I am looking to see of I am missing something in my retirement planning. I am 40 years old and recently paid my house off worth 100k and have no debt at all. I am fixing to renovate my home with about 10k in order to move to another house and rent it out. I am hoping rent from my old home will fund a good portion of my new home while also paying it down. I make about 80k/year (53k take home). I save half of that every year. I have a plan to buy 3 more homes valued at roughly 100k/house by 2019. If everything goes right I will have all 3 homes paid off by 2030 (when I am 55). I will also have my main home paid off by then as well. I do currently have a 15 year old and have factored in his 1st car and college (among other expenses). The way I have it figured is by the time I am 55 I will have the following accomplished:
1. 4 homes being rented out and bringing in roughly 3k/month after property taxes+insurance
2. Having $250k saved up
3. No debt (meaning no credit cards or mortgage)
So just to recap. By 55 years old I will have 250k cash saved up, 3k/month cash coming in.
The way I figure is right now I live off of $2,320/month and that is with me supporting my son and everything that entails. He will be much more self-sufficient in the next 3 years. In the above scenario I would be living off of 3k/month without supporting my son. If I needed to buy something large or spend some money on any of the rent homes, or if 1 or more of my homes isn't renting I have the 250k to supplement. Also, at 65 or 67 I can start taking Social Security (assuming SS is still around at that time) which should give me another $2500/month which would boost my overall monthly income to roughly $5500/month. I have factored on the low end and not taking into account the homes going up in rental price. This is all assuming my current job stays the same and nothing disastrous happens. I have worked for my families business for the last 25 years and don't see what we do being obsolete in the next 15 years. So, overall does this plan seem to be doable or am I missing something?
Thank you in advance.
Also, I have to add that I have no pension, Ira, 401k and don't intend on putting any money in the market.
Sun Sep 07, 2014 3:27 pm
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
Mostly a good plan. But I would diversify, it's always chancy to put everything into a single investment. In your case, stocks and real estate would be a good diversification - and over the decades that combo has done very well.
I, too, owned 4 houses for about 30 years, and they were very good to me. But instead of paying down the mortgages I invested the house equities into stocks - and ultimately, the stocks made even more money than the houses.
The Law of Investing applies - risk and return are directly proportional. Some investors make the assumption that the Law doesn't apply to houses because "they can see them" so they are less risky than stocks - but it doesn't work that way.
Maybe you could re-direct the money that you are prepaying into loans into stocks. IMO, you'll like a million dollar investment investment portfolio a lot better than a $250,000 savings account at age 55.
Sun Sep 07, 2014 4:42 pm
stockbroker First Time Poster
Cash: $ 0.20
Joined: 14 Sep 2014
i think you should do rest and play golf in the evening
I agree with old guy. After 2008, it's hard to imagine that anyone would think that being totally invested in real estate is a good plan. When Baby Boomers get serious about downsizing their real estate and trying to cash in on the wealth in their homes, the real estate landscape could look very different. Diversification is key to protecting yourself.