Buena Park, CA · Member since 2009 · 8 posts · 1 vote
I would like to know how many people here are living off rental income. The ability to quit your 9 to 5 job and manage properties sounds interesting! If you're doing this, please include how many rentals you currently own. Thanks!
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
15y
I am currently living off my 30 rentals. My wife works, mainly because of the benefits and she LOVES her work as an RN. I have been applying for jobs because I am bored at home. I don't have the team for flipping and flipping in my area requires a minimum of $500,000 in cash (or HML) to play in the game. My daughter's BF works for a professional flipping company in the Inland Empire and even they are having a hard time selling their properties. They buy 15-20 a week.
Property Manager · Abington, MA · Member since 2011 · 3 posts · 0 votes
15y
Thanks for the advice. I would stay in Mass but my boss doesn't pay well for all I do which is pretty much everything from minor repairs to electrical and plumbing. Maine seems to be the best right now for me and my wife plus I will be buying and selling cars on the side.
Rental Property Investor · Louisville, KY · Member since 2012 · 51 posts · 31 votes
10y
I would be interested to hear from some of the folks who were trying to make this happen a few years ago. Were you successful? Any stores to share along the way?
It always amazes me when so called educated investors think they are making more income from owning a property free and clear. This logic flies in the face of those that truly understand the value of money. The reality is they are making less money, usually nothing from the property, and losing out on the added benefit from appreciation on owning multiple income investment properties. One F&C produces 1/10 the appreciation as the same amount of money invested in 10 leveraged properties.
F&C owners are the extreme case examples of conservative investors. Why have the hassle of rentals/tenants when mutual fund investing can achieve the same results.
With leverage the potential is to make many times more with long term investing.
If you give 1M to two investors, one a F&C the other a leveraged buyer, which one do you think will have 10X the wealth of the other within 10-15 years. The reality is the F&C investor virtually stops investing the day their mortgage is paid off.
It is interesting to me that 7 years ago there was so much concern from very experienced investors with having free and clear properties. Almost as if they had just come through a crash...
In hind sight, (always 20/20) the best thing to do would have been to leverage the heak out of their portfolio. Whereas now (closer to the top of the market) it would be smart to have all those free and clear homes. Kinda makes me think I should start looking at slowing down on buying and leveraging.
Investor · Aurora, CO · Member since 2017 · 34 posts · 11 votes
9y
Interesting topic! My husband and I only have two rentals but we have always dreamed of being able to have more that so we could eventually live off the rental income. How are you all able to get the financing in order to purchase more properties? Since I work full time and manage the properties part time, i usually have to use the bulk of my day job in order to qualify for a mortgage. I have never actually gone outside of conventional financing because I don't know much about how that would work.
Also, what would be a good net return on a rental? I see figures all over the place from $100 per unit and up. Is this the net after all expenses, taxes, maintenance, etc.?
Arlington, VA · Member since 2014 · 1 post · 0 votes
9y
I have 14 units, spread over 4 small multi-unit buildings that I own (mortgaged though). After paying the mortgages, real estate taxes, escrow, as well as fixed monthly expenses (trash, water, common electric), I generate just about $7,000/month (I live in a fairly high rent area). I'm curious what folks' consider to be money they can live on (or do what they choose with, reinvest etc) versus money they must set aside for vacancies/maintenance etc. We always assume about 5%0 will go back in ($3500/month for us) to cover any vacancies or maintenance needs above and beyond monthly fixed costs. Is that about what others do?
Battle Ground, WA · Member since 2016 · 19 posts · 6 votes
9y
Thought I'd try to revive this post once again as I'm interested in you guys' arguments for free and clear vs leveraged properties, especially insofar as the tax implications. As a newbie, I've been under the impression that leveraging is the way to go since having your own money tied up in properties is no different than having them tied up in stocks. Another way I look at it is if you buy a property free and clear for $150,000 and after all expenses net $800/month, then it would take over 15 years just to break even. Any benefits (besides security) I'm missing that you proponents of free and clear can point out? Thanks
Colorado Springs, CO · Member since 2016 · 84 posts · 48 votes
9y
From what I’m seeing is that people that want to “invest” they leverage their money.
The people that have their homes F&C they’re retired off of the income. That seems to be the difference between the two.
-M.M
Denver, CO · Member since 2017 · 265 posts · 234 votes
9y
@Kim Forgione , in your example, $800 net operating income per month (or $9600/year) against a $150k purchase, is a capitalization rate of 6.4%. Note that the reciprocal of this 0.064 factor is 15.6, which is the time to "payout". If you want to payout your capital in 15.6 years, you need a 6.4% yield. If you want to payout in 10 years, you need a 10% yield. To pay out in 4 years is a 25% yield, and so on.
The leverage boosts the return. The 6.4% cap rate is calculated on the "cash purchase" and doesn't consider debt service cost.
Wholesaler · Easley, SC · Member since 2010 · 340 posts · 249 votes
9y
If you by a property for $150k that is worth a $150k what does the amount of time to get your money back have to do with it? This is an investment. You put your money to work to generate MORE money.
When you put money into an interest bearing account do you look at how long until you get your money back? No because you still have your money it is just sitting in an account generating interest. That is exactly what a rental purchase is.
You have "deposited" your $150k into an account (real estate) that is presumably worth $150K if you need to pull it out (sell it). Your only calculations you need to be concerned with is basically your ROI for that investment.
Now you can debate leveraged or not but it is a bit of a pet peeve of mine for people to think that the way to measure any investment is how long until you get your money back. If you are investing correctly you didn't lose your money you invested it.
Thought I'd try to revive this post once again as I'm interested in you guys' arguments for free and clear vs leveraged properties, especially insofar as the tax implications. As a newbie, I've been under the impression that leveraging is the way to go since having your own money tied up in properties is no different than having them tied up in stocks. Another way I look at it is if you buy a property free and clear for $150,000 and after all expenses net $800/month, then it would take over 15 years just to break even. Any benefits (besides security) I'm missing that you proponents of free and clear can point out? Thanks
Even though half my portfolio now is owned free and clear, I didn't start out that way.
Buy at good values along the way. Utilize conventional as well as seller financing. If you started in the early 2000's like I did and/or used SF, you will have mortgages in the 6%+ range and commercial loans with shorter terms and adjustable rates.
Case by case, you may see it is better for some higher rate and higher risk loans to go bye-bye. My opportunity cost these days is low. Hard to find deals I like. Roll with your market and sometimes it just makes sense to pay off some loans.
Funny how the refi till you die crowd assumes everyone has a 30yr resi loan at 3 or 4%. Well...duh. Keep those!
Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
7y
Currently
$550 a month in personal expenses $4,500 a month in rental expenses (mortgages, water, payment system, etc) $500 a month for capital expenses savings
Total monthly expenses: $5,550
14 Units (3 four fams and a duplex)
Total Monthly Gross $8,250 Total Monthly Net: $2,667 Net per unit: $190 (this is actually higher. I live in one of the units so technically I take a $1000 loss each month which skews this number down a ton)
Still working a full time job, I need to net another 2k before I'm quitting. Allllmost there.
The things that are holding me up:
I want to have enough for both my wife and I to have 1200 a month in spending money
I want to have enough for both of us to have health insurance (300 a month total?)
I want to have enough to continue to grow our savings at a good rate
I need enough to cover taxes at the end of the year. I'm super nervous that I won't have enough to have spending money and pay taxes so I'm trying to over compensate