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
- Member since 2020 · 2 posts · 0 votes2y
@Jay Hinrichs would you pls expand on this a bit
Folks purchasing their first rental will often borrow 75% and have not a lot of cash in the bank.
If you could do 10 of those (75 ltv properties and not a lot of cash left over) isn't that a ‘safer' portfolio than just 1? Why then is it risky to have a 70% LTV portfolio (4M equity) with 500k in liquidity?
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Jay Hinrichs:
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.10 years ago I did buy houses on the cheap. There was some period of time where the tenants were a little rough.
I got better at screening tenants and that improved a lot but still had a fee issues.
Now due to gentrification these neighborhoods are being replaced with DINK Mellineials. The house are being fixed up nice and selling for 350k.
It is incredible what some of these cheap houses are worth.
This happened by accident as I didn't know the future value of these houses but wow!
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure. - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesThat is exactly the case in the downtown Greenville, SC area too.
Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling. - Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
Quote from @Jeff S.:
@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.
Thanks for your positive words Jeff! Everyone has a different opinion. Sell all Indy properties and 1031 them to an appreciating location, sell the 2 cheaper ones and don't buy anymore RE (if I can get out my 20% down payments I would be happy), hold onto to them since RE is a long term hold. I'm so confused now.
One of my fears is that I will wind up homeless living in the Bay Area while I own 3 properties here (including my primary residence) with lots of equity (the multi-unit is co-owned with family) - I was half joking and half serious when I said to my friend that I'll be on the side of the street with a cardboard sign with my cat. I have a good W2 job but I don't want to work until I'm 65 or 70 years old (or worse 80). I also know medical costs have wiped some people out.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.This is what I was hoping with these Class C properties in Indianapolis. They are close to downtown Indy where a new hospital will be built. Some neighborhoods (not the ones I bought in) have old $70,000 homes next to renovated ones worth $250,000 to $450,000
So far I'm losing $300 to $500 a month on house #2. I'm communicating with my property manager and maintenance coordinator. Also if I was the tenant, would I want to renew a release on a house where things keep breaking or malfunctioning?
How long ago did you buy these properties in SC?
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.
biggest pay days in buy and hold in RE happen in the path of progress hands down. Now your lot alone is probably worth 200k to a builder. - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesI could likely split the lot and sell each for 200k to 250k. They split the lots across the street.
Quote from @Jay Hinrichs:
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.
biggest pay days in buy and hold in RE happen in the path of progress hands down. Now your lot alone is probably worth 200k to a builder. - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Becca F.:
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.This is what I was hoping with these Class C properties in Indianapolis. They are close to downtown Indy where a new hospital will be built. Some neighborhoods (not the ones I bought in) have old $70,000 homes next to renovated ones worth $250,000 to $450,000
So far I'm losing $300 to $500 a month on house #2. I'm communicating with my property manager and maintenance coordinator. Also if I was the tenant, would I want to renew a release on a house where things keep breaking or malfunctioning?
How long ago did you buy these properties in SC?
Around 8 years ago.
- 2yArn CenedellaPro MemberRental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
As @John Underwood indicates Greenville SC is a great market.
I am a multifamily investor and syndicator in Greenville SC.
Happy to connect with any and all interested in investing in Greenville SC.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @John Underwood:
I could likely split the lot and sell each for 200k to 250k. They split the lots across the street.Quote from @Jay Hinrichs:
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.
biggest pay days in buy and hold in RE happen in the path of progress hands down. Now your lot alone is probably worth 200k to a builder.
Yahtzee !! my biggest profit for just buy and hold was land as well.. we bought 3.5 acres in Sonoma county CA for 27k in 96 ish sold in 2000 for 2.2 mil. paid tax's of 300 a year and mowed it about every 3 years for 500 bucks.. same thing as you .. unbuildable acreage but Indians bought the land next to us and built the largest indian gaming facility in CA. :) City up zoned us .. We spent not one dime on entitlements. sold to a developer. - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Jay Hinrichs:
Quote from @John Underwood:
I could likely split the lot and sell each for 200k to 250k. They split the lots across the street.Quote from @Jay Hinrichs:
Quote from @John Underwood:
That is exactly the case in the downtown Greenville, SC area too.Quote from @Jay Hinrichs:
Quote from @Jeff S.:
@John Underwood my experience exactly. An accident by way of DINKs and soccer moms buying in low cost areas and putting in a couple hundred grand all new high tech wanting to be close to the center of town. The closer the better for bike riders and green thinking bus riders.
which is a very much Portland thing.. not so much in other parts of the country thats for sure.
Also there are 33 people per day moving here.
I have a house I paid 6k for at a tax sale many years ago. No one wanted it back then because it wasn't a great area.
A new house was built and sold across the street for over 800k.
The whole street is new expensive houses and my house is the ugly duckling.
biggest pay days in buy and hold in RE happen in the path of progress hands down. Now your lot alone is probably worth 200k to a builder.
Yahtzee !! my biggest profit for just buy and hold was land as well.. we bought 3.5 acres in Sonoma county CA for 27k in 96 ish sold in 2000 for 2.2 mil. paid tax's of 300 a year and mowed it about every 3 years for 500 bucks.. same thing as you .. unbuildable acreage but Indians bought the land next to us and built the largest indian gaming facility in CA. :) City up zoned us .. We spent not one dime on entitlements. sold to a developer.That is Awesome!
@John Underwood Greenville SC sounds awesome.
@Becca F. as you notice from this thread people are making it happen many different ways. Personally I like being sure I won't go broke but there are no guarantees. There are those that can live off their rentals alone but also could retire without their rentals because they are financially solid w/o RE.
@Becca F. So far I'm losing $300 to $500 a month on house #2. I'm communicating with my property manager and maintenance coordinator. Also if I was the tenant, would I want to renew a release on a house where things keep breaking or malfunctioning?
There is no way of knowing why this is happening but the whole problem may be a lack of experience. Spending an extra 6k a year would not be much of a surprise for those that have seen things go wrong but know how things work out in the long run. If the property is improving I would be ok but for those on a tight budget maybe a problem.
- Member since 2024 · 14 posts · 11 votes2y
You should read (the small and mighty real estate investor by Chad Carson) or listen to his podcast on BP, he doesn’t own many units but paid them down quickly…maybe 5 years and lives modestly off his rent income.
@Nick Benedick like the concept live below your means and cover your living expenses with RE. Are you planning to live off rentals?
Quote from @Nick Benedick:
You should read (the small and mighty real estate investor by Chad Carson) or listen to his podcast on BP, he doesn’t own many units but paid them down quickly…maybe 5 years and lives modestly off his rent income.
It's no different than what others, like me, have said. Buy a few quality one's-- sell 1, cash out refi 1(that'll you sell soon) and paid down the debts. Have a few rentals, capex reserves, and have cash flow.
Now to live off that, that really depends on your age, reserves, dependents, etc. I don't think the average couple with two kids can live off 5 rentals for the duration of their lives if they're 37 years old. 47 years old-50 years old with 7-8 rentals and two other streams of income later(401k, pension, IRAs, annuities, equities, etc.) and the kids already in college then maybe.
People need to remember every 12-15 years, costs will slowly accrue to 40-50% more than today. So your goal post today needs to actually be adjusted. If you're 40 and thinking I'll live to 80 and all I need is $7,500 in monthly income net and you have reserves. Make sure your reserves are actually 2.5-3x of what it'll cost today, and the $7500 likely needs to be able to grow into $20,000 net or find another avenue to create that.
- Member since 2024 · 14 posts · 11 votes2y
Quote from @Jeff S.:
@Nick Benedick like the concept live below your means and cover your living expenses with RE. Are you planning to live off rentals?
Absolutly, but it will take time and a lot of work, I think the biggest misconception is people need x to live on monthly, but when you reach x, you want more…eat out more, nicer car, more vacations etc so that x becomes more and we keep chasing a bigger and more expensive life. Stick to a goal and make it happen
- Member since 2024 · 14 posts · 11 votes2y
Age is not a factor, I see 25 year olds doing it, I see 60 year olds doing it.. find your monthly comfort number and go after it.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @V.G Jason:
Quote from @Nick Benedick:
You should read (the small and mighty real estate investor by Chad Carson) or listen to his podcast on BP, he doesn’t own many units but paid them down quickly…maybe 5 years and lives modestly off his rent income.
It's no different than what others, like me, have said. Buy a few quality one's-- sell 1, cash out refi 1(that'll you sell soon) and paid down the debts. Have a few rentals, capex reserves, and have cash flow.
Now to live off that, that really depends on your age, reserves, dependents, etc. I don't think the average couple with two kids can live off 5 rentals for the duration of their lives if they're 37 years old. 47 years old-50 years old with 7-8 rentals and two other streams of income later(401k, pension, IRAs, annuities, equities, etc.) and the kids already in college then maybe.
People need to remember every 12-15 years, costs will slowly accrue to 40-50% more than today. So your goal post today needs to actually be adjusted. If you're 40 and thinking I'll live to 80 and all I need is $7,500 in monthly income net and you have reserves. Make sure your reserves are actually 2.5-3x of what it'll cost today, and the $7500 likely needs to be able to grow into $20,000 net or find another avenue to create that.
10 years or sos when I first got on BP.. this discussion was common " how much would you need in cashflow to quit your job and be retired.. It was quite common to have the answer be 4 to 5k a month now we see 10k a month a pretty common answer.. And I think the majority of folks that say 5 to 10k today are younger 20s 30s.. And the idea of paying for collage of being truly self employed were you have to pay your own health insurance and self employment tax etc etc. And unless everything you own is paid for home you live in cars etc.. I dont see how 5 to 10k a month will be much of a lifestyle in the next few decades.. I mean for us even on medicare we pay over 2k a month JUST for health insurance. As you get older you need it. without it One major surgery could be 200k to 500k or more. property taxs keep going up etc etc.
Absolutly, but it will take time and a lot of work, I think the biggest misconception is people need x to live on monthly, but when you reach x, you want more…eat out more, nicer car, more vacations etc so that x becomes more and we keep chasing a bigger and more expensive life. Stick to a goal and make it happenSo true @Nick Benedick
@Jay Hinrichs my parents as were many in that age group were self employed their entire lives and retired early but it was no cake walk. Their advice get a job with benefits.
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jeff S.:
@Jay Hinrichs my parents as were many in that age group were self employed their entire lives and retired early but it was no cake walk. Their advice get a job with benefits.
Plus raising kids when you have no benefits I know for about the first 10 years or so all we could do was major medical so doctor visits prescriptions etc were not covered. Bottom line if your going to be self employeed you need to make more than just replace your W2.. at least in my experience. However us though self employed meant commission income all my life. Or owning a running my business HML biz development and brokerage..
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