Who has become financially independent from Real Estate?
Investor · Scottsdale, AZ · Member since 2011 · 509 posts · 134 votes
It would be great if your guys could answer the following questions
- Were you able to quit your day job and live off cash generated from RE?
- If so, what age did you start investing, and how long after investing did you create financial independence.
- Would it be difficult to manage 6-7 rentals while holding your day job?
There seems to be this idea that by investing in real estate you can have cash to travel to exotic locations with beautiful members of the opposite sex and not really have to work at all. I guess it those slides the gurus show that creates this idea. I think its a myth. Those gurus show those pictures and tell those stories to suck you into buying their courses. "See, buy my course and bootcamp and mentoring program and you can hang out in Aruba with this gorgeous woman!"
The best way to achieve that goal is to have enough money invested in truly passive investments to give you the returns you want. Passive doesn't include any direct real estate investments, IMHO. By real estate investments I mean income producing properties. Not wholesaling, rehabbing, property management, brokering or any other real estate jobs. Those are simply jobs, the exact thing the gurus denigrate while trying to convince you of the easy riches that will come from their courses. Income producing properties will always have an element of management. Either you manage them directly or you pay a manager. You're either managing the tenants or managing your PM. Not sure which is more work, but directly managing residential rentals doesn't scale and eventually you'll have to hire a PM or employees.
Truly passive investments, OTOH, require very little involvement. Bank CDs or treasuries are the seminal passive investment. Unfortunately, at 2%, you would need $5 million to produce $100K in annual income. Dividend paying stocks, corporate bonds, REITs, and similar investments hopefully pay a higher rate, but have more risk. Or, if you want to be more directly in real estate, investing in someone else' business will produce returns in low to mid double digits. You'll have a line of people out the door if you offer long term (more than a few years) real estate financing at 8%. You would only need $1.25 million at 8% to generate that $100K. Good NNN commercial properties can generate those returns, too, provide you tenant doesn't go belly up. You might manage 12% if you directly make hard money loans. But now you've over into the "job" realm because you have to deal with actually making the loans.
So, in reality most of "real estate investing" is really a self employees job. I'm sure there are numerous people here who fall into that category.
I think managing 6-8 rental properties with a full time job is possible. You're going to be dealing with a turnover every couple of months. You'll have minor items crop up that require you to deal with them on short notice. You'll occasionally have an evening interrupted. But I think managing one unit consumes about 12 hours per year, provided you don't have a major disaster (e.g., nasty eviction.) A big chunk of that is associated with the turnover. So, 6-8 properties means 72-96 hours a year, which is roughly 6-8 hours a month. Some months you'll do nothing but deal with collecting rent. Some months you'll spend all 8 of those hours dealing with a turnover. Once a year you have to get your taxes together.
Hello Mike....
Good to meet you.
I like the work "Yuck". For me "Yuck" is an expression of how I feel. When I hear about a situation or action which I find undesirable I think Yuck. I use to use the word which rhymes with Yuck however Ive grown up a tad... And to that I say "Yuck".. It certainly doesn’t mean that the situation or belief is unworthy and I certainly don’t use it to ridicule... There are better words for ridiculing... Idiot would be one of those words. Maybe incompetent, certainly not Yuck..
People who love their passive investments I actually admire.. It just isn’t for me... Its Yucky...
Again good to have our first conversation...
Not sure yet, but I did quit my day job. I definitely won’t be replacing that income, but I do earn enough from RE to live a frugal lifestyle. For me it was the fact that I knew this is what I want to do so I am willing to make a sacrifice to build my RE business. I wake up for me now, and that is something very important to me.
Bought my first tax lien certificates at the ripe age of 22 I believe, and my first rental property at 23. I did own my first property at age 19, but that wasn't an investment more like a mistake. I just turned 26.
That I couldn't answer, but I think I could see myself outsourcing those duties to a management company even at that point.
Wanted to add...
Managing 6-7 good rentals is a cakewalk that requires very little participation.
Managing 6-7 slum ghetto rentals could be a nightmare.
Be sure to check out the mechanics of the rentals prior to purchase.
Certain items like AC, Roof, Plumbing, etc can be real headaches if they are at the end of their service lives or have had significant deferred maint.
If the mechanics of the house are solid then your tenants will be happy.. Happy tenants = happy property owners...
I guess, unless you are truly incapacitated, such as my father was, real estate is never 100% passive, 100% of the time. A truly successful Investor is always on the look out for a good deal. Even if not actively looking for one, if one came across his/her desk, they would most likely at least look at it, thus "working."
Not sure yet, but I did quit my day job. I definitely won’t be replacing that income, but I do earn enough from RE to live a frugal lifestyle. For me it was the fact that I knew this is what I want to do so I am willing to make a sacrifice to build my RE business. I wake up for me now, and that is something very important to me.
Gale, you make a very important distinction and you emphasize that even if you are working (not passive) and maybe not making as much as you would like, the fulfillment from doing something you WANT to do instead of something you HAVE to do can be more compensation than the money itself.
Good job!
I know lots of RE investors like leverage. Me too. NOT for my residence, though. Having a place to live with no mortgage and no rent is a HUGE increment toward living off your investments. Buy a place you plan to die in. Make it the way you want. Pay it off. Don't use it for leverage. No rent. No mortgage. A large bill you just don't have each month. For me, that's better for my bottom line than a dozen rental properties.
100% Could not agree more!! We paid our home of a few years ago and will not leverage it for any deal that comes our way! Our home is not really even marketable. We are way out in the country and what we built is far beyond what our farming community comps would support. I really don't mind though, we plan on keeping it in the family and building the kids homes on the property too.( unless their future spouses don't wanna live on the "family compound" with an overbearing father in law, LOL!)
I even go as far as not leveraging our free and clear rentals. I know leverage can help you grow faster, but too much leverage can break you in half too.
I believe in making your money by flipping contracts and investing it into free and clear or being a private lender for other investors.
I believe in making your money by flipping contracts and investing it into free and clear or being a private lender for other investors.
Not a big fan of leveraging your money with hard money then?