Financial Independence Interview-No Nonsense Landlord
I definitely get the feeling that I am a unicorn in the financial independence world as read about 4% rules rather than real estate investments, so I am thrilled to have someone using the same strategy as Even Steven Money on this magical journey. For those of you who are not familiar with my catalyst to reach financial independence then shame on you for not reading every single article I write. Real Estate is the answer and that’s why I’m so excited to have No No Nonsense Landlord here today to share in today’s interview. Just recently I stopped to check in at his website and what did I find, but we had just completed working on the same project over the weekend, fixing a shower. While not exactly the same shower and work required, it was great to compare stories and find a common bond in the real estate and landlord game. Besides owning rental real estate as a common bond, we both work at a bank, it’s like we are brothers or he’s my Uncle, either way I’m excited to share, I hope you enjoy this one as much as I did.
Who are you and tell me about your reason for setting a goal of FI?
I am just a typical lazy guy that doesn’t want to work. I work hard now so I do not have to work later. I had a boss once that said ‘If you have a tough job to do, hire a lazy person to do it. They will figure out the most efficient way to get it accomplished”.
I have a BS degree in Computer Science, and a MBA in marketing. I wound up as an IT guy at a bank, so I have a decent full-time job in addition to my 25 rentals. I am able to save quite a bit. I max out my 401K at $24,000, I put $4,350 in my HSA, I put another $6,500 in my IRA. I also save a bunch of after tax income. My HSA is an account I never withdrawal from, I just keep filling it up to use at a much later date for Medicare premiums.
I started as a landlord in ~2000. I did quite a bit of household maintenance on my own homes for a long time before that. At one time, I wanted to be a carpenter, so being a landlord is a natural combination. (I also wanted to be a forester, a mega-deep sea diver, a hitman, a man-eating tiger hunter, and a bunch of other things when I was younger.)
I do not like working for other people. Sometimes you have to, but as I have progressed in my career(s), I find that work gets in the way of a lot of things. Some days, you just do not feel like looking at spreadsheets and being in meetings all day. Or working on throw away projects just because someone who has never been in business for themselves thinks it’s a good idea.
My goal of July 5, 2016 was somewhat random. I knew I was making more as a landlord than my real job for the past few years, but it took some time to actually stop and figure out just how much more. I am a numbers guy, so the numbers are not difficult, but taking the time to actually put it on paper took time. And I had to verify it 1,000 times over, then look at it again another 1,000 times.
When you take that vacation, you realize that it would be nice to be able to have the option of doing that all day, every day.
Who got you started and who motivates you on your Financial Independence journey?
I grew up in a single mother household in the 60s. It was a time that most women were not working outside the home. Our refrigerator for quite a while was a Coleman cooler we had to fill with ice periodically. Our kitchen table was a picnic table with a bed sheet on top. Mattresses were on the floor, no box springs or bed frames. There was a lot of other things we did not have, but my mother was too proud to be on any public assistance. As a kid, I never really thought we were low income.
My mother was a hard worker, and worked three jobs. She had two full-time jobs and a part-time weekend job. There were times she had to work 32 hours straight. Maybe I get her values, maybe I do not want to go back to a life where I have to think about spending a $20 bill. I am not sure why I need to be as secure as I am.
I do not want to live a minimalist lifestyle where I have to give up what others who are still working are able to participate. I currently live a pretty frugal lifestyle, and work a lot, so being completely FI will be a major change.
I am not as young as some of the Financial Independence crowd, but it takes a long time to reach true FI. It’s very hard to do it before age 50. Having your own business is nice, but it is not true independence.
Do you have any debt? If so, do you have a plan to pay this off before FI?
I have no debt other than some rental property mortgages. I paid off my own home a few years ago, and used the equity to buy property. I still use the HELOC for quick cash when I have to, and that is free and clear (today). I have nine properties, and only three mortgages. My mortgage debt is only ~20% of my property values.
I plan on paying off one more rental property mortgage in 2016, or shortly thereafter. I pay an extra $4,000 per month on it, and will likely ramp that up just a bit after I leave my job.
My advice. Stay out of debt. Pay off as many as you can. Live below your means. Buy rental property only after you have a solid cushion and can max out your 401K, HSA, and IRA every year without issues.
What planned income streams are you working on towards FI and Early Retirement?
I have 25 renters that allows me to earn more than most people that are still working. It’s passive income, so I do not have to pay self-employment taxes. Much of it is sheltered by depreciation, so no income taxes on that part whatsoever, until I sell.
I manage and maintain the properties myself, so I can squeeze a bit more out of them than an out of state investor, or someone not as handy. For the past three years, I have saved (not earned), almost double my gross pay at my IT job. I think I am ready for my freedom.
I have a blog, “No Nonsense Landlord” that generates enough to provide a cup of coffee a day. I need to jump start that a bit more, perhaps write a book (or two) to sell on the site. I give a lot of free advice, as I like to talk to other real estate investors. It also gives me time to spill my thoughts on paper.
I have a small VA disability pension, so that helps just a bit. I am able to get free healthcare from the VA, so that is an expense I do not have to worry about as much as some people.
My dividends will be right at $2,000 per month when I leave my full time job. I will be able to invest more funds, and continue to reinvest the dividends for a while. Once I turn 62, I will start taking some of them out. I am projecting close to $3,000 per month in dividends by then. I may start selling my rentals, or having them managed at that time, so I can forget about them while I am on some tropical island.
I have a small pension that I can take as soon as I leave my regular job, but I am looking at that for age 65. It will be quite a bit larger than it is now. I view it as longevity insurance in case the market crashes and doesn’t come back, or some apocalypse.
Social Security should be there for me at 70, and I should be pretty close to the maximum draw rate. I am looking at that as additional longevity insurance. If my other plans do not work out, or the doctor gives bad news, I can take it earlier.
What are your plans during early retirement? (Travel, special projects, part-time work)
I do have some deferred maintenance on my own home that I need to get caught up on, and a few rental projects. They will be good filler stuff to keep me busy for a few weeks after I retire.
I plan on traveling a bit. I want to get out of Minnesota for much of the winter. I have little desire to travel outside the USA, but I would like to visit all 58 National parks. I have a lifetime pass and can get into most parks for free.
I have a goal to get a fifth wheel, and do some exploring. Looking up old friends that I have not seen in a while. Going to a place, and deciding to stay longer, just because. Travel to Alaska for a three-month adventure. Climb Telescope Peak in Death Valley. See polar bears in Churchill, Manitoba. Maybe even go kill a man-eating tiger somewhere.
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