Let's all see our monthly budgets...???

[TexasHusker]

Pay off the $300K debt.

If I did, that would only be another $2000 per month in my pocket.

Business number 1, I have invested around $325K and its producing deep into six futures. Why wouldn't I just go after more of that, if I was going to lay out $300K?

Paying off those loans is equal to about a 5% yield. That doesn't excite me much. I'd rather round up another $100K, put in another business location, and increase my income $50K per year.

[TexasHusker]

1. It's not hard earned, you are sitting at home collecting rent.
2. Do you have 300k right now sitting in the bank? If not then you'll have to leverage that 300k to earn you 50k/year...in which after property taxes/fees/closing cost/interest/taxes, that 50k/year return is more like 10k or less. If you pay off 300k worth of borrowed money, you'll save 15k/year on interest so you can pick your poison. If you leverage another 300k, then that's 30k/year total worth of interest on 600k borrowed to get you an additional 50k of before tax money and at your income, not sure if that's worth it.

This is why I think real estate sucks currently. You can double your return during the housing crisis, now it's just too much work for such little return.

I don't agree that real estate sucks - last year I bought two more, smaller vacation homes to rent out for $260K cash. After all expenses I'm still nettting about $35K rents per year on those, in 6.5 more years I'll have recouped every dime I paid for them, and they will likely be worth more, maybe much more. I'm getting around a 13% annual yield before even factoring my deductions, correct ?

I also get a big tax break with the various deductions - repairs, insurance, depreciation, taxes, etc.

If you can point me to a better investment, I'm all ears.

[corn18]

How do you reconcile your expectation of increasing value of the property with the deprecated value of the property?

[TexasHusker]

How do you reconcile your expectation of increasing value of the property with the deprecated value of the property?

My main concern is income. Price appreciation would just be a bonus. The yield is there regardless of what the value does, although certainly if it dropped 50% that wouldn't be so good.

Real estate sporting a 13% cap rate is going to be an attractive buy for someone.


But the fact is, most properties are worth more in 10 years...

[TexasHusker]

Adding to that, I did in fact buy two vacation homes pre-bubble. While values are still off 20% from their highs, the income keeps coming in. The rents have pretty much been enough to pay for the homes outright, although I used the $$$ to fund another business.

[Singuy]

Adding to that, I did in fact buy two vacation homes pre-bubble. While values are still off 20% from their highs, the income keeps coming in. The rents have pretty much been enough to pay for the homes outright, although I used the $$$ to fund another business.

Sounds like you are not retired but want more income and more houses(which is fine, it's not for everyone but you like it).

If that's the case, then I probably would tone down on that massive monthly expenditure and focus more on growing the business. I mean you can keep using leverage to buy more houses but that's most likely not the most efficient way to make more money with your business. You are essentially not taking money you make from the business and reinvesting it back into the business.

[tripods68]

If I did, that would only be another $2000 per month in my pocket.

Business number 1, I have invested around $325K and its producing deep into six futures. Why wouldn't I just go after more of that, if I was going to lay out $300K?

Paying off those loans is equal to about a 5% yield. That doesn't excite me much. I'd rather round up another $100K, put in another business location, and increase my income $50K per year.

I'm not an accountant, but i'm going to extrapolate the numbers you gave us.

Business Income = $220K a year (assuming you pay 30% in taxes)
Taxable Income $154K
Rental Income = $85K a year
Expenses = $240K (20K a month)
Taxable Income $154K + 85K= $239K
Taxable Income $239K - Expenses $240K
-Negative Income $1K


What happen if the business 1 collapsed? DO you have 6K to replace that income? NO

What happened business 2 collapsed? Do you have 12K to replaced that income ? NO

Yet you have 20K in expenses both personal and business, in red. (I'm no accountant again correct me IF i'm wrong) your business model minus expenses is not sustainable.

Could you sell some properties to pay off your debt? Yes, this will reduced your annual expenses because you don't have to service debt.

You have NO retirement, EF? No, but you use your business income as your retirement income which isn't sustainable based on the numbers.

What happened if you get sick or unable to work? Do you have life Insurance?

I think you can make up any type of excuses, but you come wanted our suggestion, and the numbers appears gloomy....numbers don't lie.

[TexasHusker]

1. My effective tax rate is nowhere near 30%.

2. My income taxes are INCLUDED in my $20K per month of expenses, as is my SAVINGS.

So...I'm not SPENDING $20K per month - about half my income is going to taxes, giving, and saving. Another $3200 per month is going to debt service and expenses on rental properties, which are producing good INCOME.

[TexasHusker]

Sounds like you are not retired

Thr definition of "retired" is subjective. To me, it means self employment, passive income, and not having to brown nose any more😜

[corn18]

Thr definition of "retired" is subjective. To me, it means self employment, passive income, and not having to brown nose any more😜

Yet another insult. This is getting old.

[TexasHusker]

Yet another insult. This is getting old.

You are insulted far too easily, my friend. Are you the brown nose-ER, or EE?

[corn18]

You are insulted far too easily, my friend. Are you the brown nose-ER, or EE?

And another one.

[Singuy]

Yet another insult. This is getting old.

Hmm, I didn't find his comment insulting. Perhaps he was in a corporate job that requires a lot of brown nosing...doesn't mean everyone in a corporate job needs to brown nose.

I read that comment thinking he was talking about himself specifically.

Also it's true, effective tax rate is not the same as your tax bracket tax rate. I suspect he pays about 20% in effective tax rate.

[Singuy]

Retirement to me = able to spend my passive income however I see fit and besides combating inflation, no longer need to make any more money.

You are still managing a bunch of properties and always trying to find new ones..that is not retirement to me..it's more of a work at home kind of job...

[tripods68]

1. My effective tax rate is nowhere near 30%.

2. My income taxes are INCLUDED in my $20K per month of expenses, as is my SAVINGS.

So...I'm not SPENDING $20K per month - about half my income is going to taxes, giving, and saving. Another $3200 per month is going to debt service and expenses on rental properties, which are producing good INCOME.

Business Income $220,000
Rental $ 85,000
Total Income $305,000 20% effective
After Tax Income $244,000 (Excluded fromROTH contributions)
Yearly Expenses $144,000 12K a month expenses
Retained Earnings $100,000 100K/12= $8333 a month

Additional $5K savings = $60K a year savings a year.

You mentioned (can't remember exact number) around $3400 charity/church $40,800 a year (fully deductible)

R.E. + Savings - Church = $119,200 Net Income (Ballpark)