Living off rentals

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Living off rentals

Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes

While listening to Barbara Corcoran she emphasized the need to have other income while building your real estate holdings. I wonder how many actually live off rental income alone without having put in years of building equity and having other main sources of income. I know in my area starting out cash flow is low and while holding RE over the long-term is lucrative pulling money out to live would be a constant drain on equity.

I imagine if you buy low cost properties and get lots of doors and frugally manage them you could earn a living. If you are a good RE agent or builder/developer or have a great source of income and can delay gratification then you are golden. As she says after 20 years or so she can easily pull cash out for personal use. Living off rentals is the plan just wonder if it is realistic. 

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y

Living off rentals will take a long, long time for the average REI. 15-20 years, probably. You'll need 7-10 quality doors.

Going the full scale--- lower barrier to entry, lots of doors, etc. You got to remember the more houses, the more capex, the more tenants. Bad areas then you're talking bad tenants. So on paper, sure, you'll get there maybe in 8-10 years but reality will hit. You'll get higher turnover, more damage to the properties, higher vacancies.


The average BP folk on a W2 making $80k/year. Needs to save up to buy 1 rental property in a favorable location every 3-4 years. By year 12-15, re-fi 1 and sell 1. Take that cash do capex, and pay down the debts. Have 2-3 rentals that make you probably $7500/mo. To really get into the part where you're having 8-10 fully paid off rentals in year 12-15, you'll need to make a  $400-500k/year at least for a 4-5 year stretch. 

This whole jump in and get rich on REI passed us in 08-22. It's going to be the even longer game now.

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    2y
    Quote from @Timothy Howdeshell:
    Quote from @Andrew Syrios:

    Quite a few, especially if you use any debt at all. The secret about real estate is that, when it comes to buy and hold, you build wealth through appreciation/principal paydown; i.e. you gain equity that you can eventually tap into by either selling or refinancing. The cash flow is really just the cherry on top and usually modest for quite a while. 


    My thoughts exactly (and my experience :-) ). The name of the game is getting equity, somehow, someway. Real estate is a great option due to leverage options and tax benefits primarily. But it really boils down to building that equity. For buy and hold it is a long term play which is very slow. Cash-flow is a defensive strategy at best (I don't find it very reliable; unexpected CAPEX, vacancy, etc.).

    Once you have several million in equity it would be easy for most people to generate enough income to live comfortably (unless you're in expensive coastal markets I guess). But it doesn't need to be real estate. Cash, business equity, stocks all can be converted into monthly income. Getting there is the trouble! 

    "Cash-flow is a defensive strategy at best"

    I love that saying and will be stealing FYI. Cash flow is to make sure you stay solvent with real estate. Equity is how you build wealth.


    Podcast Guest on Show #121
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  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    Once you have several million in equity it would be easy for most people to generate enough income to live comfortably (unless you're in expensive coastal markets I guess).

    @Timothy Howdeshell exactly getting there takes time. I want to hear actual stories where it was easy and quick. 

    Once you have several million in equity it would be easy for most people to generate enough income to live comfortably (unless you're in expensive coastal markets I guess). But it doesn't need to be real estate. Cash, business equity, stocks all can be converted into monthly income. Getting there is the trouble!

    3Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Jeff S.:

    Once you have several million in equity it would be easy for most people to generate enough income to live comfortably (unless you're in expensive coastal markets I guess).

    @Timothy Howdeshell exactly getting there takes time. I want to hear actual stories where it was easy and quick. 

    Once you have several million in equity it would be easy for most people to generate enough income to live comfortably (unless you're in expensive coastal markets I guess). But it doesn't need to be real estate. Cash, business equity, stocks all can be converted into monthly income. Getting there is the trouble!

     I hear people tell me stories on instagram and heck even on this site's advertisement where people make millions with no money down. And quick too.

    Fast money & freedom only comes in a very few fashions:

    1) Windfalls
    2) Lottery
    3) Incredible success out the gates with your own small business.

    Lots of #3 happened in 2020-2021. They are getting eaten alive in late 2022 to now. Maybe I am missing some, but in general fast money & freedom are rarely how it works. Plant the seeds today, wait 7-12 years to see them season and mature. Reap the rewards likely after that. Best advice is to start as early as possible, keep reserves as a buffer, live below your means, and take the cash you make and re-invest in stuff that make you more cash.

    3Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @V.G Jason trillions waiting to be inherited from the worlds wealthiest generation boomers. That ought to keep the economy humming for a while. I have seen more than one commentator happy to report that statistic. Hope the kids can handle it. 

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    @Jeff S.

    I live off rentals that I paid cash for, and I'm still buying more.

    Quit my job as an Electrical Engineer and I now make more money letting my money work for me.

    3Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @John Underwood wondering how long it took. Many are saying long-game but with short-term rentals maybe quickly? Sounds like a solid w2 got you on your way.

    0Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    There are plenty of people doing it besides Barbara Corcoran, though few operating at her magnitude. If you're interested in financial independence, whether it's through real estate or other types of investments, there's a whole universe of Financial Independence or FI experts and influencers out there who can explain how they've done it. I don't like the flashy show off ones because that doesn't speak to me. But I DO like the very authentic and relatable teachers like Craig Curelop, Mr. Money Moustache, Choose FI, Kirby Atwell at Living Off Rentals, and Coach Carson. Most of these individuals have used real estate either wholly or partially to fund their early retirement and freely share their methods and resources.

    [email protected]
    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y
    Quote from @Jeff S.:

    @John Underwood wondering how long it took. Many are saying long-game but with short-term rentals maybe quickly? Sounds like a solid w2 got you on your way.

    It took about 10 years for me.
    1Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @John Underwood another success story this one paying cash so super solid plan and it took 10 years. 10 years is relatively short and a great goal.

    0Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @Bonnie Low all the FI group lots of fun and have read most of their stuff. You mention some new names and I see there is actually a guy that podcasts "Living off Rentals." The stories are great I think we all want to be our own boss and get to a point where we don't fear being able to pay our debts and be able to loosen the purse strings a little. My point here on this post is it is a tough road trying to live off cash flow alone but it can be done through grit and patience rolling on the roller coaster and rolling with the punches. Lots of seasoned real estate operators here and awesome success stories.

    0Reply
  • Vinny NA
    Member since 2023 · 11 posts · 4 votes
    2y

    A dream for most of us certainly, but as the original poster said, you have to have the $ flooding from other sources first before achieving rental-only income.

    1Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @Vinny NA and other sources can be relationships you do the work someone finances you. Theoretically you can start with nothing by wholesaling or partnering but instead of cash there needs to be something brought to the table.

    If you buy and 1/2 goes to debt service and the other 1/2 goes to expenses, capital repairs and reserves where is the cash flow to live off of? This where the 10 or so years comes from. There are those exceptions but most would agree working hard at it is required many not willing to pay the price or willing to stick it out over time.

    0Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    Of course it is realistic... the earlier you start the better off that you are. Its just like the compounding interest for a bank account - time will be more favorable than the amount of money. I own several properties. Some have a mortgage and some do not, some cashflow well and some just a little. I can easily live off of the cash flow of just a few properties if I live a fairly common life but if I want to live a more affluent life than I just need to get more rentals. It really comes down to what type of life style you want to live, how soon can you start investing, and how long you are willing to wait.

    [email protected]239-339-3969
    Bartomeo Property Management4.7161 Reviews
    WebsiteView Page
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  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    That is great @Adam Bartomeo. Having a free and clear property or 2 is certainly good for cash flow. How long did it take to get there? I would bet a lot of investors would like property free and clear and then leverage others for growth. How did you get there?

    1Reply
  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    2y
    Quote from @Adam Bartomeo:

    Of course it is realistic... the earlier you start the better off that you are. Its just like the compounding interest for a bank account - time will be more favorable than the amount of money. I own several properties. Some have a mortgage and some do not, some cashflow well and some just a little. I can easily live off of the cash flow of just a few properties if I live a fairly common life but if I want to live a more affluent life than I just need to get more rentals. It really comes down to what type of life style you want to live, how soon can you start investing, and how long you are willing to wait.


     Such great stuff here

    1Reply
  • Joe C.
    Investor · Naples, FL · Member since 2015 · 8 posts · 7 votes
    2y

    I attacked the affordability problem from a different angle. Started around 2015 when prices were on the upswing and the ratios were not to my liking. I designed a 1300 sq ft 3bed 2bath with no garage to keep costs down and still receive maximum rent. Then I studied, took the test and got my contractor's license. Hired my own subs, managed each project and did a lot of the work myself. I purchased most of my land at tax deed sales. I would sell one and keep the next. In the process of finishing my 6th rental and carry very small mortgages on just 3, with 3 paid off. Where there's a will there's a way.

    1Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y
    Quote from @Jeff S.:

    That is great @Adam Bartomeo. Having a free and clear property or 2 is certainly good for cash flow. How long did it take to get there? I would bet a lot of investors would like property free and clear and then leverage others for growth. How did you get there?


     It really doesn't take that long once you put your mind to it. After I divorced we sold everything and I had about $100k cash left over. It took me two years from that point.

    [email protected]239-339-3969
    Bartomeo Property Management4.7161 Reviews
    WebsiteView Page
    0Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @Joe C. it doesn't get any better than to build your own to sell and rent. One of the people I admired growing up was a developer and builder and having once been over extended and BK, started over with new construction and cheap rentals he fixed up as a back-up to changing economic conditions. He did then build a very large apartment complex that he kept for himself. He was a broker and property manager had it all going on. He also kept going until the end in his 80's.

    0Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    I believe you really did put your mind to it @Adam Bartomeo. What you did not use in time you made up with effort.

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y
    Quote from @Joe C.:

    I attacked the affordability problem from a different angle. Started around 2015 when prices were on the upswing and the ratios were not to my liking. I designed a 1300 sq ft 3bed 2bath with no garage to keep costs down and still receive maximum rent. Then I studied, took the test and got my contractor's license. Hired my own subs, managed each project and did a lot of the work myself. I purchased most of my land at tax deed sales. I would sell one and keep the next. In the process of finishing my 6th rental and carry very small mortgages on just 3, with 3 paid off. Where there's a will there's a way.


     This is a great success story and a way to save some to get to financial freedom sooner.

    I buy alot of properties via tax lien sells.

    Do you do a quiet title on the land after you get it or are you just using all cash to build?

    0Reply
  • Joe C.
    Investor · Naples, FL · Member since 2015 · 8 posts · 7 votes
    2y
    Quote from @John Underwood:
    Quote from @Joe C.:

    I attacked the affordability problem from a different angle. Started around 2015 when prices were on the upswing and the ratios were not to my liking. I designed a 1300 sq ft 3bed 2bath with no garage to keep costs down and still receive maximum rent. Then I studied, took the test and got my contractor's license. Hired my own subs, managed each project and did a lot of the work myself. I purchased most of my land at tax deed sales. I would sell one and keep the next. In the process of finishing my 6th rental and carry very small mortgages on just 3, with 3 paid off. Where there's a will there's a way.


     This is a great success story and a way to save some to get to financial freedom sooner.

    I buy alot of properties via tax lien sells.

    Do you do a quiet title on the land after you get it or are you just using all cash to build?


    0Reply
  • Tasha McCray
    Rental Property Investor · Tampa, FL · Member since 2019 · 24 posts · 24 votes
    2y

    @Jeff S. As for me, I use some of my rentals as unlicensed group homes. Meaning I rent out beds to people who receive SSDI. The turnover rate is low with the older population.

    The cash flow is really good. I also teach other people how to do the same(other income).

    I’ve been retired from nursing since 2018. Now, I’m in the beginning stages of developing 60 acres and mixing up my portfolio.

    1Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @Tasha McCray I have heard these group type homes are profitable but have not had the opportunity to take part. We found a great home for our mother that was owned and run by an RN it was great with 24 hour care. It was a large daylight ranch with 6 bedrooms all with their own baths with nice views and some acreage.

    1Reply
  • Loren Clive
    Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
    2y

    I live completely off my rental income. But I've been investing since 2013. It's possible

    1Reply
  • Jeff S.
    OP
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    2y

    @Loren Clive we are happy to hear that. How many years did it take to have enough income to live? Seems short-term rentals are quicker to FI. Would like to hear your story.

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