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
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Jeff S. I’m about to be chasing the wild dream in the next week. I’m quitting my full time job due to an issue with a potentially ongoing contagious illness at work that I do not want to catch so I am going to go limited part time where I’ll likely get 4-6 shifts per month which will subsidize my bills just enough that what I’m able to collect from my real estate will be plenty.
I have other means to be able to continue investing in some new properties going forward and have one in the pipeline for after the new year.
Deep in my heart I know this is the right move. I’ve got one property about to be undergoing a renovation that I’ll be working on and if I need more income I’ll look for something part time after that. I won’t likely work full time again though.
Jeff S. I’m about to be chasing the wild dream in the next week. I’m quitting my full time job due to an issue with a potentially ongoing contagious illness at work that I do not want to catch so I am going to go limited part time where I’ll likely get 4-6 shifts per month which will subsidize my bills just enough that what I’m able to collect from my real estate will be plenty.
I have other means to be able to continue investing in some new properties going forward and have one in the pipeline for after the new year.
Deep in my heart I know this is the right move. I’ve got one property about to be undergoing a renovation that I’ll be working on and if I need more income I’ll look for something part time after that. I won’t likely work full time again though
That is awesome @Alecia Loveless! You have been working hard and now it will pay off. Do you have a philosophy about growth and debt? I like it that you can work part-time sure sounds like you are on top of everything. Truly living the dream. Congratulations!
- Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes2y
In 2010 I had been recruited by a hui of investors on Oahu, and we were flipping houses at foreclosure auction, so I had been trained how to find deals and what to look for.
I've always been a good saver, so I had about $50k I'd earned from selling real estate to use as a down. The first house I bought was a duplex in 2013. I actually showed the house to a client, turned out he couldn't qualify, but then my mortgage broker pointed out I could buy the house, so I did. The downstairs tenants more than paid for the mortgage, I decided to live upstairs. Once I didn't have to pay rent ($1000/mo at least on Maui), that cut my living expenses by a third. I got a HELOC on the house and was able to tap my equity to use on other deals.
I kept saving money and reinvesting it in real estate. Living off my own cashflow happened within three years of buying my first property since I was used to $30k a year income. I was single, no dependents at the time.
I partnered with a local attorney to raise more capital to acquire high return properties. I had consulted him on an eviction, and he noticed what I was doing and wanted to get in on the action. I also had some partners on flipping projects, but I much prefer buy and hold. I own a mix of long- and short-term rentals, but I initially started out with long-term. Rents are pretty high here on Maui, so back in the day it was way easier to find cashflowing properties before values skyrocketed.I was so focused on working that all of sudden, around 2016 I realized I'd gotten pretty rich. Then I got married had kids and started to enjoy my life. But it is different not having a 9-to-5. Most people my age don't have the amount of leisure time I do, so I just work out a lot.
Now I'm a single mom, and my daughter is my #1 priority, but I only have her half the time. So still out there making money but my new goal is finding a life partner . . . which is way harder than real estate LOL.
Bottom line, it comes down to dedication and focus. I never in a million years thought I would be living on Maui as a real estate mogul, but hey life always surprises you. Hard work is its own reward.
- Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes2y
@Jeff S.
I just started to attempt this now so we'll see how it goes... I'm in the Midwest and live alone (and don't mind some risk). I keep roughly 30 doors (some are paid off...but that may change).
It may be a bad move on my part, only time will tell, but I could no longer handle the egos in the corp world as it was very much impacting my mental health.
Bottom line, it comes down to dedication and focus. I never in a million years thought I would be living on Maui as a real estate mogul, but hey life always surprises you. Hard work is its own reward.
Pretty much says it all @Loren Clive. Great story!
I just started to attempt this now so we'll see how it goes... I'm in the Midwest and live alone (and don't mind some risk). I keep roughly 30 doors (some are paid off...but that may change).It may be a bad move on my part, only time will tell, but I could no longer handle the egos in the corp world as it was very much impacting my mental health.
@Account Closed I understand that mental health feeling working for bosses can make us feel mental for sure. We look forward to seeing your posts going forward.
- 2yJustin BrickmanBusiness MemberRealtor · San Antonio, TX · Member since 2021 · 503 posts · 274 votes
It depends on many different factors, such as location, cash flow, and type of property, furnished/unfurnished. Each investor will have a different answer because of those different variables that go into it.
Justin Brickman Realty4.9137 Reviews - Lender · United States · Member since 2020 · 1k+ posts · 499 votes2y
Depends on the situation you put yourself in. Network with other investors. I have clients who invest in properties using OPM (other peoples money). If you find the right deal, investors will lend capital.
One of my favorite clients started investing in 2009 with $40k. He currently has a $12 million portfolio. He uses OPM.
@Justin Brickman looks like you are the midterm rental guy doing well in San Antonio. How long did it take for you to get traction? Nice places.
@Timothy Hero One of my favorite clients started investing in 2009 with $40k. He currently has a $12 million portfolio. He uses OPM.
But he did start with 40k and leverage over 14-15 years. What % of leverage would you say his portfolio is now?
- Lender · United States · Member since 2020 · 1k+ posts · 499 votes2y
Quote from @Jeff S.:
@Timothy Hero One of my favorite clients started investing in 2009 with $40k. He currently has a $12 million portfolio. He uses OPM.
But he did start with 40k and leverage over 14-15 years. What % of leverage would you say his portfolio is now?
I'm not sure what he's currently leveraged at, but it's under 70% LTV. He owns 30% or more. $12 Million portfolio with 30% equity means he has just under $4 million in equity. Essentially meaning he turned $40k into $4 million, not including cash flow.
@Timothy Hero hopefully your client has a solid cushion and doesn't get hurt with refinance problems. How much liquidity would you say he should have to buffer his risk?
- Lender · United States · Member since 2020 · 1k+ posts · 499 votes2y
Quote from @Jeff S.:
@Timothy Hero hopefully your client has a solid cushion and doesn't get hurt with refinance problems. How much liquidity would you say he should have to buffer his risk?
The last loan I did with him, which was maybe around August or September, he was liquid around $500k. I've done a handful of deals with him and the lowest I ever saw his liquidity was maybe $300k.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Timothy Hero:
Quote from @Jeff S.:
@Timothy Hero hopefully your client has a solid cushion and doesn't get hurt with refinance problems. How much liquidity would you say he should have to buffer his risk?
The last loan I did with him, which was maybe around August or September, he was liquid around $500k. I've done a handful of deals with him and the lowest I ever saw his liquidity was maybe $300k.
with my clients I fund I see this as an issue all the time as they are building up .. liquidity is always lower than one would probably like for most of us older conservative investors ( speaking about myself only here ) No way I would owe the bank that kind of money and only have 300 to 500k. Although I suppose if their rentals are rock solid and totally perform you can take that risk.. Lenders these days let folks get way out there on equity VS cash in the bank thats for sure. @Timothy Hero thanks for the interesting post. So does he live totally off rentals alone?
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
This is a great thread! I read through most of the comments. My goal was to quit W2 or go part-time in 2 to 5 years. Now I am starting to realize this is going to be extremely challenging with 2 Bay Area rentals (acquired pre-2008) and now 3 Indianapolis area SFH rentals. I have a good paying W2 job but because I live in an expensive part of the country it's going to be difficult to leave. I pay for my own health insurance like I'm self employed - this was in exchange for higher salary so I don't get health insurance through my employer (at the current time)
I posted a separate post but the California properties have appreciated the most and I have lots of equity, also a good amount of in my primary residence. Lots of equity in Indy SFH#1 (great property in nice suburb with great schools but my property taxes have increased dramatically).
My approach was to listen to a lot of people, include YouTube and influencers who said to buy inexpensive properties OOS to "cash flow" and "California is a terrible place to invest with not being tenant friendly etc". My property taxes on my California rentals are reasonable due to Proposition 13. The 2 Class C Indiana (potentially Class B) properties purchased (March 2023 and Dec. 2023). Class C#1 I just got a notification that tenant has called for repair for 4th time in 6 months. I don't think the tenant is breaking anything but it's a 100 year old renovated home so issues will come up, am communicating with PM. Just closed on Class #3 and repairs are being done now so it can be rented out. I don't how much my property taxes will increase on these properties, can't see any logical pattern (confirmed with other Indy investors I talked to). Hard to predict but will these Class C properties expenses cost me more in 5 to 10 years time than had I bought another Class A or B property (which would negative cash flow with these interest rates as LTR).
At this point, I've decided not to buy anymore properties and re-evaluate my portfolio and put money in HYSA and index funds My co-worker helped me organize and streamline my processes at work so I'm not so stressed out (my reason for wanting to quit in 2 to 3 years). I'm starting to see the glass as half full. I have a great W2 job that's pretty recession proof (I'm not in tech) and we have a shortage of workers and hiring - there are people losing their jobs, homeless people in Bay Area, people having to go back to work at age 72 as a cashier (I know this person) because their Social Security payment aren't enough to keep up with cost of living, so I'm thankful for my job.
Would also like to bring up as people get older health care costs increase including long term care. One of my friends is paying $15,000 a month for 24/7 care in home for her elderly mother in the Bay Area. She said this costs less than a nursing home, where they charge for every little thing. Nursing home care anywhere in the USA isn't cheap and and certainly not in the Bay Area. Are those of you living off real estate accounting for medical costs/long term care when you're older?
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Becca F.:
This is a great thread! I read through most of the comments. My goal was to quit W2 or go part-time in 2 to 5 years. Now I am starting to realize this is going to be extremely challenging with 2 Bay Area rentals (acquired pre-2008) and now 3 Indianapolis area SFH rentals. I have a good paying W2 job but because I live in an expensive part of the country it's going to be difficult to leave. I pay for my own health insurance like I'm self employed - this was in exchange for higher salary so I don't get health insurance through my employer (at the current time)
I posted a separate post but the California properties have appreciated the most and I have lots of equity, also a good amount of in my primary residence. Lots of equity in Indy SFH#1 (great property in nice suburb with great schools but my property taxes have increased dramatically).
My approach was to listen to a lot of people, include YouTube and influencers who said to buy inexpensive properties OOS to "cash flow" and "California is a terrible place to invest with not being tenant friendly etc". My property taxes on my California rentals are reasonable due to Proposition 13. The 2 Class C Indiana (potentially Class B) properties purchased (March 2023 and Dec. 2023). Class C#1 I just got a notification that tenant has called for repair for 4th time in 6 months. I don't think the tenant is breaking anything but it's a 100 year old renovated home so issues will come up, am communicating with PM. Just closed on Class #3 and repairs are being done now so it can be rented out. I don't how much my property taxes will increase on these properties, can't see any logical pattern (confirmed with other Indy investors I talked to). Hard to predict but will these Class C properties expenses cost me more in 5 to 10 years time than had I bought another Class A or B property (which would negative cash flow with these interest rates as LTR).
At this point, I've decided not to buy anymore properties and re-evaluate my portfolio and put money in HYSA and index funds My co-worker helped me organize and streamline my processes at work so I'm not so stressed out (my reason for wanting to quit in 2 to 3 years). I'm starting to see the glass as half full. I have a great W2 job that's pretty recession proof (I'm not in tech) and we have a shortage of workers and hiring - there are people losing their jobs, homeless people in Bay Area, people having to go back to work at age 72 as a cashier (I know this person) because their Social Security payment aren't enough to keep up with cost of living, so I'm thankful for my job.
Would also like to bring up as people get older health care costs increase including long term care. One of my friends is paying $15,000 a month for 24/7 care in home for her elderly mother in the Bay Area. She said this costs less than a nursing home, where they charge for every little thing. Nursing home care anywhere in the USA isn't cheap and and certainly not in the Bay Area. Are those of you living off real estate accounting for medical costs/long term care when you're older?
my wife and I even with Medicare pay about 2k per month for health insurance medicare is about half of that.. For sure investors in their 20 30 40s probably are not thinking about healthcare cost as they age out.. - Lender · United States · Member since 2020 · 1k+ posts · 499 votes2y
Quote from @Jeff S.:
@Timothy Hero thanks for the interesting post. So does he live totally off rentals alone?
He flips and wholesales as well, but that's by choice. His portfolio cash flows enough to live off of, but he's too well connected these days to turn down flipping and wholesaling.
@Becca F. you have a good head on your shoulders and I trust you will figure it out. I know about 100 year old properties and they can be solid buildings with old growth timber. I know costs of repairs can be painful but as you have seen your wealth has been created from quality areas. California is experiencing huge reductions in capital gains taxes as tech companies move out but I have heard they are starting to clean up their act so there is that hope.
You have family that has worked hard and struck gold in the Bay area. It is a blessing to have had family to blaze the trail for you. I feel the same way about RE as I have watched those that would not own rentals get buried in inflation as they age out. The rich are getting richer faster and the others are caught in the middle. You are working hard and helping take care of family which is the way it should be. Keep it up.
Also $15,000 per month is cheap. Home Instead charges $30 an hour which adds up quickly using 24 hour care.
I do know older people who don't need the money who go back to work because of boredom which is better than having to supplement SS because of not being able to make ends meet. I don't think that is a concern for you.
I see why he is your favorite client @Timothy Hero. He can live off rentals and he flips and wholesales. He is golden. He likes to keep his cash working for him.
- Cincinnati, OH · Member since 2016 · 116 posts · 83 votes2y
Ok so I ran across this video the other day and it made some lightbulbs go off in my head.
;t=11s
This guy got up to 900 rental units by the age of 30 starting with nothing. Basically the trick is wholesaling, buying super cheap and pulling your money back out with a loan. This way you can scale fast. - Cincinnati, OH · Member since 2016 · 116 posts · 83 votes2y
;t=11s
Here is the video
YouTube link Ok so I ran across this video the other day and it made some lightbulbs go off in my head.
This guy got up to 900 rental units by the age of 30 starting with nothing. Basically the trick is wholesaling, buying super cheap and pulling your money back out with a loan. This way you can scale fast.@Timur Salikov that does seem to be the BP way. I did not listen to the entire blog but a little I gathered he started talking about partnerships and did not listen further. Honestly my idea is that this is not realistic and there really isn't any way to effectively manage low cost properties in such a hurry. Is it possible? Maybe with apartments but I have my doubts. Maybe he is talking about fractional shares.
What is your story Timur?
- Cincinnati, OH · Member since 2016 · 116 posts · 83 votes2y
Its basically wholesaling to yourself. The trick is to find properties far under market value and refinance your capital back out so you can keep going. That guy mentions he is not into partnerships and he owns almost everything himself.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Timur Salikov:
Its basically wholesaling to yourself. The trick is to find properties far under market value and refinance your capital back out so you can keep going. That guy mentions he is not into partnerships and he owns almost everything himself.
well he needed the cash up front to get any scale.. He had to own them then rehab them before he could refinance them.. so he either did it with cash or HML . but there are areas of the country especially 10 years ago were you could buy houses in mass for 10 to 30k each.. Very difficult to manage those type of assets though given tenant demographics and theft and vandalism.
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