[Adam]

people with real estate investments: When using the 4% in determining how much you will need in retirement, how do you take your investment properties into account for your calculation?

Do you just take the earnings you’ll get from it as income you’ll continue to receive in retirement?

Are you also including the value of the property in your calculation to determine how much you need to have in your other investments to be at your FI number?

Thanks for any responses.

[Michael]

The “4% Rule” does not consider real estate and was modeled with a specific portfolio of S&P500 and Intermediate term treasuries.

You would include their value if you intend to liquidate and invest in the modeled portfolio at retirement.

You would count them as non-portfolio income (aka like a pension or Social Security) if you do not.

[Rick]

Expense reduction.
But be very very very (3x means take it seriously) honest about long term landlord cash flow.

None of this “rent – mortgage” bad landlord math.

[Frank]

Unless you plan on selling them, you should treat them as a net stream of income to offset your gross expenses.

The 4% rule is just modeling a financial asset portfolio and does not account for other streams of income.

So, it (or rather a variation of it predicated on what you are actually holding) applies to your invested assets compared with the expenses you expect the portfolio to be covering.

[Eva]

If you plan to continue renting then you count rent
If you plan to sell the you count the value of the property
Either of the above become a part of your fire calc.

If you plan to rent and collect on that you typically take your annual spend and subtract net rental revenue x25 to get to your fire goal

If you plan to sell, you take your fire number (annual spend x 25) then subtract that by the net earnings you’ll receive upon selling home (presuming you’ll put those profits into market or other passive income stream)

I like to cross compare the two for flexibility should I ever change my mind.

Right now we plan to keep rental but who knows what burdens I want to take on or if I want my level of diversification in income streams to change one day.

Life views tend to change every 5-10 years so I try to keep that in mind when I think of the future.

[David]

We arent including rental income in our numbers but rather a cushion l.

[Tony]

I include rental cash flow, just like any other income.

I also include future soc sec income.

[Sean]

You take the cash flow after accounting for all expenses including vacancies and amount put aside for maintenance/repairs and subtract they from your annual expense needs.

[Author]

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