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I have $300,000 to invest; is early retirement on my horizon?

Living in Los Angeles, it only made sense to my parents to get me a commercial agent who would send me out for parts in commercials/magazine ads at the age of 5. Ultimately, I worked in the industry for 10 years and accumulated a tidy sum. I'm 28 years old now and have roughly $480,000 in investments: An IRA ($170,000), personal brokerage account ($32,000), and non-retirement accounts ($278,000). In two years, I expect having $300,000 to invest into an early retirement (about age 35). By that point, I'll be in control of a property my parents own and I'll be receiving $1,500 per month in rent from that property. My question is geared to the roughly $300,000 I'll have to invest; should I purchase a home and rent it? Is $300,000 enough to purchase multiple homes?

Retirement, Investing, IRAs, Real Estate
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2 weeks ago

Congratulations on being so well-established for a potential early retirement. You seem to be well diversified with $480,000 in investment accounts, so buying rental properties would be a sound strategy from a diversification stand-point, especially if you don't plan on touching the $480k for a while to allow it to grow.

Regarding your early retirement, you are on track to retire very early, but I don't know if age 35 is feasible yet. It will depend on how your investments are invested, what your expenses are likely to be, the lifestyle you want to live, and how much of the rental income you can count on. Keep in mind, you will have to save some of the rental income for rainy days such as when the tenant moves out or when the roof needs a $20,000 replacement. Based on your numbers, you may want to have a fiduciary and fee-only financial planner do a retirement projection for you to make sure you can retire in the time frame you are hoping for. You may be surprised that even the considerable savings you have may not sustain the lifestyle you want, especially since you will be dealing with inflation over a 60+ year period.

I would consider waiting on investing in the rental properties until after you've managed the property your parents own for at least a couple years. It would be horrible to find out you don't like managing and running real estate after you sunk your money into additional properties. I also personally wouldn't buy multiple properties at once, as the workload tends to be exponential as you add more properties. Instead, consider putting the $300,000 into a low-risk investment for a couple years while you get used to running rental properties. Then using some of it to purchase another rental property and get used to running two properties. Then add a third a few years down the road if you still enjoy being a landlord/property manager.

Managing rental properties can be a pain and is a lot more work than the 'gurus' would have you believe. (Keep in mind, these gurus make their living by selling books, courses, and other services to people after convincing the people to invest in rental properties.) This is not to say rental properties are a bad investment. My family has been in real estate since WWII and my mother, two brothers, and myself run a private rental real estate company. But one of my brothers has a full-time job dealing with the day-to-day operations of the real estate business. And there is still extra work to go around to the rest of us.

2 weeks ago
5 days ago