How to retire at 30 on $1 million

Or are we talking about the possibility that your occupancy may fall or rents may fall or maintenance costs may rise to the point where it's no longer profitable? That makes sense.

First, for the rest of this comment I'll define income as 'what you've got coming in' and wealth as 'what you keep or what you grow'.

Most people fail to make this distinction (If you ask somebody if they are wealthy they will start talking about how much they get paid), but it's important, especially when thinking about how to optimize your tax situation.

Tony's article makes several assumptions:

(1) That you want to live a high consumption lifestyle. The $200k p/a first class lifestyle he quotes isn't necessarily what everybody wants. Even people with some wealth have to live within their means or they'll (as he correctly pointed out) lose it eventually.

I'd actually take a guess that a typical family wouldn't be able to spend $200k in a year if they did not make purchases whose primary purpose was to display status.

(2) That you would invest your $4m in a low-return investment.

(3) That you would invest the money in such a way that 100% of your income is realisable (subject to income tax).

The best strategy, imo, for somebody with a freshly minted $4m to play with is to put as much as possible into an investment where growth in their wealth is not realisable (which usually means buying property because appreciation is not taxed whilst it's happening [1]).

They have a balancing act to play because they want to invest as much in this way as possible whilst leaving enough in an investment that will provide them with an income substantial enough to live on.

As for Ryan W's article, I'd basically agree with what he said other than the part about buying a property with a mortgage. It would be better to buy a smaller property you could afford outright or partner with some other investors to buy the apartment complex (which has it's own set of problems).

[1] I might actually be wrong about this. I know I've read somewhere that there have been attempts to tax wealth directly in some US states. I've no idea how the govt would be able to do this in a workable way though - how to you value the appreciation in somebody's house when the only meaningful way to value a property is to sell it?

What if that million was invested in a low cost REIT index?

There are going to be distinct advantages and disadvantages with any investment philosophy you wish to make your own. The real question is what are your long term goals?

This is how I see real estate investment.

PROS - After paying off the mortgage you can still sell the house for its current value. If you select wisely, this is an additional investment. - Monthly income that is generated as safely as possible. Since you can select a good market to invest in, and even select who is moving in. You have as much security as in a monthly payout as you are ever going to get. - Can be used to leverage other investments. Equity can be an incredible tool. - Makes your credit score and personal financial statement look amazing. If profitable, of course. - You can invest money to make continued improvements on the property. And potentially increase it's value. - Can live there is your significant other kicks you out (haha)

CONS - Limited mobility. If you invest in real estate with are with it for a while. - High initial cost. Unlike investing in stocks, it is difficult just to buy 10 shares google. You have invest quite a bit of personal capital. - Ties your investment to the community. Which may be a positive if you don't like the swings of the investment market.

To say that an investment can be unsafe, or it is changing from a way you know how to make money to a way you don't, is an invalid reason not to do it.

Any investment can be unsafe. Business lose value all the time. General Motors has lost value consistently, buying there stock doesn't mean that Google Stock isn't going to be a great idea.

As for a learning curve, there was plenty to learn about stocks while learning to invest in those. There was plenty to learn about your startup before you could make it profitable. There will be plenty to learn about real estate as well.

Ultimately, what are your investment goals? How much money do you need, and how are you comfortable spending? Do you need money for huge investments, or are you content to have a steady safe income?

I love the idea of real estate investing just because it seems like it could replace the income from my job. Therefore, I would not have to work. Also, it gives you a base of credit to allow massive loans for massive expansions in business.

Also, if you don't screw it up, it can be multi-generational income. Which is something you can not say for capital style investment.