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it pertains to drawing money out of a volatile portfolio . you can't spend the living room so real estate would be a different issue.
if it is rental real estate after you subtract out social security , any pension ,real estate income you get , it pertains to the portion of your income your portfolio has to provide .
You need an emergency fund.
You may have it from the 10% you set aside. It depends on how large it is. I do not see the need for two separate funds.
You have to figure out what you will need to pay your bills if you lose part of your income for a period of time. This could be several years.
Will your fund cover you if the tenant vandalizes the property and it takes you a year to evict? You have the lost net rent, repair costs and legal fees to pay from your emergency fund.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,557,056 times
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Quote:
Originally Posted by james777
I think you would get better answers in the business forum (because you are essentially running a business) or real estate forum (real estate investors will be in a better position to answer your question). My answer is that if all you have is your retirement income (pension, SS) and your paid for rental properties, you need a BIG rainy day fund in cash or stocks/funds, something that is liquid and can be accessed quickly. I would put aside as much as possible, and if necessary return to work, part time or full time to fund it. I like your strategy of having paid off properties that you never touch the principal, but I don't see it being viable unless you have a decent amount put away in liquid assets such as cash or stocks/funds.
As far as taking out a loan against one or more of your properties, I am sure it would break any investor's heart to have to dip into their paid for properties. In addition, a loan would be probably very hard to get under the rules revised after the 2008 financial crisis and could take a while; not good if you need the money in a hurry.
How much are you thinking?
My SS will be really minimal at best, so not counting on it.
My rentals are providing me with my living for the rest of my life so are in fact my retirement.
My Roth IRAs hold additional real estate and I can draw from them when I hit that age.
Right now my net income will be $109 to $127K a year on my rentals.
My Ira will add about $25K a year tax free when I withdraw from it when I hit retirement age.
while you are pretty much covered as long as the loss of use in a property won't devastate you i always like to see some cash for those unexpected large expenses that just appear ala our 20k plus dental .
we are retired and while we hold 2 years expenses in cash ready to go we do hold what i call a "cup" with money for those large expenses that suddenly appear on the radar .
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,557,056 times
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Quote:
Originally Posted by mathjak107
it pertains to drawing money out of a volatile portfolio . you can't spend the living room so real estate would be a different issue.
if it is rental real estate after you subtract out social security , any pension ,real estate income you get , it pertains to the portion of your income your portfolio has to provide .
Where does the SS come in. I thought since the rental income is unearned, there is no contribution to SS. ? I also can't use any of it to contribute to an IRA since it is unearned.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,557,056 times
Reputation: 16674
Quote:
Originally Posted by mathjak107
while you are pretty much covered as long as the loss of use in a property won't devastate you i always like to see some cash for those unexpected large expenses that just appear ala our 20k plus dental .
we are retired and while we hold 2 years expenses in cash ready to go we do hold what i call a "cup" with money for those large expenses that suddenly appear on the radar .
Makes perfect sense.
How do you hold the 2 years, in a bank account? Is the 2 years rated on your current lifestyle or less as in if you thought you needed it you would be cutting back?
Is the Cup an additional reserve?
the current year is being spent down now and represents about 80% of our current income , the other 20% is a small pension and a bit of my wifes ss check . it is laddered in cd's that come due in time to spend the money . next years money is also held in cd's laddered but go out longer. we keep 50k in the cup in reserve . that is only for the things that come up that are outside the range of being covered by our yearly budget .
all other money is invested and generates the future income stream . we are delaying taking ss as long as we can .
Last edited by mathjak107; 08-28-2016 at 02:23 PM..
I have a savings account for emergencies plus I always keep some plain old cash just in case. I probably don't really need to do that because there are almost as many ATM's in Vegas as there are residents!
we already had three times in new york city atm's were down . 9-11 , the tornado we had and sandy . some were down for quite a few days and many of the banks were closed as well
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