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Old 08-28-2014, 12:51 PM
 
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Accounting for all of my expenses in 2013, including a moderate amount of discretionary spending (eating out a lot, alcohol, impulse Amazon purchases), I spent approximately $25,000 of my take-home income of approximately $37,000. Other than leisure travel or emergencies, I'm not sure what else I would spend more money on, and I'm pretty content with my current lifestyle. What I really want is more TIME, not more money.

So I'm curious what amount of capital would be needed to generate $25,000 after-tax income to maintain my current lifestyle without working, assuming historical inflation from 1913-2014 of 3.22% and a capital gains tax of 15%, and where would one invest this capital (T-bills? Index funds?).
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Old 08-29-2014, 01:53 AM
 
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with low rates and high stock valuations today about 1 million bucks if you are lucky may do it in a 60/40 mix of stocks /bonds /cash.estimates today are about a 2.80% withdrawal rate is the new 4%
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Old 08-29-2014, 02:15 AM
 
Location: Sunrise
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Or own four rental properties that generate $1K per month. Keep $25K per year. And use the additional funds to pay for maintenance and taxes. In my city, I can swing that kind of income for about $600K. And since the market is rising, I'm building equity as well. But I absolutely agree that another crash could erase that at any time.
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Old 08-29-2014, 02:17 AM
 
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earning income and accumulating assets are very different than spending down and what you need to produce an annuitized income stream in good and bad times. very different math involved in decumulating.

you still need to produce that income stream under the worst of times to live off of ,no different than a retiree does.

it is all about drawing from a buffer bucket in a way so that disruptions don't effect the income stream. a new roof or boiler needed at the same time you have a vacancy or non paying tenant could kill that income stream and force reductions in income as an example.

so the stream has to be adjusted in a way that it is safe , secure and consistant and under worst case scenerio's you do not run out of money before you run out of time..
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Old 08-29-2014, 03:24 AM
 
Location: Sunrise
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I get that. Absolutely.

I am suggesting $48K per year in rental income to maintain $24K in real annual income. Four $150K houses in my area which easily rent for $1K per month. I can do that blindfolded for less than your suggested $1 million in investments. And I'll get some decent capital gains out of the property ownership itself. But I'm only talking about rent.
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Old 08-29-2014, 03:32 AM
 
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i do agree ,i can generate about 25kin cash flow with about 500k , but that does not mean you can pull 25k as an income reliably,consistently and through good and bad times which is what the op is asking about..

as i said generating profits is one thing , converting it in to a reliable income stream is quite another. very different things.

you can generate 25k in the good times but you may get 1/2 that in the bad times such as when you have vacancy's , or tenant damages , or even dealing with non paying tenants that can take months to get out in some areas like here. so income planning is based on a combination of good and bad times and requires an amount that is going to be much larger in order to keep the income stream not only constant but inflation adjusted too.. you need additional money and investments to draw from when you have shortfalls if this is your income to live on.

real estate is highly localized.

around these parts you would barely break even buying and renting in the early years , making a profit day one is not even an option unless it is a special situation property.

walking in to real estate is no different than any other long term investment , it can take quite a while paying your dues before you see profits.

down payments ,closing costs, expenses and repairs usually make it near impossible to see a profit day 1 in most desireable areas.

we always figure about 3 years for break even on our real estate deals and even that has turned out to be to short at times.. you also need lots of dry powder for all those expenses and black swan events that strike every landlord eventually.

but time is your friend and the wait can be well worth it.

we were partners in some commercial lease rights in nyc by central park. while they took years to generate positive cash flow they became more and more valuable as time went on.

in march an investor group paid us 18 million dollars just for those remaining 20 years we had left on those lease rights, then the investment is over and done for.

the sale made headline news in the real estate world as it offered no ownership of property at all..

the bad news is i really didn't want to sell as i am retiring within the year and that generated an income that was like a pension for us. now the job of generating that income falls on my shoulders and quite frankly with markets and rates where they are i don't think i will come close going forward to getting anywhere near that amount consistantly.


but it was our majority partner who calls the shots so it was sold..

here is the story if anyone cares to read it.

http://therealdeal.com/blog/2014/01/...itzer-for-18m/

Last edited by mathjak107; 08-29-2014 at 04:43 AM..
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