Another newbie

10 Replies

Hi all,

I am in a situation similar to others on the board but a bit different from most. I work overseas for a foreign company so my retirement is basically entirely in my hands. I doubt I will get much, if anything, from social security.

I do not want to get into rental properties to get rich or to do as a full-time job. I just want to learn how feasible it is to invest in real estate as retirement income. I would buy and hold, have the property managed, and would not really be concerned with appreciation. If there's some that's a plus but not something I want to rely on.

I have a house back home in WA. I bought it thinking I would live there forever so probably paid a bit more than it was worth and it's about as far from the ideal rental property as you can get. I've had it for five years, tried to sell it but would have lost too much money, so now it's sitting maybe breaking even if I'm lucky.

I could afford to put 20% down on a 50-60k property every year. How much could I reasonably expect in rental income from that kind of property? It's easy enough to estimate mortgage payments and I have an idea about expenses, but I've never lived in a place with $60k houses, heh. Also I am living in Beijing right now and it's throwing off my sense even more. Houses here rent for a tiny fraction of their worth, to the point where many owners just leave them vacant. Not worth it to furnish it and deal with tenants for such a small amount of money.

My goal would be something like:

Next 5 years, buy a house each year with 20% down and 25-year mortgage

Next 5 years: buy a house each year with 20% down and 20-year mortgage

Next 5 years: buy a house each year with 20% down and 15-year mortgage

With the goal of the rental income from the first houses helping to make the mortgage payments on the last houses.

That would put 15 houses paid off around the time I plan to retire, plus the house I already have.

I would be OK if I got no income between now and then, if the houses were able to pay for themselves. Is that feasible? And how hard is it?

Again, I'm just looking for some security with retirement, not to get rich quick or make a ton of money.

Thanks for any help you can give.

I would be looking at turnkey properties and if anyone with experience buying them can throw me a link or an e-mail that would be appreciated.

60k houses can rent for 800-1000 in many areas.

If you buy in good markets with a good TK company you can expect good results. I see two issues with your plan. 1 - currently you can only have 10 residential mortgages and 2 - with rates like this I would do as many 30 year fixed as possible. You can always pay them down early but with residential loans your DTI will be an issue as you grow and you want it as light as possible

The key is to find yourself a team. We are buy and hold as means to early retirement but self manage from afar. Currently the rules is 10 mortgages per name. After putting the first 4 houses on both of our names, we are buying one house per name. I don't anticipate rates to be this low for ever so we are locking in as many 30 years loans as possible!

You are on a solid road! Good luck

Welcome @Mike Johnson

Your investment strategy and approach is not only conservative, but very sound.  I like how you thought it out.

A few comments:

  • With 30-year fixed-rate financing still at historic lows, you should load up with as much as you can on income-producing properties (and as soon as you can).
  • With 20% down on $60,000 (+/-) you can expect to get rental income in the range of $200 to $600 per month.  $300-$400/month is very doable as we have properties in four markets today that produce those numbers.
  • Your limit may be more than 10 properties.  Some of our lending partners can finance up to 16 properties per borrower (credit score).
  • It can be argued that paying off your properties may not be the best strategy to maximize your cash-flow, among other benefits.

Last but not least, do NOT accept "no income" as an option.  I see far too many positive cash-flow opportunities in good markets and neighborhoods for anyone to settle for a break-even scenario.  Just don't go there.

Real estate is a get rich slow investment and with the right plan almost anyone can achieve it.

Continued success!

@Mike Johnson  

I'm interested, how did you come up with that investment strategy?  I have to say I agree with the previous posts, with the rates where they are at today borrow as much cheap money as you can, 30 year loans are the way to go.

I believe pretty firmly in what I call the 1.3% rule.  Basically the same thing as the 1% or 2% rule, but 1.3%.  I've found a lot of great properties that rent for at least 1.3% of the purchase price, and often times you can find these types of properties in good neighborhoods.  Be careful though, do your due diligence and ask lots of questions when looking into potential investment properties.  If the investment brokers can't give you straight answers to your questions, that should be an immediate red flag!  I recommend running properties by the BP community for advice if needed.

My house in WA is worth maybe 165k and I'd be lucky to get 1,100 in rent. I mentioned in another thread the condo I live in right now would rent for maybe 500 and sell for maybe 350k. The idea of a 60k house renting for 800-1k seems nuts to me still. 

I don't really trust my retirement to the stock market (and long term returns of 8% barely keep up with real inflation imho). I basically looked at my house and thought "this will be paid off at 55...if I had 2 paid off houses I could at least retire in China and live ok." Upon researching a lot more than that seems possible. I can save $1,000 or a bit more every month without affecting my lifestyle and I don't want it to sit in a bank losing value. The exchange rate is quite favorable now too. 

10 mortgages max changes things a little. What if you incorporate? Maybe ten 90kish houses is a better idea? Or maybe start out smaller and just see how the market goes?

My actual salary is on the low side but I get free housing, insurance, and the cost of living is very low (I get by pretty well on 500 bucks per month, excluding vacations). But this will make it harder to borrow. What do people here think about having a family member co-sign? My mom could but I would never want to put her at any sort of real risk. I've seen lots of posts talking about doing an llc to shield yourself from risk and that worries me. But maybe that's more for flipping or investing?

So $60k house. 30yr mortgage at 5%. 20% down. 800-1000 rent. 

80 for PM

150 maintenance budget

50 reserve for if it's empty

Maybe 100 for taxes and insurance?

260 mortgage

160-360 net revenue.

Would I be correct in that the advantage of a more expensive house is a better chance for appreciation and a lower percentage of revenue going towards maintenance? Is there any sort of sweet spot people have found? Seems too cheap can be a hassle due to bad tenants?

@Mike Johnson sounds like a good plan.

Being overseas, it maybe advantageous to form a relationship with a property management company to manage your portfolio?

Next, maybe consider looking at states that have bulk sf available for sale?


@Mike Johnson  

I agree with the other posts about getting 30 year loans at current rates. The limit of 10 houses or multis (2-4 units) refers to conventional mortgages under your name, but there are ways to go beyond this. For example should you get married somewhere along the line, another 10 can go under your spouse's name. I understand there are also ways to establish business entities that can qualify for conventional lending that would not necessarily count against your 10. One additional note, after 4 mortgages, the lender will offer 5% lower LTV on 5-10. That is on SFH it would typically require 25% down, and on multis 30% down. That is something best calculated in your plan.

You can always look for landlords with loaded rentals looking to exit the business.

We just sold one of our properties this week for 10k down and carried the balance.  It should break even while the loan pays off and then in 8 years should be a cash cow for our buyer.  I am know other people doing similar deals.

Originally posted by @Chauncy R. :

Mike Johnson sounds like a good plan.

Being overseas, it maybe advantageous to form a relationship with a property management company to manage your portfolio?

Next, maybe consider looking at states that have bulk sf available for sale?


 I would definitely like to form a relationship with a good pm company. My experience renting out my own house was that many pms are also realtors and could perhaps be willing to keep an eye out for good rental properties coming onto the market. 

I like the idea of a bulk deal but would wonder why they were selling. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here