That’s right, I quit my job to be a landlord. Are you prepared to give up your job and be financially independent?
It takes more than just a vision of what it is like to be financially independent. For me, I was planning on this for several years. And when you have a goal in mind, you shoot for the goal. The problem comes when the goal is near at hand, sort of like when a dog is chasing a car. Pretty soon, you catch the car.
So here is what went through my mind in deciding the day, how the time went by, and what I gave up.
For those of you that have follow my blog, I have had a “Countdown to Retirement” counter since the early days. It was over two years out at one point, and I kept lowering the days remaining as the days progressed. My financial goal was also getting close. There was a time when I thought if I hit the money first, I would leave. As I began to explore the ‘perfect’ date to leave, there were other things to consider.
Taking Risk
Financial Independence is all about taking risk. Do you invest in the stock market, real estate, buy gold, or start a business? Al these items activities are from the traditional risk model. They are well known, and mainstream. How you use them and take the your risk path may be different.
I chose the real estate route. There are many different flavors of real estate. I then chose the rental route, rather than doing flips, RE sales, property development, etc. I have done some flips, but in the end, I wanted cash flow. Lots of it. My method is also a combination of running a maintenance business, a property management business, and being a real estate investor. Even when I was mowing grass on the side, several of my customers would ask if I could help with various odd chores. I soon realized, that if I had ~20 customers with homes, I could probably make enough money just doing maintenance for these homes to live on.
At that time, it really did not occurred to me that if I also owned these homes, and rented them out, the cash flow would be even better.
Running Retirement Planners
I ran retirement planners’ multiple times a day. I used multiple retirement planners. The planners used different algorithms, like Monte Carlo simulators, historical simulators, and random. I had a spreadsheet that listed and calculated how much money I would need and have. I analyzed top down, bottom up, sideways both left and right. I calculated how much I should be saving based on my income. I calculated how much I should have based on my tax forms. I added up how much I actually did save and compared it to my projections.
All looked well, multiple times over. It was then just a timing mechanism to pass the days until my exit point.
First of the Year Jitters
Once the first of the year came, my final date became more real. It was no longer some imaginary date in some distant future year. It was this year. It was coming. And fast. I could not wait, but it was the first time I had any apprehension, and needed to make sure I was mentally prepared. I received my pay raise and saw my total benefits. WOW, this may be the last time I ever make this much.
January 1 Benefits
I had to be employed on January 1. I wanted to get a $400 subsidy from the company in my HSA. And get paid for the January 1 holiday. That meant I had to be on the job on January 2. Any money I made during those two days would help with a 401K and a match too.
I earn 20 days of vacation, so each month I earn 1.67 days. By working a single day, January 2, I get paid for new year’s day, a holiday. I get paid for the day I worked. I get 1.67 days of vacation. And I get any healthcare subsidy for the month. That single day of working is worth 3.67 day’s pay, plus the $400 HSA subsidy, at a minimum.
Bonuses
I wanted to get my bonuses. I have two bonuses, a long-term incentive (LTI) bonus in mid-February, and a performance bonus in late February. If I leave a minute before they are in my bank account, I lose them. So that was a date I have to stay employed through.
My LTI bonus doesn’t count towards my 401K. No deductions are made out of that part of the money, I suspect because it is from money I earned in prior years. I get a lump sum every year, and it vests over the course of the next four years. If I get $4,000 awarded this year, I do not get any until next year, when I get $1,000. I get that $1000 every year for four years. If I do that for four years, each year I get $4,000, $1,000 each for the preceding four years.
I also get a performance bonus. That is a lump sum that is deemed to be earned as I get it. My 401K contribution gets deducted from it. In a good year, it could be 15% of my base salary. I do not want to give up that kind of money, if all I have to do is stay a month or two extra.
Maxing out the 401K
I wanted to max out my 401K. Being over 50, I can put in 24K. I keep my 401K allocation at 75%, which is as much as the company will allow. That way, if I leave work from being FIRE’d, or fired, I have the most money into the account.
If I did not get any bonus at all, my 401K would be maxed out by 4/30/2016. Of course my bonus helps a great deal, but I wanted to calculate worst case. In 2016, my 401K was maxed out by 3/25 with my final contribution of just under $500.
The Final Run
Once that 401K was maxed out, it became a tough march to the final day. I remember thinking it was a LONG way away. I wanted to quit now. I was assigned to a project that did not make sense, or maybe I was so close I couldn’t make sense of the project. I was near my 100 days left mark, so I found a 100-day count down. Each day, I would cross off a number for the previous day. Each weekend, I could cross off three. Memorial day weekend, it was four days crossed off. Yes, that is my actual count down chart in the post.
I kept thinking each day is 1% of my total time left. Then it was 2%, and soon each day was 10%.
Another Year of Pension
At the 1,000 working hours, I accumulate another year of pension, according to the plan documents. At age 65, that is ~$100 extra. As a non-COLA annuity, purchased today, it would be worth ~$13K. It’s not much, but after you have worked until 4/30, working another two months is not too bad – or so I thought…
June 23, 2016 was my 1,000-hour marker to guarantee that year of pension. Or was it? Payroll for 2016 started on 12/28/2015, which is the last week of 2015, so maybe it was sooner by 32 hours. The pension estimator we have at work changed to the updated amount on 5/30/16, so maybe I accumulated the 1,000 hours by the end of May?
To be safe, I went the full run, and 6/23 was mine.
July Benefits
Similar to the January benefits, by working 7/1/16, I got paid for a day. I received 1.67 days of vacation. I got July healthcare. It was a Friday, the day before a long weekend, and a slow day around the office. And when you only have a couple of work days left, it’s even slower. As in, I did not do any work.
Coming in on 7/5, I received two days pay, one for that day, and one for the 7/4 holiday.
Calculated out, I received 65% of my salary and only worked 50% of the year. It’s like a pay cut to work the last half of the year.
Giving Notice
I sent my notice in, via email, on Sunday, June 3. It was over a full month’s notice. I did not hear back from my boss until Tuesday, 6/5. He said “I am getting ready to submit this to HR. Are you sure?”
Crap! I was 100% sure and confident for the last 2+ years. Now I get the pop-up message “Are you sure”. As a IT person, that means you better check everything again, twice. So I did some brief calculations again, and said “100% sure”.
My bosses knew I was leaving, as I told them several times. It was also a standing joke, as I passed people in the hallway, “How many days do you have left?”. I always had a quick answer, typically within a day or two of the actual number.
The Final Party
On 6/29, the department threw a retirement party. They catered Jimmy johns for 90 people, with sandwiches, chips and soda. They bought a full-sheet cake, which was more than enough. They had a nice plaque, and a book for people to sign. It was a really nice touch to experience on my last week.
My Situation
My original financial goal was to have $1.5M in investable assets, a home paid off, and $75K in rental income after expenses. That way, I would have two sources of income, either of which would be enough to live on. It would be nearly what I was making at my job after some taxes, although I was spending considerably less. As it turned out, I paid off much of my rental mortgages, so I had to count the extra principle I paid towards the financial goal. You cannot have paid nearly $300K in mortgages and expect to have the same amount of financial assets than if you did not pay it. By doing this, combined with rent increases and a new rental, I was able to double my rental income after expenses.
In future years, I will get nearly the maximum amount of Social Security. A small ($1,262) non-COLA pension will start at 65, or as soon as I want to take it. The earlier I take it, the lower it will be. Between Social Security and the pension, that would be enough to barely live on, if I had to. So I am triple protected. Dividends are ~$2K a month, when I decide to take them. Currently they are reinvested.
Savings
I have saved an average of almost $200K for the past three years. That includes my company 401K match, 401K savings, HSA contributions, extra principle paid on mortgages, and after tax savings. The savings is more than 100% of my gross W2 wages. It does include some money that my employer pays in. Subtracting FICA, Medicare taxes and my tax liability from my W2 wages, my savings rate was ~250% of my take home pay for the past three years.
Inflation Protection
Hopefully rental income will be inflation protected. My VA Disability includes free healthcare, so that is inflation protected. Social Security is inflation protected. Investments, historically have outperformed inflation, so that is (hopefully) inflation protected.
The Conclusion
I quit my Job to be a landlord. So now, I am unemployed except for the rental income. Twenty-five renters, nine buildings (including my own home), and three 50% (or less) LTV mortgages. I gave up a job that made $113,001 in 2015 on my W2. I had 5 weeks of vacation (I bought a week in 2015 which lowered my W2 wage), 10 paid holidays, a pension, a 4% of salary 401K match (in 2015 it was $4,556), healthcare and a HSA subsidy. It was in an air conditioned and heated building, with free covered parking.
Did I give up too much? Should I have stayed?
Is your money more important, or your time? How do you know if you have saved enough?
Congratulations Landlord. It will take a couple months to feel normal, but you’ll never regret it after that. It’s been a shade over 5 months for me, and I don’t regret it one bit. These past five months of flexibility and memories have been fantastic. Congratulations again on the next phase of your life. You’ve earned it 🙂
-Bryan
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I am certainly looking forward to it. I received my final paycheck yesterday, and it’s a bit of a good feeling, yet a bit of nervousness.
You are in fantastic shape – nice job!! Good luck in your next leg of your journey!
I can’t wait to be in a position like yours where I can make the move out of the 9-5. I definitely understand the frustration of wanting to do it sooner, but it sounds like you’ve made incredible strides to make it happen in good time. Nice work!
— Jim
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It was agony for a month or two. I am glad I stuck it out now. Hopefully I can do a wrap up in a year and say it’s even better than I imagined.
One day you are going to look back and say, I should done it sooner, you can not take your assets and as we get older our body does not allow us to do fun things. I quit my job at 45 and my husband at 49, six year ago and we are doing more less the same as you! Enjoy.
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I look forward to spending the last third of my life doing things I enjoy. You are right, you cannot take it with you. And if you die at your desk at work, you lose.
Been following your blog for a number of years (I’m am too a retired and a landlord – amazing how busy you can be for not working) so it’s cool to see you make it. One question and perhaps you covered this before but how did you manage to save 250% of your take home?
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I save a lot. I also pay a bunch in taxes, and contribute to the 401K. I only take home ~50K or less. My rental income, after expenses, is near $160K, so I can save that, my 401K, the 401K match, HSA and it all adds up to about $200k every year that I have been saving for a few years.
Outstanding Eric!
Very inspiring!
Please continue this blog as a testament to the rest of us that it can be done with perseverance and smart hard work.
I’m not to far behind as my wife and I are planning on retiring from our jobs 100% debt free in mid 2017. We sacrificed a lot over the years and now we are soooo looking forward to having more freedom and pursuing a more care free life in the future.
The end of career apprehension hasn’t hit us yet but we are very interested to watch how you reinvent yourself going forward.
All the Best
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I will have more time to devote to the blog, since I no longer work. At least that is the theory anyway. Great job on your progress too. It seems like it takes a long time, then all of a sudden you are there.
Eric, this is such an amazing story!
So many of us are working towards Financial Independence to be able to spend time on things we like and reading your story made me smile quite a bit 🙂
I have also looked the numbers probably a 1000 times already and when I’ll quit, I’ll be 120% of the calculations.
If you ask this community if you made the right decision, you’re only going to find crowds of support.
It is very inspiring to read your story, so thanks for sharing it will all the details.
Anyways, huge congrats for being FIRE’d!
How do you plan to spend yours days now? Do you have on buying more rentals in the future?
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I am going to do a bit of traveling right here in the USA. I will still manage and maintain the rentals, but I should be free for ~3 weeks of each month. I may buy more, but it has to be a great deal, as always.
I’ve been following your blog for a few years now. You know you made the right decision, now enjoy your time away from the office.
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I plan on making the last third of my life the best!
Congrats! I have been watching your numbers over the last few months. Exciting that you managed to hit both the day and number goal in the end! The power of compounding is amazing in how much money you’ve been able to save in the last few years. Enjoy your well saved for retirement. I remember Jeremy at Go Curry Cracker saying he saved his entire paycheck for a year or two before he quit.
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It was actually sort of a fluke I hit the number, almost exactly. The market was mostly flat, and I originally thought I was going to hit it early, as I expected a bit more help from the market. And we had Jan/Feb of this year…
For the past three years I have not only lived on my rental income, but saved all of my W2 income and then some. I look forward to spending it. It is easy to save when you are working a FT job and doing as much work as I did on the rentals. There is no time for anything fun. My first real vacation in many years was Fall 2015. Other then that, I took vacation (and sick) days and did rehabs, classes, etc.
Congrats! I’ve been following your blog and it’s cool to see a plan come to life. It seems you maximized your traditional retirement avenues and put the rest in rental real estate. Do you have a post on paying off your primary? Do you think it’s better to do that early or late in the process if rentals and 401ks are the plan?
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I have maxed out my 401K, HSA and even IRAs for many years. I do have a couple of mortgage payoff posts, although not my own home.
Keep it up Eric. Congrats on the new chapter in your life. You’ve worked so hard to be in this position today. I commend you.
Looking forward to hear about your new adventures. Cheers!
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Keep up the dividend building on your end, it will come soon enough for you too!
Congratulations on seeing your plan through! I’m 37 and coming up with a similar exit. While you are technically retired…how much time to you anticipate spending handling the rental properties you have now per week?
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I think it will be ~20 hours a month for the rentals. I am also an HOA president, and a HOA property manager, so maybe a bit more.
My rental log shows how much work it is, not including apartment turns.
Congrats on the fun time you will have with life coming up. I plan on the same in 3 to 5 years but I could walk now, always a good feeling.
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It comes faster than you think. Get ready!
Congratulations on hitting your goal and making your exit! I’m still 32, but in an engineering job that surprisingly has the same benefits (4 weeks off, 10 days holiday, 4% match) and pay raise timeline (mid and end Feb). Still trying to wrap my head around your 250% savings rate…incredible.
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I save all of my take home pay, plus max out the 401K, HSA, do an IRA, put a bunch on mortgages, and save over $100K. I do not have a mortgage myself, and no kids. So I really do not need to spend too much. Probably less than $1000 a month discretionary spending, and another $1000 a month for property taxes, insurance, etc.
Virtually 100% of my take home pay is sent to the various taxing agencies, as I do not send in extra for estimated taxes. I let it all go in with my W2 withholding.
Congrats Eric. It’s such a pleasure to follow you on your journey and to see you accomplish the goal you set from the beginning.
Awesome work.
George
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The real meat and potatoes will come in the next few months after I do not have a paycheck. Hopefully, all goes well.
Congrats! I loved reading this. I’m heading down a similar path (I’m still a number of years out though), but you mentioned a few things I had never even considered. I’ll have to be ready to calculate everything like you did. The 75% retirement addition is something I had not considered, but might implement that for the next few years just in case too.
Congrats again! I’ll look forward to reading about some of your landlord experiences too.
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IT helps to do the 75% 401K allocation. Maxing it out early in the year is generally good, and learning to live on less is a skill you have to learn.
Congratulations Landlord. You took the step that so many of us are afraid to take. If it works or doesn’t work, at least you know that you went down aiming for the stars instead of watch thedoor open and then slam shut. However, after reading this article and about your financial position, I think you are in great shape. With your work ethic and determination, no one is going to get in your way and stop you from living your dream. thanks for the great read and the inspiration!
Bert
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It was a bit of a leap, sort of like diving off the high dive for the first time. So far so good, although I have not even missed a paycheck yet. The coming months will be a great story.
Eric/NNL I am over joyed that you made the switch. Seeing all of the numbers and specifics being a real estate investor certainly helps. I personally think having having a catalyst like real estate or investing and then placing another leg or multiple legs of the stool to your retirement chair is the way to go.
I’ve always found the pension at my place of work very complicated especially as it translates to my future, I have mostly decided to treat it like SSI and not include it into my FI calculations.
Congratulations again sir, I even updated the FI page to show you as FIRE, so you know it’s official;)
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It never hurts to have a few legs to fall back on. no one leg is 100% solid. Some streams have COLAs, some like rents are market based. Stocks and dividends can fall. Pensions can fail. Social Security laws can be changed.
The more sources of income you have, the better off you will be.
Also did HR/401K stop after you reached the 24K mark or did they allow you to go over the amount?
They stop it at $24K. It gets heavy contributions and then stops in mid-March. I have done it as early as the end of February, when bonuses were larger.
Eric,
I am about a couple weeks late, but I wanted to congratulate you on your retirement.
You have several streams of income – rent, dividends, pension and social security that you are in a very good position that you will be retired no matter what happens with the world.
Enjoy your time – you have earned it!
DGI
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I follow your blog a bit too. You are making some great headway too!
“Did I give up too much? Should I have stayed?”
Ha, not even by a long shot! Congrats on the financial retirement, with such a well diversified portfolio and asset pool, you have a very, very solid starting point for a long and secure financial retirement.
Hope you can enjoy your new found freedom. We wish you well.
Congrats Eric! It’s been fun following your story and I want to let you know you’ve really inspired me to hustle and, in turn, shove that money into real estate. I would have to credit your blog with giving me the idea of us not selling our home when we decide to move but instead buying a second property and renting out our current one. You’ve also convinced me that duplexes and fourplexes are the way to go. Very inspiring story and something I can work towards over the next 2-3 decades.
I hope you enjoy the time away from work and the newfound freedom (5 weeks of vacation to 52!). From everything I know about you, you’ll have no problem staying busy. Congrats again!
Congrats Eric! Found your blog by accident 🙂 Working for yourself is probably one of the best decisions you’ve made!
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It’s been right at six months now, and I have never been happier. A lifetimes achievement come to fruition.
Your story is very inspiring to me. I hope I can do the same(retire early). I have 2 young kids and I am already 47 years old. Don’t know how am I going to do it but I’ll find a way…buy more good deal properties and live off the cashflow.
Thanks for sharing…now I am burning FIRE.
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If you set your mind to something, you can do it.
So you’re just straight up admitting that being a landlord isn’t a real job? You fucking parasite.
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As someone that worked 40+ hours a week at a regular IT job, plus an additional 60+ hours a week purchasing, rehabbing, marketing, renting and managing the rental business that I built up, I decided that I no longer needed to work that extra 40 hours a week. I now can work half days, only 12 hours.
Someday, when you grow up, you can do that too.