Real Estate

[spazzyfry123]

Originally Posted by Run Silent

I generate a decent % of my income from rental properties. Most are overseas. Let me know if you have any specific questions. I am happy to answer what I can.

Why overseas? Stricter regulations or more lax? Does the $ go further in acquiring property? How do income and other taxes work? Is labor potentially cheaper for a management company? Multi family or single homes? Did you buy personally, set up a company, finance the properties? Short term (Air BnB, VRBO, etc) or long term renters?

Rapid fire, I know, but that is an intriguing idea. I’d be interested to see how the business plan is and why you choose international.

[chassis]

@run silent

How often do you personally lay eyes on the structures (not via webcam)? Do you pay a local management company/individual/family member in country for this service?

[Run Silent]

Originally Posted by spazzyfry123

Why overseas? Stricter regulations or more lax? Does the $ go further in acquiring property? How do income and other taxes work? Is labor potentially cheaper for a management company? Multi family or single homes? Did you buy personally, set up a company, finance the properties? Short term (Air BnB, VRBO, etc) or long term renters?

Rapid fire, I know, but that is an intriguing idea. I’d be interested to see how the business plan is and why you choose international.

Whew - lot to take in here. At work, so minimal time for answers.

Why overseas? cheaper property, less governmental regulation. I am frequently in that country and wife is from there.

Stricter regulations or more lax? Far less regulation for pretty much everything. While some areas - such as renting regulations for tenants are stronger there than in the USA, you can avoid many of them if you deal with the informal sector.

Does the $ go further in acquiring property? Yes. All three properties are 1500sf (roughly) penthouses in large highrise condos on a beach in one of the most lux areas of the country (think Malibu or Miami). I paid less than $100K for each of them.

How do income and other taxes work? It's complicated, but I am a CPA, so I have more knowledge than most. The bulk of the net income is retained in that country, so I am able to avoid some tax liability here in the USA, but not all.

Is labor potentially cheaper for a management company? Labor is super cheap. House cleaning runs about $0.50 an hour. I use a management company. They take about 15%, but that includes housekeeping, basic maintenance, security, and more.

Multi family or single homes? Multifamily high rise condos on the beach.

Did you buy personally, set up a company, finance the properties? We don't believe in debt, so all properties have been paid for with cash. They are run as Pty. Ltd. corporations in the foreign country - like an LLC here in the USA.

Short term (Air BnB, VRBO, etc) or long term renters? I run them all as short term rentals to avoid tenant laws in the host country, which are extremely stringent. We use Air BNB, but for the most part, it doesn't work that well there, so we use the local version of a vacation rental site. We also have a website run through the PMC. Occasionally we will have a longer term renter, like 30-60 days, but that's about it. They are occupied about 70-80% of the year.

Originally Posted by chassis

@run silent

How often do you personally lay eyes on the structures (not via webcam)? Do you pay a local management company/individual/family member in country for this service?

Yes - we have a local PMC that handles most everything. They take 15%. Typically, we visit them once a year - although with Covid - we didn't go this year as the country has had a travel ban since March.

[spazzyfry123]

Originally Posted by Run Silent

Whew - lot to take in here. At work, so minimal time for answers.

Why overseas? cheaper property, less governmental regulation. I am frequently in that country and wife is from there.

Stricter regulations or more lax? Far less regulation for pretty much everything. While some areas - such as renting regulations for tenants are stronger there than in the USA, you can avoid many of them if you deal with the informal sector.

Does the $ go further in acquiring property? Yes. All three properties are 1500sf (roughly) penthouses in large highrise condos on a beach in one of the most lux areas of the country (think Malibu or Miami). I paid less than $100K for each of them.

How do income and other taxes work? It's complicated, but I am a CPA, so I have more knowledge than most. The bulk of the net income is retained in that country, so I am able to avoid some tax liability here in the USA, but not all.

Is labor potentially cheaper for a management company? Labor is super cheap. House cleaning runs about $0.50 an hour. I use a management company. They take about 15%, but that includes housekeeping, basic maintenance, security, and more.

Multi family or single homes? Multifamily high rise condos on the beach.

Did you buy personally, set up a company, finance the properties? We don't believe in debt, so all properties have been paid for with cash. They are run as Pty. Ltd. corporations in the foreign country - like an LLC here in the USA.

Short term (Air BnB, VRBO, etc) or long term renters? I run them all as short term rentals to avoid tenant laws in the host country, which are extremely stringent. We use Air BNB, but for the most part, it doesn't work that well there, so we use the local version of a vacation rental site. We also have a website run through the PMC. Occasionally we will have a longer term renter, like 30-60 days, but that's about it. They are occupied about 70-80% of the year.




Yes - we have a local PMC that handles most everything. They take 15%. Typically, we visit them once a year - although with Covid - we didn't go this year as the country has had a travel ban since March.

Excellent.

Debt free is great and the prices sound better. Are the nightly rates proportionate to the lower initial investment, or are you just making in hand over fist. I'd imagine the HOA is minimal as well.

Taxes always spook me - really because I don't understand them as well as I would like. I'm always interested in a way to reduce the burden. Not illegally of course, but knowing the right paths to take are more difficult than I would...hope? Maybe I'm just expecting a light shining down saying "do this."

Sounds like you've got a good system over there. Great for you and yours; hope the fortune continues.

[AmuroRay]

I bought a home - give me ALL the advice lol. From where and how to furnish it, to what should be a long term strategy.

[NorCalAthlete]

I'm really torn right now. Prices in my area are dropping as I'd anticipated and have been waiting for, but I basically have a choice between dropping 6 figures on a down payment or dumping that 6 figures into an investment account.

It's so steep for a down payment even for an entry level payment that there are a lot of people I know opting to rent - long term - and invest, instead of purchasing a home here. Median price is ~$1.4 million, even with the prices dropping, so an entry level starter townhouse is still like $800k. I've got about $150k I can throw at either investing or the down payment - right now it's sitting in a high yield savings account.

Currently I have a 401k, Roth IRA, individual investment account, and a robinhood "play" investing account. I'm debating on talking to an actual wealth manager / financial advisor and just turning it over to them and being like "help me retire in 10 years."

[PoorLurker]

Run Silent Thanks for the details! Which country is this?

NorCalAthlete Love the avatar! Also, are you bound to the bay area? Not sure how living there will help you retire in 10 years. The real estate is absolutely ridiculous there. If there was some gem of a reason to be there, it'd make sense, but ... I just don't get it. (and this comes from someone who will never leave Orange County where people complain constantly about housing)

[chassis]

Originally Posted by NorCalAthlete

I'm really torn right now. Prices in my area are dropping as I'd anticipated and have been waiting for, but I basically have a choice between dropping 6 figures on a down payment or dumping that 6 figures into an investment account.

It's so steep for a down payment even for an entry level payment that there are a lot of people I know opting to rent - long term - and invest, instead of purchasing a home here. Median price is ~$1.4 million, even with the prices dropping, so an entry level starter townhouse is still like $800k. I've got about $150k I can throw at either investing or the down payment - right now it's sitting in a high yield savings account.

Currently I have a 401k, Roth IRA, individual investment account, and a robinhood "play" investing account. I'm debating on talking to an actual wealth manager / financial advisor and just turning it over to them and being like "help me retire in 10 years."

NorCalAthlete Interesting that you are seeing prices come down.

Do you spend time on early-retirement.org or bogleheads.org? There are some perspectives on the retirement topic on those sites. The basic principles on those sites are good, and each person needs to create their own plan based on their particular situation. Take some of what is posted on those sites with a grain of salt, like any internet forum.

[NorCalAthlete]

Originally Posted by PoorLurker

Run Silent Thanks for the details! Which country is this?

NorCalAthlete Love the avatar! Also, are you bound to the bay area? Not sure how living there will help you retire in 10 years. The real estate is absolutely ridiculous there. If there was some gem of a reason to be there, it'd make sense, but ... I just don't get it. (and this comes from someone who will never leave Orange County where people complain constantly about housing)

Tied here for family reasons for the foreseeable future. I figure probably at least another 10-20 years.

Way I see it though, if I can make it to retirement here, I'll be well set for anywhere else in the country (if not the world. I have family and friends in Switzerland and wouldn't mind retiring there...)

Originally Posted by chassis

NorCalAthlete Interesting that you are seeing prices come down.

Do you spend time on early-retirement.org or bogleheads.org? There are some perspectives on the retirement topic on those sites. The basic principles on those sites are good, and each person needs to create their own plan based on their particular situation. Take some of what is posted on those sites with a grain of salt, like any internet forum.

I don't....guess I'll have to scope them out. I read r/fire and r/fatfire among others.

[chassis]

The sites I mentioned commonly talk about two things - safe withdrawal rate (SWR) and living expenses. Net worth needs to attain a level to sustain living expenses at the SWR.

Estimate your living expenses 10 years from now. Multiply by 25. This is one estimate of net worth required 10 years from now, for you to withdraw at an SWR of 4% per year.

Take the number you calculated above, and divide by your net worth today. Then take the 10th root of that number, or raise it to the 0.1 power. This is the required annual growth needed to achieve the target net worth in 10 years.

Today's net worth should include all assets minus all liabilities. This includes real estate at market value and mortgages.

A question to consider is: do you feel comfortable creating an investment portfolio that gives you the annual growth rate you need to retire in 10 years? If you choose to use an advisor, be aware they charge in the neighborhood of 1% of portfolio value, which increases the return the portfolio needs to earn, to meet your goals and pay for the advisor. I don't use an advisor and don't have plans to use one.

[roastbeef]

Originally Posted by Run Silent

I generate a decent % of my income from rental properties. Most are overseas. Let me know if you have any specific questions. I am happy to answer what I can.

i've been curious about overseas properties. where are yours? do you have vacation rentals, or long term leases?

i briefly looked into a foreign rental. i'd potentially want it to be somewhere i would like to vacation to when i retire. i was thinking australia, but i did a little reading and found it was rather difficult for foreigners to buy property there. i'm curious to know what/where your basic setup is, and some of the challenges you face.

edit- missed your post above.

[NorCalAthlete]

Originally Posted by chassis

The sites I mentioned commonly talk about two things - safe withdrawal rate (SWR) and living expenses. Net worth needs to attain a level to sustain living expenses at the SWR.

Estimate your living expenses 10 years from now. Multiply by 25. This is one estimate of net worth required 10 years from now, for you to withdraw at an SWR of 4% per year.

Take the number you calculated above, and divide by your net worth today. Then take the 10th root of that number, or raise it to the 0.1 power. This is the required annual growth needed to achieve the target net worth in 10 years.

Today's net worth should include all assets minus all liabilities. This includes real estate at market value and mortgages.

A question to consider is: do you feel comfortable creating an investment portfolio that gives you the annual growth rate you need to retire in 10 years? If you choose to use an advisor, be aware they charge in the neighborhood of 1% of portfolio value, which increases the return the portfolio needs to earn, to meet your goals and pay for the advisor. I don't use an advisor and don't have plans to use one.

I got 7.5, which I think is fairly easily attainable (if that's representing a percentage and not a multiplier). That's with a very moderate estimate of living expenses, as my only real vices are not particularly extravagant.

That being said, I'm more of the fatFIRE ambition, so if I could hit well beyond 7.5 (%? X?) growth rate I think 10 years is feasible to live a pretty decent, if not extravagant, life. We're talking modest house, BMW, golf, and a couple vacations per year. Also, I don't know that I'd fully retire anyway even if I could - I get bored easily. What I think it would mostly do is give me enough financial flexibility to explore more career options and entrepreneurship. Ideally, I could grow it enough to make a full time (or at least part time) job out of angel investing and mentoring / teaching / helping small businesses and such.

[chassis]

Originally Posted by NorCalAthlete

I got 7.5, which I think is fairly easily attainable (if that's representing a percentage and not a multiplier). That's with a very moderate estimate of living expenses, as my only real vices are not particularly extravagant.

That being said, I'm more of the fatFIRE ambition, so if I could hit well beyond 7.5 (%? X?) growth rate I think 10 years is feasible to live a pretty decent, if not extravagant, life. We're talking modest house, BMW, golf, and a couple vacations per year. Also, I don't know that I'd fully retire anyway even if I could - I get bored easily. What I think it would mostly do is give me enough financial flexibility to explore more career options and entrepreneurship. Ideally, I could grow it enough to make a full time (or at least part time) job out of angel investing and mentoring / teaching / helping small businesses and such.

The math above gives a number of one plus the required portfolio growth rate, to achieve the targeted value by the targeted date.

((Net worth target in 10 yrs)/(today’s net worth))^0.1 = A number larger than 1.0, if your net worth today is below your target net worth in 10 years. Subtract 1 from this number, and that is the required growth rate needed to achieve your target in 10 years.

[AmuroRay]

Originally Posted by roastbeef

i've been curious about overseas properties. where are yours? do you have vacation rentals, or long term leases?

i briefly looked into a foreign rental. i'd potentially want it to be somewhere i would like to vacation to when i retire. i was thinking australia, but i did a little reading and found it was rather difficult for foreigners to buy property there. i'm curious to know what/where your basic setup is, and some of the challenges you face.

edit- missed your post above.

Costa Rica.

Also, I do NOT notice prices dropping for houses in my area. My house already is appreciating and it's not even done.

[chassis]

Latest home price data release from the US Federal government show continued strength in home prices.

[Run Silent]

Originally Posted by PoorLurker

Run Silent Thanks for the details! Which country is this?

NorCalAthlete Love the avatar! Also, are you bound to the bay area? Not sure how living there will help you retire in 10 years. The real estate is absolutely ridiculous there. If there was some gem of a reason to be there, it'd make sense, but ... I just don't get it. (and this comes from someone who will never leave Orange County where people complain constantly about housing)

South Africa