adjust to quote plus add another 10%

3- I want to see how my lifestyle will be living off rentals for over 18 months

4- i want to up my heloc from 125k to 250-300k while i got my day job

I have about 45 rentals.. In debt with primary an heloc of about 425k.. Plan on living on rentals an all extra rental income going towards paying down debt.. Goal is to have under 100k in debt by time i retire

Any other ideas?

I am going to get my real estate license before i retire an do that on side....at my own schedule... Since i love real estate an the wheeling an dealing of it...

Thanks

My father retired at 62 to maximize on his employee pension. My brother retired at 45, with no pension until he turns 65, relying on his passive real estate rental income.

And I retired from doing outside work at 47, having rental income and other investments.

However shortly after retiring, real estate dropped 40% in value. Bank Certificates of Deposit dropped from 4.5% to under 1/2 %. Tax free bonds lost 40% in value and took years to recover.

I retired early myself. A few things to consider.

1. Additional income sources/streams of income. Despite the cash flow you may have from the rentals, this income can be looked at as almost a single source. What happens if, say, another bug shows up and the govt says the tenants don't have to pay and you still have to maintain the places, pay property tax, etc.

2. What if the govt decides to house invaders from elsewhere in your places without paying you?

3.There's no telling what will happen in the near future.

4. Inflation is expected by some people to get much higher. Seen the increased price of gas since January? Here it's up from 1.85 to 2,90 since January. Food is up a good bit.

5. I think health insurance is going to go way up as MILLIONS of invaders from elsewhere get FREE medical while we pay for them as well as ourselves.

6. Taxes of all kinds are going to go way up. Nothing is free unless you are an invader from elsewhere, then everything is free. The govt will take thousands or more right out of your pocket and give it to these others.

7. The HELOC you talk about may be cancelled as soon as you retire. Maybe/maybe not. There are no guarantees.

8. I'd recommend that you develop several alternate streams of income asap, before you stop work. I'd make these streams the type that have a small chance of being stopped by the govt. (growing vegetables, flowers, etc that could be sold at farmers markets for instance. Buy some timber land, even if it's smaller plots of an acre or so. Get a year or more supply of essentials in safe storage, Get a pickup truck or two, older ones without the electric computers in them, say 1980's or earlier. Maybe set up an ebay type business where you can sell most anything. Maybe set up a thrift store type operation. Have the kids run it if you have kids. Bicycle repair. Small engine repairs.

There's lots of things that can be done if needed to create other streams of income.

Don't just rely on one thing or type.

I retired early myself. A few things to consider.

1. Additional income sources/streams of income. Despite the cash flow you may have from the rentals, this income can be looked at as almost a single source. What happens if, say, another bug shows up and the govt says the tenants don't have to pay and you still have to maintain the places, pay property tax, etc.

2. What if the govt decides to house invaders from elsewhere in your places without paying you?

3.There's no telling what will happen in the near future.

4. Inflation is expected by some people to get much higher. Seen the increased price of gas since January? Here it's up from 1.85 to 2,90 since January. Food is up a good bit.

5. I think health insurance is going to go way up as MILLIONS of invaders from elsewhere get FREE medical while we pay for them as well as ourselves.

6. Taxes of all kinds are going to go way up. Nothing is free unless you are an invader from elsewhere, then everything is free. The govt will take thousands or more right out of your pocket and give it to these others.

7. The HELOC you talk about may be cancelled as soon as you retire. Maybe/maybe not. There are no guarantees.

8. I'd recommend that you develop several alternate streams of income asap, before you stop work. I'd make these streams the type that have a small chance of being stopped by the govt. (growing vegetables, flowers, etc that could be sold at farmers markets for instance. Buy some timber land, even if it's smaller plots of an acre or so. Get a year or more supply of essentials in safe storage, Get a pickup truck or two, older ones without the electric computers in them, say 1980's or earlier. Maybe set up an ebay type business where you can sell most anything. Maybe set up a thrift store type operation. Have the kids run it if you have kids. Bicycle repair. Small engine repairs.

There's lots of things that can be done if needed to create other streams of income.

Don't just rely on one thing or type.

Health Insurance: it goes up exponentially as you age. We retired in 2012 with a $350 per month catastrophic plan in place for the two of us, with a built-in cap on Out of Pocket expenses which we also budgeted for. Couldn't be cancelled as long as we paid the premiums. Okay, good, have that covered in our plans.

Over the next few years, OCare happened and our costs went up up up up. Right now I am paying $1100 per month for just ME - cheapest plan available in my state with BCBS - plus a $7000 per year deductible. That's $20,000 a year BEFORE I GET SICK.

DH is on Medicare and that is cheaper but still a monthly fee everything.

Do you have enough life insurance to cover your debt and for your family to live on when you are gone? Don’t assume they can manage it without you.

Do you have disability insurance if you get hurt and can’t manage the real estate?

Do you have similar insurance for your wife? If she dies and you still have kids at home, you need to be able to hire a Mary Poppins to keep the home front running.

Have way more cash on hand than you think you will need.

Always except the unexpected.

Congratulations and happy retirement!

Your plan sounds pretty good. A couple of thoughts. If the interest rates go through the roof like in the 1980's don't plan on a HELOC. You need to lock in a fixed rate on existing or you could find yourself on a call or paying 15-20% interest with little or no options. While maxing out the 401K isn't a bad plan, going into it with available emergency cash is also important, you don't want to have to pay that 10% withdrawal penalty if you find yourself in a short-term pinch for cash before 59 1/2. Living off of the rentals for 18 months and stashing the day gig cash is a good plan. While all the experts tell you that your expenses will go down in retirement, I found different. It did go down about 8-10% but we spend more than that splurging on travel, leisure, and giving back to the community since I have more time to do it now.

Check in with your banker and get his opinion. You might be ending your business relationship with them and not know it. If they don't like the ideas, then you might want to start lining up private money NOW.

Jason,

Congrats! A man with a plan and the juice to get it done!

Me? I went on a RE buying spree while I was still employed and looked good to the banks. Once you quit the financing will grind to a halt and they'll want a bunch of records, etc.

Health Ins: Don't let it slow you down. Just do a ton of research and make certain your family is covered. Consider Christian Healthcare Coop and others like it. My friends on it love it!

Once unemployed st up an HSA - Health Savings Account. It's no more than a separate checking account. Pay for healthcare premiums and care with pre-tax dollars.

I agree with MIKE A - less debt is better than more in savings.

Also, I set up a Self Directed Solo401K Roth thru Mike at IRA Innovations as a self-employed person. You can make a large contribution to get it started and put RE in it for tax free income. Did I mention it's TAX FREE INCOME!!!

License: I got my license and the education was OK, but I could have taught much of the class. You'll make more money doing your own RE investing than as a realtor - AND you'll have a life! Very few realtors actually make any money.

Keep going!

BRAD

Jason,

My other tip: Mistletoe on your back belt loop.

(Just joking!)

My friend gave his boss a gold watch.

Drive away in your new Porsche. Maybe a donut in the parking lot.

Fun tho think about. This stuff motivated me because I could not WAIT to get outta there.

Even in a good situation short timer's attitude will develop - when you are making double on the side and realize you are losing money by staying.

BRAD

A few things to take from Brad's message:

1) Owning rentals does not make you self-employed. Even if you are an RE Pro for tax purposes, you are not self-employed. This designation requires another level of government intervention, reporting on Schedule C's not E's, and paying self-employment taxes. I don't know all the steps as we are just LLCs, which is pass-through income to our personal return.

We took out a mortgage on our paid-off house while DH was still employed so we had cash to invest.