Living off rentals
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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.
187 Replies
- Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes2y
So, the question is what do you need per month? Most would say 8k - 10k is decent monthly cashflow. If your average cashflow per door is 300 then you need 30 doors for that range. How do you get there quicker, well if you can ever do a fix n flip with cash and hold it woth no mortgage, do it. There's spots in the south and in the midwest where you can buy a house in need of work for like 30k, someone brought me a duplex in Tenn the other day that they had under contract for 65k. It was too small and I couldn't help them, but if you can swing one per year that is a cash project I'd say do it. Cause now it's pure cash flow, 4x than your average door. Sprinkle these into the portfolio and it will get you to 10k faster.
Here's the issue, I'd say in more than 75% of the markets in the US (broad guess), the 1% rule is a thing of the past. For those who do not know, they say your rent should be 1% of your value, that means it's a good hold. I do a ton of DSCR loans and I can tell you it's becoming more and more rare. Borrowers are coming in saying they plan to lease it for x and when the appraisal comes back the market rent is 25% less than the number they gave. It messes up the entire loan because your max loan amount just decreased as well, so to make the loan work you don't need to put up 20%, you need to come with 30% to get the loan amount low enough to work with the rent constraints. I have to have these tough conversations with people all the time.
The deals that really do well right now for holds are multis in certain markets. There's markets where you can buy a 2 - 4 building for 100k - 130k. Someone in my group has a triplex under contract right now, closing next week. He's buying it for 128k, it is getting 100k in love, and ARV came in 345k. The three units combined will bring in 4700. Borrower will do a 70% cash out refi after the work is done for 241,500. He'll pocket like 10k and now have a mortgage of like 3k/month or so and collect 4700 each month. Line up about 7 of those deals and you are home.
You also have to be looking and investing in the right markets. Markets are like playing fields. What fields can you play on? Are you even playing on the right field? The parameters and guidelines of which fields benefit you the most? Which fields can you afford financially? If you play above your head you may get crushed and taken out of the game. Where are you set-up to play? Get set-up in a market that suits you best. Correct entry point, feasible budgets, project costs less than 75% ARV, active market place - good product doesn't sit long. You are allowed to set yourself up as well as you see fit, that's what I do for my clients who want to be an active investor. I am creating that 3x - 5x environment for investors so they can start to scale.
- Investor · Hopedale, MA · Member since 2021 · 321 posts · 213 votes2y
tons of people live off rental income, but here's the thing, as you suspect:
- it's REALLY HARD (not impossible) to achieve this in just a few years, unless your cost of living is like next to nothing.
- consider investing out of state if your local market is not cashflow-strong.
- set your 'living off rental income' financial goal to ~2x what you actually spend every month, just in case. i wouldn't let go of my other income streams until that point, but that's a personal comfort level.
- if you CAN live off other active income, you can keep reinvesting your rental income and build wealth faster. david green preaches this on the podcast a lot: find a job you aren't trying to get away from.
- 2yTravis TimmonsPro MemberRental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
I think so. That's my goal for next year, and I think it is realistic. Perhaps you can evaluate my plan below and poke holes in it.
My thoughts are that it either takes a long time or real estate is just part of the story. We have an index fund/stock portfolio, dividend/simple interest income, real estate cash flow, and a low cost of living to get there.We have about $30k of net cash flow from our 2 active properties - 1 short term, 1 mid term. I am closing on the sale of my non-RE business in January; we are then selling our home and moving across the country to a cheaper property in Maine. Our current Texas primary home is worth around $400k, the Maine home that we have already purchased was $180k, but needs about $60k in work. Our primary in TX is paid off and we plan on leaving the primary home in Maine paid off as well.
Prior to the sale of my business, I already have a net worth of over $1M and no debt outside of mortgages on cash flowing investment properties. Our monthly living expenses will be about $3000-3500 per month after we move. That's the only way this works comfortably. We also plan on short term renting our house for peak season in July and the start of August next summer. We'll go stay with family out of state (and will mix in some travel). That should add around $10k in monthly gross booking income as a house hack of sorts. We'll have a pile of cash in the bank that will yield $30-40k annually of simple interest in high yield savings accounts at current rates. We will likely split that between index funds, money market/savings, and short term bonds while being opportunistic in acquiring value add properties.
I'll continue to do some contract work (from home) that pays around $1k per month, will substitute teach at my kids' school, maybe pick up a bartending shift here and there because it's fun and nostalgic (waited tables and bartended my way through college and the first 2 years that I started my business), and will chase curiosity to find my next low stakes venture - hopefully something that I can start with my daughters - who are 7 and 10. Between that, interest income, rental income, and our low cost of living, I think we can pull it off.
For reference, I am also 41 like @Travis Biziorek - I've lived below my means and sold 2 other business over the course of the last 18 years. That's the primary driver, and real estate is part of the story after growing businesses and getting some financial traction. Many of the folks here got rich in real estate. I made money doing something else and then started investing in real estate. Both ways work, require a lot of sacrifice, delayed gratification, sustained focused effort, and patience. Both also take longer than strangers on the internet will tell you.
@Albert Hasson I know we see many physicians, orthodontist and dentists who keep working. A great lifestyle for sure. We are talking FAT FIRE here retire not in that double wide but super comfortably. CA by the beach with wife and 3 kids worth working for. Gotta love those warm weather beaches.
Quote from @Jeff S.:
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.
Of course, it is!! Simple, not easy but simple. Buy rentals that net about 700 per month, well buy 10, - 20, how much do you really need ? My buddy has 245 props in Columbus, do the math even at only 500 per , :)
I just picked up 7 more SF all with about 10k net per year, well do the math :)
Good luck
Another amazing story @Dan H.. It sounds like many agree it has been possible but lots aren't so sure about doing it now. I think it is still good for those that are already capitalized and don't need the income now, those who are creative and can add value and those that can weather the storm of tougher areas. You among those that have done it and enjoyed appreciation. Hard work paying off.
- Cleveland, OH · Member since 2022 · 826 posts · 578 votes2y
Quote from @Travis Timmons:
I think so. That's my goal for next year, and I think it is realistic. Perhaps you can evaluate my plan below and poke holes in it.
My thoughts are that it either takes a long time or real estate is just part of the story. We have an index fund/stock portfolio, dividend/simple interest income, real estate cash flow, and a low cost of living to get there.We have about $30k of net cash flow from our 2 active properties - 1 short term, 1 mid term. I am closing on the sale of my non-RE business in January; we are then selling our home and moving across the country to a cheaper property in Maine. Our current Texas primary home is worth around $400k, the Maine home that we have already purchased was $180k, but needs about $60k in work. Our primary in TX is paid off and we plan on leaving the primary home in Maine paid off as well.
Prior to the sale of my business, I already have a net worth of over $1M and no debt outside of mortgages on cash flowing investment properties. Our monthly living expenses will be about $3000-3500 per month after we move. That's the only way this works comfortably. We also plan on short term renting our house for peak season in July and the start of August next summer. We'll go stay with family out of state (and will mix in some travel). That should add around $10k in monthly gross booking income as a house hack of sorts. We'll have a pile of cash in the bank that will yield $30-40k annually of simple interest in high yield savings accounts at current rates. We will likely split that between index funds, money market/savings, and short term bonds while being opportunistic in acquiring value add properties.
I'll continue to do some contract work (from home) that pays around $1k per month, will substitute teach at my kids' school, maybe pick up a bartending shift here and there because it's fun and nostalgic (waited tables and bartended my way through college and the first 2 years that I started my business), and will chase curiosity to find my next low stakes venture - hopefully something that I can start with my daughters - who are 7 and 10. Between that, interest income, rental income, and our low cost of living, I think we can pull it off.
For reference, I am also 41 like @Travis Biziorek - I've lived below my means and sold 2 other business over the course of the last 18 years. That's the primary driver, and real estate is part of the story after growing businesses and getting some financial traction. Many of the folks here got rich in real estate. I made money doing something else and then started investing in real estate. Both ways work, require a lot of sacrifice, delayed gratification, sustained focused effort, and patience. Both also take longer than strangers on the internet will tell you.
@Travis Timmons
Congratulations on your success, man! It's all about not living above your means and accepting delayed gratification. Nothing that the gurus would tell anyone.
What's your plan for instilling principles of frugality and investing into the minds of your kids? @Jayson Ewert sounds solid and a case for doing rentals and RE sales too. Great to have that solid base. People are saying 10-20 years you are on the fast track starting in 2020. Looks good.
- Specialist · San Clemente, CA · Member since 2014 · 50 posts · 75 votes2y
Living off the income is very realistic, I live comfortably off of 7 doors in So Cal but........it is a long game. Bought a beach duplex in 1999 and 5 condos from 2009 through 2014 and fully retired at 52 in 2017 with all units paid off and the rentals as my only source of income. Many would say that I got lucky buying most of my properties during the great recession and that this cannot be duplicated, but I disagree on both counts.
Real estate is a cyclical industry, though it may not seem that way to the 20 and 30 somethings who have only seen things going up. Sure, you may be able buy high and still be ok long term if not over leveraged, but your hands will be tied by debt and negative equity properties when things go south and thus not be in a position to buy when everyone else wants to sell and there are great opportunities.
I graduated from college at a time with very high relative valuations and I was sure I would not be able to buy for a long time. I saved and lived frugally, housing prices crashed in the early 90's and all of a sudden I had a house. For the next 5 years real estate valuations stayed relatively low, I saved and saved and before I knew it I had a duplex. The early 2000's were even crazier than now and I did not want to touch anything, as I wanted to have both cash flow and opportunity for appreciation in anything I bought. I saved and saved and the great recession hit and it was the greatest thing that ever happened to me. Prices crashed and I bought 5 condos in 6 years. I retired from my firm after paying everything off in 2017. The common theme here is that I was patient and bought when prices corrected/crashed, not when they were crazy. I read a lot on this forum about people striking it rich or wanting to in a few years and I am sure it is possible and I am sure that some do it, but I also know many people personally who tried to in the late 80's/early 90's and lost everything and in 2000-2007 and lost everything. Becoming self sufficient slowly, and conservatively is not sexy but it does work. This means saving, saving, saving, and only buying when it makes clear sense and it means having the self control to sit on the sidelines and just save when the numbers are questionable.
As an interesting side note, I did some detailed calculations and I could have achieved a slightly higher net worth by just investing in the S&P500, though I would not currently be enjoying the benefits of depreciation and the resulting lower income taxes that real estate affords. Also, I would have probably gone crazy giving up control and leaving my retirement funds to the whims of corporate CEOs that mainly have their own self interests at heart.
- You did get lucky, there's no argument otherwise. I say that to compliment not take away from what you've done, but don't confuse it. None of this kind of luck happens in todays world. You're still missing the fact that median income: household ratio was completely different back then and the overall price of living in all other metrics are significantly and disproportionately higher than the 90s and early 2000s. It's not even a fair comparison. Lending rules then versus now is also in another stratosphere, show me one person in today's W2 world with a solid one($80k) that'd be able to buy 5 condos in 6 years, let alone 2. You literally bottom fed and bought in the great recession, that's the definition of being lucky.
Quote from @Bob Ritner:
Living off the income is very realistic, I live comfortably off of 7 doors in So Cal but........it is a long game. Bought a beach duplex in 1999 and 5 condos from 2009 through 2014 and fully retired at 52 in 2017 with all units paid off and the rentals as my only source of income. Many would say that I got lucky buying most of my properties during the great recession and that this cannot be duplicated, but I disagree on both counts.
Real estate is a cyclical industry, though it may not seem that way to the 20 and 30 somethings who have only seen things going up. Sure, you may be able buy high and still be ok long term if not over leveraged, but your hands will be tied by debt and negative equity properties when things go south and thus not be in a position to buy when everyone else wants to sell and there are great opportunities.
I graduated from college at a time with very high relative valuations and I was sure I would not be able to buy for a long time. I saved and lived frugally, housing prices crashed in the early 90's and all of a sudden I had a house. For the next 5 years real estate valuations stayed relatively low, I saved and saved and before I knew it I had a duplex. The early 2000's were even crazier than now and I did not want to touch anything, as I wanted to have both cash flow and opportunity for appreciation in anything I bought. I saved and saved and the great recession hit and it was the greatest thing that ever happened to me. Prices crashed and I bought 5 condos in 6 years. I retired from my firm after paying everything off in 2017. The common theme here is that I was patient and bought when prices corrected/crashed, not when they were crazy. I read a lot on this forum about people striking it rich or wanting to in a few years and I am sure it is possible and I am sure that some do it, but I also know many people personally who tried to in the late 80's/early 90's and lost everything and in 2000-2007 and lost everything. Becoming self sufficient slowly, and conservatively is not sexy but it does work. This means saving, saving, saving, and only buying when it makes clear sense and it means having the self control to sit on the sidelines and just save when the numbers are questionable.
As an interesting side note, I did some detailed calculations and I could have achieved a slightly higher net worth by just investing in the S&P500, though I would not currently be enjoying the benefits of depreciation and the resulting lower income taxes that real estate affords. Also, I would have probably gone crazy giving up control and leaving my retirement funds to the whims of corporate CEOs that mainly have their own self interests at heart.
We're literally in an 40-year affordability crisis, you can't tell me what you were able to accomplish is realistic. It's just as discouraging as the 2010-2020 folks saying you can scale and make it all the way to top. Sure, when valuations crash into a third and the rental market skyrockets; that's a feat that may never, ever happen again. The chickens have come home to roost--we are going to sit in a period of higher inflation, higher rates, limited inventory(due to less homebuilding + low rates). It's just not possible to scale like you for the average person out there in todays world. I am closing my first property this week. Rent after expenses (not including mortgage) is about 7% assuming self managed. Rent 1900 (appraisal came back 1975) 500 taxes and insurance (high deductible insurance to keep costs down) 25% assumed expense ratio for maintenance, vacancy and cap ex. I will need nearly 2 million in equity to retire. More if I am still highly leveraged or if I want someone else to manage for me (which I will)
Appreciation is likely 5% so we are looking at 12% total return. leverage will boost it to 17% or so. Which is a good return. At 6% interest rates looking at 20%.If I can get those kind of returns on all the properties I buy and keep reinvesting all proceeds it’ll take 15 years providing I’m adding 1000/mo to the pot. Which brings my retirement age in by almost 10 years.
I could make more with value add tactics (like brrr). But finding time to make them work will be hard because I have little kids and I want to spend time with them. Maybe after I get my feet wet here.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes2y
Well, I will tell you how I did it (or you can just listen to me on the podcast in my signature below).
I spent a career working in local government. While I was doing that I saved a chunk of money. Eventually I had enough money saved that I was able to buy 3 houses for cash in one year: a 2br/1ba 1000sf tired old rental for $37k; a 2br/1ba 1400sf home with several extra rooms for $46k from a court-ordered estate sale; and a 2br/1.5ba 1100sf repo I called the cat piss house for $37k (interestingly enough I have bought 5 houses for $37k, not sure why this number was successful). That was essentially the entirety of my life savings. During that year, I worked every day after work and all weekends rehabbing the houses with my own money. I spent about $13k fixing up the first one, including a new roof; $5k on the second one; and about $3k on the last one. I got the first two rented for $600 per month and the third for $650. That was $1850 per month on about $140k worth of investment. Considering that then taxes and insurance were virtually nothing, it worked out to about a 15% annual ROI.
Because I had a decent W2 job, I took every bit of that cash flow and saved it, along with money I was saving from living beneath my means (how I had saved the original $100k in the first place). I think the next house I bought cost me $25k because it was a disgusting hoarder house. The one after that was maybe $37k again. I literally bought two houses for cash with credit cards while I was short on cash because of a rehab with no interest for 18 months and 24 months respectively on the two cards. During this whole time I mucked around in tiny crawl spaces with mouse crap and snakes, cleaned sewage off of myself more than once, made at least two emergency room visits (one for drilling a hole straight through my hand installing cabinet knobs), sweated my *** off in attics in the summer. I once spent all night pumping 3 feet of water out of a basement, in a monsoon, using a DC pump attached to my truck battery because there was no electricity to the house and the sump pump couldn't work. I planned my holiday days off at work around rehab and inspection work. My vacations were "staycations" where I spent a week ripping up rotted floorboards or tearing out toilets and tubs. In between my agent and I would walk houses where human feces was smeared all over walls, flea infestations were so bad you had to spray yourself down in the front yard when you came out, and rugs with years of dog and cat urine baked into it. Twice I fell through rotted floors into the crawlspace, luckily both times I was in the shallow end of the crawlspace and only went 3-4 feet down.
I did this for years. After almost a decade one day I noticed that my net rental income brought in more money than my job. I worked a few more years then turned in my retirement and started collecting my pension. My pension brings in enough money to cover my own personal living expenses. The rentals pay for all the fun stuff. I'm ex-military so I have VA health care and purchase supplemental for my wife.
There was nothing glamorous or lucky about it, other than seeing an opportunity (buying houses for cheap) and taking advantage of it. I worked my *** off, but I also got to retire at 50. Yes, I gave up something in the process but I also now get to do whatever I want, whenever I want it. I was able to buy my grandkids cars (used, of course - I'm still frugal) for their HS graduations. I was able to buy a second home in Florida for family to use. I paid for my own education along the way (I have a doctorate) and have been able to be the bank of choice for family members (0% interest).
I tell my grandkids all the time: hard work and vision trumps everything else. Make a plan and work it. We live in the greatest nation in the history of the earth when it comes to opportunities. If you want to live off of rentals, bust *** and get it done.
Skyline Properties @Mike Klarman yes most would agree 10k per month would do the trick. How do you get there unless you have lots of cash or a solid w2 or some other kind of income and not rely on rental income to do it. We are getting stories of people doing it and that is where the genius comes in. How do you help someone who is pulling money out of the deals to pay their bills?
@Jessie Dillon great situation with realistic expectations. Good point to plan on 2 times income cash flow and you have done a lot in a short time. Solid advice and realistic view. Cool older place to live a super bonus.
- Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes2y
So, you don't start holding. Your first few deals should be flips. Generate profit and gain experience. Once you always have a few bullets in the chamber - figure a deal may require 25k - 40k in liquidity during its lifecycle - so once you have a few bullets in the chamber then you can start looking for those 2 - 4 buildings that cashflow well. But why stop the flipping? You shouldn't.
Nothing wrong with constantly turning over SFHs to generate an income. If you have just one bullet to start with, you find a good deal and shoot your shot and try to exit with some profit. Keep doing that until you have a few bullets, and then now look to build the portfolio.
@Travis Timmons not seeing any holes in your plans you seem to check all the boxes for success. We continually see people living far below their means to keep things going even after great success. You have a fantastic cushion and for me that is what it is all about. Fantastic and a young 41 too awesome. 2 Travis's age 41 super successful. That does not happen every day. You gotta love those income vehicles spitting out safe interest.
Sacrifice, delayed gratification and focused effort and all with a family that is the best.
That is incredible @Bob S. is your buddy paying cash from his tremendous portfolio? Can't imagine trying to finance a monster like that. I should come look around sometime this is so foreign to me. So 10 houses you have it made?
Looks like a great plan for your future @Benjamin Sulka. Look forward to hearing your plans going forward.
Quote from @Jeff S.:
That is incredible @Bob S. is your buddy paying cash from his tremendous portfolio? Can't imagine trying to finance a monster like that. I should come look around sometime this is so foreign to me. So 10 houses you have it made?
All depends the life you want to live. If you have 10ksih coming in no debt while playing with your kids or sitting on the beach, well.. What about 20k, or 30k, It IS very possible,
All the best
@Bob Ritner super sweet FI and nice weather too. I agree long game is a more secure way to go but it is a hard sell. I know if someone has the wealth they can sit back and play the market cycles and really get rich. That is a tough way to go but it has worked for Warren Buffett and some other billionaires. What to do in the meantime is a good question.
I am thinking you must have had solid income going into this staying financially solid while waiting for the market to come to you. I am assuming you have a cushion and reserves to keep all things running smoothly.
@V.G Jason while I don't disagree with you about these cycles things do change and there are always ways to survive one way or another. Having been around for a while in my area it took lots of properties to consider yourself in a real estate business. They were called real estate operators with many units. The banks would not lend to investors so everything was bought on contract. I bought a few places never thinking they would amount to much just a small supplement to my income and future net worth. Nowadays I could live off the income. Who knows maybe someday if investors keep flocking to Cleveland maybe people will be able to retire on 7 doors there. I do think duplicating a small income is easier than trying to replace a large one unless a reduction in lifestyle is desired which is uncommon. Those that save and invest for a cushion like some on here are the solid bets in my book.
Not knowing more details @Peter W. I would hope just for ballpark figures that your PI (principal and interest) are not much more than $950 with rent being $1900 if all other things are average.
I like your long-term views. For me nothing made sense until I made my present include 10 years out.
Including appreciation in your forecasts are tricky because you want to be able to do well even when things move down. That is when the long-view comes in handy. If values decline and you stick it out it usually pays in the long run. Have watched people bail in a downturn and give it all back then watch prices skyrocket with their old properties becoming worth millions.
- Credit to you for doing all that, but make no mistake about it. And a lot of that opportunity is luck depending on the time frame you bought. If anything was bought in the great recession, then yes that was excellent preparation but absolutely excellent luck too.
Quote from @JD Martin:
Well, I will tell you how I did it (or you can just listen to me on the podcast in my signature below).
I spent a career working in local government. While I was doing that I saved a chunk of money. Eventually I had enough money saved that I was able to buy 3 houses for cash in one year: a 2br/1ba 1000sf tired old rental for $37k; a 2br/1ba 1400sf home with several extra rooms for $46k from a court-ordered estate sale; and a 2br/1.5ba 1100sf repo I called the cat piss house for $37k (interestingly enough I have bought 5 houses for $37k, not sure why this number was successful). That was essentially the entirety of my life savings. During that year, I worked every day after work and all weekends rehabbing the houses with my own money. I spent about $13k fixing up the first one, including a new roof; $5k on the second one; and about $3k on the last one. I got the first two rented for $600 per month and the third for $650. That was $1850 per month on about $140k worth of investment. Considering that then taxes and insurance were virtually nothing, it worked out to about a 15% annual ROI.
Because I had a decent W2 job, I took every bit of that cash flow and saved it, along with money I was saving from living beneath my means (how I had saved the original $100k in the first place). I think the next house I bought cost me $25k because it was a disgusting hoarder house. The one after that was maybe $37k again. I literally bought two houses for cash with credit cards while I was short on cash because of a rehab with no interest for 18 months and 24 months respectively on the two cards. During this whole time I mucked around in tiny crawl spaces with mouse crap and snakes, cleaned sewage off of myself more than once, made at least two emergency room visits (one for drilling a hole straight through my hand installing cabinet knobs), sweated my *** off in attics in the summer. I once spent all night pumping 3 feet of water out of a basement, in a monsoon, using a DC pump attached to my truck battery because there was no electricity to the house and the sump pump couldn't work. I planned my holiday days off at work around rehab and inspection work. My vacations were "staycations" where I spent a week ripping up rotted floorboards or tearing out toilets and tubs. In between my agent and I would walk houses where human feces was smeared all over walls, flea infestations were so bad you had to spray yourself down in the front yard when you came out, and rugs with years of dog and cat urine baked into it. Twice I fell through rotted floors into the crawlspace, luckily both times I was in the shallow end of the crawlspace and only went 3-4 feet down.
I did this for years. After almost a decade one day I noticed that my net rental income brought in more money than my job. I worked a few more years then turned in my retirement and started collecting my pension. My pension brings in enough money to cover my own personal living expenses. The rentals pay for all the fun stuff. I'm ex-military so I have VA health care and purchase supplemental for my wife.
There was nothing glamorous or lucky about it, other than seeing an opportunity (buying houses for cheap) and taking advantage of it. I worked my *** off, but I also got to retire at 50. Yes, I gave up something in the process but I also now get to do whatever I want, whenever I want it. I was able to buy my grandkids cars (used, of course - I'm still frugal) for their HS graduations. I was able to buy a second home in Florida for family to use. I paid for my own education along the way (I have a doctorate) and have been able to be the bank of choice for family members (0% interest).
I tell my grandkids all the time: hard work and vision trumps everything else. Make a plan and work it. We live in the greatest nation in the history of the earth when it comes to opportunities. If you want to live off of rentals, bust *** and get it done.
That opportunity isn't there today. The main points I've mentioned before:
1) Higher barrier to entry
2) Cost of capital increase
3) Average living expenses completely disproportionate to back 15-25 years ago. I mean I am talking in all aspects.
You could no re-do what you did then and do it now. It doesn't work that way. You have to apply advice to the this era. This era the best bet on your money is hard assets & owning debt, not taking debt(in most cases). That changes this entire set up.
I know my background was a topic in another thread, and I don't want to open those cans of worms again, but if I had to re-do what made me successful, it could not be repeated like that. I can't go to the industry I had success in and tell them look at what I did and do that, it's a completely different ball game. Risk management is the only common thing that's applied, and it has to be done differently right now. - Flips in this era are the highest risk and highest taxable. You should avoid flips if you're starting out. You should really pay to own the debt. That's how you get started in REI if you're doing well, but not great like $125k +. And can't find a house in a good location that pencils, at minimum, a breakeven or a little OTM.
Quote from @Mike Klarman:
So, you don't start holding. Your first few deals should be flips. Generate profit and gain experience. Once you always have a few bullets in the chamber - figure a deal may require 25k - 40k in liquidity during its lifecycle - so once you have a few bullets in the chamber then you can start looking for those 2 - 4 buildings that cashflow well. But why stop the flipping? You shouldn't.
Nothing wrong with constantly turning over SFHs to generate an income. If you have just one bullet to start with, you find a good deal and shoot your shot and try to exit with some profit. Keep doing that until you have a few bullets, and then now look to build the portfolio.
Quote from @Jeff S.:
@Mike Klarman yes most would agree 10k per month would do the trick. How do you get there unless you have lots of cash or a solid w2 or some other kind of income and not rely on rental income to do it. We are getting stories of people doing it and that is where the genius comes in. How do you help someone who is pulling money out of the deals to pay their bills?
Today, $10k/mo will do the trick. In 12-15 years, that'll be $15k/month. It's a sliding scale. Assume every 14 years, you'll need about 40-50% more of what you made before.
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