How to generate 40k passive income monthly in 20 years

Buying & Selling Real Estate
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How to generate 40k passive income monthly in 20 years

Sue Zikria
Member since 2018 · 30 posts · 4 votes

Dear Forum,

What is the safest most effective way to earn 40k passive income monthly in 20 years by retirement?

I have 100k to invest now plus I save 2-3k monthly from salary.

I’ve been researching small MFH but not sure if that would generate enough passive income monthly in 20 years?

Also I live in NJ which has high real estate taxes.

I have an IRA but don't want to take money out of it for real estate investment.

Any feedback would be greatly appreciated.

Best regards,

Sue

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Brian Van Pelt
Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
7y


@Sue Zikria

Without knowing your background and your tolerance for risk in the RE market. Also purchasing that many properties in such a short amount of time, would require yo to either PM your own properties or hire a PM to manage them for you. Also keep in mind we are at the top or nearly at the top of the RE market. 

Even with buying 1 property per year for 20 years, the basic math does not come close to 480K per year.

In RE , no income is ever passive IMHO

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  • Brian Van Pelt
    Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
    7y

    @Sue Zikria

    Win the lottery and take the annuity.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Brian Van Pelt

    Lol, no but seriously

    I can buy 1 rental property a year for 20 years.

    Should I invest in notes?

    0Reply
  • Brian Van Pelt
    Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
    7y


    @Sue Zikria

    Without knowing your background and your tolerance for risk in the RE market. Also purchasing that many properties in such a short amount of time, would require yo to either PM your own properties or hire a PM to manage them for you. Also keep in mind we are at the top or nearly at the top of the RE market. 

    Even with buying 1 property per year for 20 years, the basic math does not come close to 480K per year.

    In RE , no income is ever passive IMHO

    2Reply
  • Bryan Devitt
    Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
    7y

    $40k now or $40k in 20 years? There is a giant difference in value between now and then. $40k then will be easy with that strategy, $40k now is tough. I suppose it would be possible if you bought every property right, put them on 15 year loans, reinvest all the income to paying off all of the debt as you go. IE. property 1 is paid off and you roll all of the net into property 2. 1 and 2 are paid, roll it all into 3. 1, 2 and 3 are paid roll it all into 4, etc. At that point you would have paid off properties and only need to generate minimal net per door if they're in C+ or better neighborhoods in higher rent states. There is huge risk there though because a lot of higher rent states are pushing for rent control, which would derail the entire strategy. So it is definitely possible, but there is no defined path and they all have landmines 

    1Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Brian Van Pelt

    Thank you for your assessment.

    0Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Sue Zikria

    Hi Sue, you can do it! (I did it in 1 year with a fraction of your capital). One step/property at a time though!

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Bryan Devitt

    For 40k passive monthly income in 20 years.

    Thank you. Much appreciated.

    Should I consider buying notes as well?

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @CJ M.

    Hello CJ,

    Wonderful. Thank you.

    What was your approach?

    0Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Sue Zikria

    I do a combination of BRRRR's and turnkeys. And I should clarify, I self manage mine so technically it's not completely passive imcome.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    7y

    @Sue Zikria

    1. It’s not easy as if it was then everyone would be doing it.

    2. There is no such thing as passive investing in real estate unless you are putting money into a fund as an accredited investor or investing in a REIT.

    3. When you are retired you will be looking to take on less risk. Say you were looking at 6% returns. You would need to have $8M in the bank in 20 years to have truly passive income.

    In order to get there you will need to be extremely active in real estate in the next ten years to build a portfolio to get you there. Nothing is impossible but I would not say it’s easy by any stretch of the imagination.

    7e investments53 Reviews
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    1Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @CJ M.

    Impressive. Did you do one property a year?

    I would prefer PM my own rentals so save 10%.

    I can buy 1 rental apartment a year or 1 small MFH every 2 years.

    So in 20 years will have 20 rental apartments or 10 small MFH.

    Since I’m more concerned with cash flow monthly, do you think I should focus on MFH?

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Chris

    Thank you. Appreciate your assessment.

    0Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    @Sue Zikria

    1) In order to decide what type of investing RE strategy to implement, you need to first make a decision as to whether you can/have the bandwidth be active or passive investor. Here's an article to help you make such decision:

    https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

    2) Once you figure that out, you may look for strategies within such (active or passive profile.) For instance, if you want to be active and aggressively generate a lot of money, then flipping might for you. Alternatively, if your preference is to be as passive as it gets, then you may want to look into syndication investing. 

    What I found helpful from personal experience is speaking with other like-minded investors. Hence if you haven't already, join the local REI clubs. If you're close to the City or Bergen county, join our meetup. More details under my profile.

    0Reply
  • Curtis Rouse Jr
    Realtor · Atlanta, GA · Member since 2015 · 266 posts · 182 votes
    7y

    @Sue Zikria

    To achieve your $40k passive income with your starting point of roughly $100k to invest, I would definitely start looking into larger syndication deals on LP side that would give you more scale. While networking and looking for these experienced operators, on the short term I would look at some flips/wholesale deals to get some additional funds coming in to invest in these larger deals that will ultimately help you build wealth, preserve capital and act as a tax shelter over this 20 year period you are targeting. I hope this helps and Best of Luck. God Bless!

    0Reply
  • Theo Hicks
    Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
    7y

    I would check out Holly Williams on BP. She was able to quit her job exclusively through passive investing.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Alina Trigub

    Thank you for your feedback. I’m near Princeton.

    In your opinion, is it possible to 2x investment in

    Apartment syndication every 5 years?

    It would save a lot of headaches from PM of rentals.

    Thank you for your advice and consideration.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Theo Hicks

    Thank you.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Curtis Rouse Jr

    Thank you.

    0Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y
    Sue,
    You asked me the very same question in another post :) Like I said, anything is possible but nothing is guaranteed. 
    If you do decide to start buying yourself, then look into Philly since you're relatively close to there. 
    My best!

    Originally posted by @Sue Zikria:

    @Alina Trigub

    Thank you for your feedback. I’m near Princeton.

    In your opinion, is it possible to 2x investment in

    Apartment syndication every 5 years?

    It would save a lot of headaches from PM of rentals.

    Thank you for your advice and consideration.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @Alina Trigub

    Thank you Alina for your feedback. Much appreciated.

    We are looking to start investing in apartment syndication as passive investors in 1 year.

    I hope I talk to you then

    Best,

    Sue

    0Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y
    Sue,
    Then you have plenty of time to educate yourself before then.

    Originally posted by @Sue Zikria:

    @Alina Trigub

    Thank you Alina for your feedback. Much appreciated.

    We are looking to start investing in apartment syndication as passive investors in 1 year.

    I hope I talk to you then

    Best,

    Sue

    0Reply
  • John Corey
    London · Member since 2019 · 722 posts · 386 votes
    7y

    Sue, there is no one path and there is no way to tell what path would be optimal for you. I do not know you and stuff will change.

    What I can say is you want to get time on yourself. 20 years gives you a great runway.

    What needs to happen is investing the funds so they can grow and make a difference to the monthly. You can not save enough at $2K a month. While that is a great amount to be setting aside each month, you just could not save enough in 20 years.

    The following is not a prediction and not even statistically backed up. Just folk wisdom to highlight a point.

    Assume you purchased a $100K property for all cash. You used zero debt and you picked a rather normal house in a market where $100K would buy a 3 bed, 2 ba house. A community where people have jobs and otherwise the place looks pretty normal. Forget what city this might be or if it actually exists. That is not the point.

    If prices were do double every 10 years (sub 7% compounded growth), your $100K would become $200K in 10 years and then $400K in 20 years. You do almost zero for 20 years and you see some reasonable growth. The magic of time in a 'normal' or healthy market.

    If you want $40K a month, that is $480K a year in 'passive' income. If you could earn 5% from a completely passive syndicate, you would need to contribute 20 times that amount ($9,600,000). Clearly the $400K was nice yet not even close.

    So, you would need to make your $100K plus future savings work a bit harder than 7%. Using 50% LTV debt with your %100K would imply you start with $200K and end up with $800K.

    In all cases, I ignored the savings you are putting aside each month. I also ignored the income from the rental over the 20 years. That rental income, even after debt service, would make a difference.

    What is the point? I am trying to shape your thinking so you get started in the right direction. If you need to travel North, knowing which way is North matters a lot. You do not need to be exactly on course if you are heading in the right, general direction. As you make progress, you will learn more and you will course correct or tweak the process to improve the results.

    Good luck. Reach out if you like. I started 35 years ago while enjoying my career. Time has worked its magic.

    0Reply
  • Sue Zikria
    OP
    Member since 2018 · 30 posts · 4 votes
    7y

    @John Corey

    Thank you for your feedback.

    I have several ideas:

    passive investing in apartment syndication.

    And/or buying 1 apt a year with 20% down for 20 years. Or buy 1 duplex every 2 years with 20% down.

    0Reply
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