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
@Jeff S.
To your OP, it IS possible. It was possible back then, right now, and in the future. It has a lot more to do with mindset than many people believe. MINDSET is so powerful!
I have posted how I did it a few times in the past. I concur @Travis Biziorek and @Dan Heuschele in their mindset, as I have had a similar journey in REI. It took discipline and a lot of hustle. It is not for the faint of heart. Like @JD Martin posted, you need to have the right perspective. There are so many opportunities, yet those that refuse to take action often make excuses and continue to claim others that made it were lucky or started at the right time.
I believe that as times change, opportunities change, but the opportunities are there. In this day and age, education is plentiful and readily available, not like before. Thus, in the past, it was not luck. It was sheer will, determination, and hustle... Much like what those who live off rentals have posted.
I only recently invested, compared to many of the veterans on this forum. It took A LOT of grind. I was working full time, with a few part time jobs, and raising three kids. But I never gave up, even with minimal sleep. I kept looking for ways to overcome obstacles as they come. I dragged my young children with me and had them sleep or wait in the car in the crazy summer heat while I made repairs, more times than I can remember. Eventually, I graduated to hiring others. Now I have my own in-house managers. I walk away from my W2 in December 2021. I stay on the fence and kept the door open to go back, but I put all of my efforts to building the rentals into a sustainable business. By the end of 2022, I was just wasting time with lingering on the W2 fence.
It can be done. Where there is a will, there is a way. Glass half full all the way.
@Jonathan R McLaughlin certainly more fun that way especially with a solid cushion and a less stressful way to go in a partnership.
Still building amd would have been quicker if I’d stayed longer, but wouldn’t trade it.Yeh but so much less stress and getting it done.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes2y
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.
- Specialist · San Clemente, CA · Member since 2014 · 50 posts · 75 votes2y
Quote from @V.G Jason:
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 totally agree that this cannot be duplicated today, which is why I was suggesting that instead of rushing to invest now, that some should just sit on the sidelines for 5 or 7 years and amass cash so that they can duplicate this when things eventually revert to the mean or below. I sat on the sidelines for almost 9 years saving and saving, having an itch I could not scratch, but knowing that real estate IS cyclical. I only bought my 2nd through 7th properties when the crash happened. You can call this luck, but I feel that this was planning and, above all, patience. The issue I see is that many folks are in a big rush to buy now and don't have the patience to save and wait. Those that had FOMO in 2005 and bought had their capital tied up in upside down properties for 10 years and were thus not in a position to take advantage of the once in a generation opportunity that was teed up in 2009. Or worse yet, had all of their capital taken through foreclosures.
There are other opportunities now other than buy and hold residential real estate, just not in my market or many others, for real estate folks more creative than me. There is a huge opportunity now and in in the next few years, for instance, for those that buy mall, small and large office and retail properties in default and have a vision for adaptive re-use or re-development. I suspect we will look back at this in 10 or 15 years as a similar once in a generation opportunity.
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Jeff S. I’ve worked 3rd shift for about 15 years. I’ve been investing in real estate for 4 years. I think I have about 3 years left in me at the 3rd shift job. It really sucks your soul out of you. My partner gets mad at me when I stay up in the morning to do real estate stuff whether it’s going to a property to meet a contractor or head to the bank to deposit rent checks. But I know that the extra work now will get me to where I need to be in another few years.
I’ve got 7 doors with 25 units and my goal is to have another 25 units in 3 more years. I’m currently bidding my time and rebuilding the war chest while we rehab the most recent 5 units and get them rented.
I owned my own business in my 20s and 30s and originally took the W-2 as a side hustle to that even though it was full time to get health insurance because ours had risen to $1400/month for two healthy nonsmoking adults. Once I took on the job it dropped to $350/month plus I was getting a paycheck. Now I can’t wait to get back to my freedom!
I’m in a pretty low cash flowing area so even though I’ve got 25 doors I’m only cash flowing about $5000/month. I’d like to get to $10,000 before I quit the W-2. I know I can get there. But there’s been a bit of a dry spell for viable properties being available in my area recently. So I’ve been lining up a new lender and biding my time.
@V.G Jason I don't totally agree or disagree with you but when one does business it is like a roller coaster. It is feast or famine sometimes in RE doesn't matter if you are an agent or builder or in the debt business. We have not had a serious downturn in sometime so most on here too young to have weathered too many storms. For me it is like the stress testing the banks have to do how well do you do when SHTF. When I was selling RE and there was no financing we took notes for commissions. My broker used them for wallpaper in his office because prices were dropping and these notes were worthless. Debt was the last place to be. It was time for the debt free to dance on the graves of those who were leveraged. Pay cash huge discount and resell on contract at retail. The discount was at least 40%. Could it happen again?
Can you time the market? Maybe. Is it luck? A little.
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
@Jeff S.
It took me 8 years investigating in RE to make 16k/month. I scaled up by using the equity and monthly cash flow to buy more and more rentals with no $ out of pocket. Most of mine are boring “base hits” but I could probably live off the rental income if I wanted to. I retired my wife who was a nurse 2 years ago from the rental income. It’s a slow process. But I tell people to be patient and give themselves 5-10 years and they’ll be set for life. Most people can’t wait that long. But if you can, you’ll be glad you invested in RE.
@Sam Yin you nailed it as far as growing and achieving in the best market in the country for appreciation. Of course when you have the asset appreciating the rents keep going up too. Gotta love those CA markets. The word grind that you did along with risking shows what it takes. It doesn't really matter those that just keep going and not giving up will come out on top. Most aren't willing to do the grind. Some have wives that won't go along too so there is that too. With the grind the planets need to align up too.
Have followed your story @Andrew Syrios packing up and leaving Portland. That took some courage but it looks like you are still involved in Oregon too. Portland appreciation and hard work was a good launching pad to then redeploy to Kansas City. Lots of energy and drive has been your obvious motto to achieve success. Another story to give BP credibility.
@Bob Ritner or at least now we can get paid to wait. With 0 interest rates it was costly to save and wait but now not so bad.
@Alecia Loveless I know that soul sucking grind of the w2 I stayed a little too long myself. We just keep moving that goal post always (for me) wanting more solid security. So you are talking about getting there in a few plus 4 years adding w2 to your efforts. That seems to be the road to success or at least one of them. Thanks for the update.
I think you tagged me on accident. At this point in time I do not promote a program and the main boss I have is Jesus and my wife. Lol.
Quote from @Jeff S.:
@Bob Ritner or at least now we can get paid to wait. With 0 interest rates it was costly to save and wait but now not so bad.
Why wait??? The only ones that make money on the sidelines are coaches :) Get in the game
Good luck
@John Morgan It seems to be the prevailing theme a few have done it faster but playing the long game and being able to weather the ups and downs of owning RE and supporting oneself in the process is the challenge. This is with emphasis on being able to support oneself during the process. Lots of winners in Texas too.
But I tell people to be patient and give themselves 5-10 years and they’ll be set for life. Most people can’t wait that long. But if you can, you’ll be glad you invested in RE.- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff S.:
@V.G Jason I don't totally agree or disagree with you but when one does business it is like a roller coaster. It is feast or famine sometimes in RE doesn't matter if you are an agent or builder or in the debt business. We have not had a serious downturn in sometime so most on here too young to have weathered too many storms. For me it is like the stress testing the banks have to do how well do you do when SHTF. When I was selling RE and there was no financing we took notes for commissions. My broker used them for wallpaper in his office because prices were dropping and these notes were worthless. Debt was the last place to be. It was time for the debt free to dance on the graves of those who were leveraged. Pay cash huge discount and resell on contract at retail. The discount was at least 40%. Could it happen again?
Can you time the market? Maybe. Is it luck? A little.
Ah the notes for commissions that worked well for me personally through the early 80s. I did it a little different since I was doing 100% land and 100% owner financing I took an interest in the seller carry back ( collateral interest) so I was not hanging out there with personal notes.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes2y
@Andrew Syrios agrees especially with b-b+ and up properties, or owner occupant quality/locations I think.. They can function as both a kind of savings account from the pay down with a reasonable exit to a retail buyer, and with small multiracial very well set up for condo conversion.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes2y
Quote from @Jeff S.:
Have followed your story @Andrew Syrios packing up and leaving Portland. That took some courage but it looks like you are still involved in Oregon too. Portland appreciation and hard work was a good launching pad to then redeploy to Kansas City. Lots of energy and drive has been your obvious motto to achieve success. Another story to give BP credibility.
Thank you Jeff, I really appreciate that! (Although it was Eugene, not Portland)
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes2y
Quote from @Jonathan R McLaughlin:
@Andrew Syrios agrees especially with b-b+ and up properties, or owner occupant quality/locations I think.. They can function as both a kind of savings account from the pay down with a reasonable exit to a retail buyer, and with small multiracial very well set up for condo conversion.
Even with lower end properties, cash flow is difficult to live off for quite a while because often the capital expenses of such properties eats up all the cash flow. Gurus like to talk about living of cash flow, but it's a (very) long term proposition.
- Turnovers, repairs, and evictions can eat up years of cash flow.
Quote from @Andrew Syrios:
Quote from @Jonathan R McLaughlin:
@Andrew Syrios agrees especially with b-b+ and up properties, or owner occupant quality/locations I think.. They can function as both a kind of savings account from the pay down with a reasonable exit to a retail buyer, and with small multiracial very well set up for condo conversion.
Even with lower end properties, cash flow is difficult to live off for quite a while because often the capital expenses of such properties eats up all the cash flow. Gurus like to talk about living of cash flow, but it's a (very) long term proposition.
- Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes2y
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!
@Jay Hinrichs we secured our notes. Our landlord loved them I would discount to yield 24% and guarantee with personal signature. I remember selling trust deeds to grandmas to make deals work. They would tire of all those CD's and some grandmas had rentals too. You gotta love those rich grandmas especially with the apple pie and coffee or milk.
Then there were those flaky deals with unsecured notes as used as down payments on some of those hard to sell commercial vacant buildings held together with a wish and a promise.
Wonder if we will ever see those days again. Fun being super creative. I also liked those unpriced exchanges you didn't want anyone to be able to figure out values.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes2y
Quote from @Joe S.:
Turnovers, repairs, and evictions can eat up years of cash flow.Quote from @Andrew Syrios:
Quote from @Jonathan R McLaughlin:
@Andrew Syrios agrees especially with b-b+ and up properties, or owner occupant quality/locations I think.. They can function as both a kind of savings account from the pay down with a reasonable exit to a retail buyer, and with small multiracial very well set up for condo conversion.
Even with lower end properties, cash flow is difficult to live off for quite a while because often the capital expenses of such properties eats up all the cash flow. Gurus like to talk about living of cash flow, but it's a (very) long term proposition.
Ain't that the truth. It always seems to cost more than you think, especially these days.
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