10 houses paid for plan? - Posted by Brian,WI

Posted by Frank Chin on September 23, 2003 at 16:33:16:


I know of dentists, lawyers, doctors, and other high income professionals who do REI as a retirement plan. My brother in law, the doctor, is one of them.

Both he and his wife who is a banker, and in their 40’s, have careers that they are happy and comfortable with. They are not exactly suffering in poverty, want to chuck their jobs yesterday, or need profits from quick deals in Real Estate to get them out of a financial rut.

For these folks, financial independence means another thing altogether. Many of them are self employed, but a stroke, bad accident, could put them into “financial hell” in quick order.

So REI means for my brother in law and wife, both in his mid forties, the ability to sell one of his properties, pay off the mortgage on the others, and be financially independent. He leveraged up from a free and clear multi family so as to not pay taxes on cash flow a few years back.

Many of us ASSUME that REI is a “be all and end all”. No such assumption is made of day traders or others playing the stock market on the side.

Recently, my brother in law mentioned that he’s in a position to “stop the world” for a few years, go travel. With rentals, and a management agent, I can see him doing it.

But creative RE is too close to being a job where he can’t easily step away. The money stops flowing after a while, particulary if one steps away for a few years.

In a way, while in his 40’s, his situation is similar to my dad in a nursing home. He’s stepping away for a while, whereas my dad stepped away permanently. But the rent checks will keep on flowing for both.

Frank Chin

10 houses paid for plan? - Posted by Brian,WI

Posted by Brian,WI on September 22, 2003 at 23:44:25:

Recently I’ve heard this, and think I have in the past as well…

If you have 10 rental houses paid off, you are pretty much financially free. Assuming each brings in rent of $1000/month that’s $10,000/month and I can see that.

The question is…Is there a formula or particular way of doing this? And how long does it take?



Dust off Nothing Down - Posted by DaveD(WI)

Posted by DaveD(WI) on September 23, 2003 at 08:50:45:

Bob Allen goes into this extensively in his classic. Basically a John Schaub play, best known as creative self-unemployment. The idea is to buy a couple houses a year for about 5 years. The more undervalued the better, of course.

At the end of 5 years, you should be able to refinance one of five per year to pull out all the cash you need to live. Let the other five amortize. Easy to do today with 10-15 year notes because interest is so cheap these days.

I’ve heard too that rooming houses are a good play. Uh-oh, that’s right, you just got out of them, didn’t you? LOL!

Hope this helps you get there.

Re: 10 houses paid for plan? - Posted by Frank Chin

Posted by Frank Chin on September 23, 2003 at 08:20:54:


There’s a fella named “Gorel”, who gave a talk at the NYC REI club sometime back. He purchases, and manages SFH’ for investors with a view towards retirement.

His plan is this.

He buys SFH in areas where the rent covers management fees, expenses, plus a 15 year mortgage amoritzation. The investor plunks down a 20% down payment for SFH’s that goes for 120K at the time.

The plan is, beginning in the 16th year, one SFH would become free and clear every single year. By the 25th year, they’ll be 10 free and clear houses.

I have to say this is not a plan for many folks visiting this board with no money and bad credit. Its a plan aimed for high income professionals with the opposite problem. They DON’T WANT taxable cash flow, but trade for writeoff’s and appreciation.

In high rent, high appreciating places such as NYC, some folks advised that one can buy 4 or six properties, hold on to it for 10 to 20 years, sell half, pay the capital gains, and pay off the loans on the other half.

How you acheive the goal depends on where you live.

Frank Chin

Re: 10 houses paid for plan? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 23, 2003 at 24:33:08:


No, I don’t think there is a particular program to do it. Just do it any old way you can.

It will probably take you about 20 years. It could vary some depending upon how much appreciation there is in the market where you invest, how much positive cash flow you can get to help pay down the loans, and how good of deals you can get.

One way to go is to buy more than 10 properties, with high leverage loans. Not much positive cash flow at first. Hoever, you will be getting the appreication on a lot of properties, plus the paydown on a lot of loans. Then, when you have about as much equity in all the properties combined as 10 houses are worth, you sell off the ones you like least and use the sales proceeds to pay off the loans on the ones you want to keep.

It means buying a lot more properties and having more renters. But it means you might get the 10 free and clear much sooner. With twenty properties, you might be finished in 10 years or so. With 30, maybe in 7 or 8 years. Lots of effort up front, lots of relaxation after that.

Good InvestingRon Starr***

Why do people assume… - Posted by Sammy

Posted by Sammy on September 23, 2003 at 13:39:40:

The original poster talked about becoming financially free. Why do most people assume this has to take 25 years and you have to be 60 or 70 years old to get there? I guess different people look at things different ways …