Anyway, you are correct in that “retirement” is a misgnomer in the way the term is traditionally used. The idea of doing nothing meaningful for the rest of my life and living the “pro-leisure circuit” does not come anywhere close to my definition of fulfillment or happiness.

I find leisure most satisfying when it serves as a break from meaningful work. I work a lot during the winter months when my kids are in school and take summers and holidays off. For example, last spring I wrote 4 months of posts to cover the summer and didn’t touch the business the entire summer vacation. I typically take about 3 months a year off and work roughly 9 months. That is about the right mix for me.

Retirement (in my opinion)is really just another form of financial freedom. It means you can choose what you do based purely on your desire and not on your financial needs. I don’t use the term retirement in the traditional sense. I think of it as retiring from the work-a-day world, but not retiring from active productive involvement in the world. I reserve the latter for the time when my health has failed.

So anyway, I’m retired in the sense of not having to work, but like Jacob, I’m very motivated by my blogging work, the education it provides, and the feedback I get from my readers. It is meaningful work. It is a way to contribute and hopefully make a positive difference.

Hope that clarifies.

Is retirement a misnomer, where you are just retired from one job, but are simply doing another one that’s more to do with the internet?

1: Do it when you are young. You won’t reduce your lifestyle to do it since you likely live in comparable housing and you will build management and maintenance skills (along with equity) that will serve you for a lifetime. It will also allow lots of time for long-term inflation to work its magic and give you many years to enjoy the income from the property after it is paid off.

2: Real estate is essentially a leveraged play on inflation which is the dominant economic environment 90+% of the time. That is why real estate rarely goes down. A purchase at the tale of this deflationary credit bubble (1-2 years from now) would likely provide a low risk long term entry point.

3: Buy it with fully amortizing fixed rate financing. This fixes your single biggest expense – interest. As inflation returns the financial leverage means you can build wealth in real terms despite inflation. It also causes operating leverage which creates ever increasing cash flows (assuming you bought positive cash flow to begin with) as your interest expense becomes a decreasing proportion of your total outflow.

4: The net result is it produces an inflation adjusted income stream you can never outlive.
For example, if 10 apartment units are sufficient to support your lifestyle today, they will likely support your lifestyle 50 years in the future.

It doesn’t matter if the dollar goes to zero or the currency is replaced with the Amero or any other nonsense. Your apartments will get priced at a certain percent of a workers income and you as the owner receive that income through inflation, deflation, currency changes and everything in between. There are very few investments that offer that feature and security.

Anyway, there is much more to this discussion than a blog comment can provide. I just wanted to give you an idea that the analysis goes beyond what you can buy and rent it for today. That is the starting point of the anlysis, but it is not the point of the strategy.

Hope that helps…

My $500k scenario was pulled from a hat. I had no idea of what real 4-plexes cost, but that seemed like a reasonable number to begin with (provided one isn’t in SF or NYC).

The $190k scenario is just an indication of what’s available in the real world (incidentally, I later searched for rents in the Astoria area and discovered the lowest rents are $400/mo, so one could profit handsomely if motivated and the building doesn’t need too much repair!).

So, assuming that you live in one unit, and assuming that all units are similar and the rents reflect legitimate market rates… If you put 20% down, you’re getting a “free” $800/mo apartment or $300/mo apartment.

For the $500k scenario, you put in $125k, and get a free $9600/year apartment. Alternatively, if you invested $125k in some other fashion and net 7.7% after taxes, you’ll get about $9600, which you could use to rent an $800/mo apartment. If you own the 4plex, you’ll spend some time managing and maintaining the place. If you rent, you could spend the same amount of time earning money in some other way– it’s work either way, right?

I’m not trying to argue that people don’t make money by buying and renting 4 plexes, because certainly many people do. And, for some people it is a great choice– particularly if you already know how to do a lot of maintenance type things.

For me, I think that other people will pay me more in my current capacity than I will earn by maintaining a 4 plex. But maybe if I trained myself in the right things, and started in my 20s, things would be different.

There certainly are many different paths to the top of the mountain, and I did really appreciate this post for pointing out what Todd had figured out over his career– valuable knowledge.

PS- the complex I rent at recently sold (asking price was $18.3mil, 148 units), the proforma cash flow before taxes was $625k.

Good news: Inexplicably, the structure (not land) is considered a depreciating asset for tax purposes, so you can amortize this out as an annual loss. This, in combination with the myriad other deductible business expenses, means that a rental business could show a paper loss despite being cash flow positive. If you use a flow-through business structure this loss lowers your personal taxable income.

Bad news: The whole thing should really be treated as a proper business. That means you need to incorporate as a business, have a separate bank account, pay an accountant to do your taxes, take delinquent tenants to court, carry liability/litigation insurance, stay apprised of and comply with all the relevant laws and ordinances, and so on.

It’s certainly doable, but it’s not as simple as buying a property and waiting for cash dividends. I don’t have any firsthand experience because so far I’ve had other opportunities with more appealing income/effort prospects.

Just for kicks, I went looking on rmls.com for 4-plexes a few minutes ago. Found one in Astoria, OR for $190k.

If you put $50k down, the mortgage is $794. That means 3 renters could each pay $300/mo and you’d be covered. I think $300/mo would be below market in Astoria for studio or 1 bedroom, but I could be wrong.

I do wonder if a 20-something buying an apt building would even be something a bank would consider in this tigher-lending environment, however. I would imagine you’d have to have significant outside income to qualify. Nonetheless, it is a decent strategy.