Living off rentals

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Living off rentals

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

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

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

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

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

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


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

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

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

    @Jay Hinrichs
    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..

    Same here couple with RE sales only no health insurance kids but we did not survive during crash as you did and it wasn't for lack of effort. All is well that ends well though. I certainly never could have predicted how and where I ended up.

    0Reply
  • Sean Lambert
    Investor · Pacific City, OR · Member since 2016 · 175 posts · 123 votes
    2y

    @Peter Woerner what is the monthly cash flow? You numbers should include the mortgage payment, not just interest and insurance.

    I, personally, don’t count debt pay down and appreciation in my calculations. They are gravy on top of the cash flow.

    0Reply
  • Greg JeanfreauPro Member
    Real Estate Agent · New Orleans, LA · Member since 2015 · 146 posts · 127 votes
    2y

    @Jeff S. My wife and I have been investing for about 10 years or so - although my first small multifamily "house hack / BRRRRR" was in 2006. Our first strictly investment purchase was in 2014. We boot strapped and DIY'd the Reno. It cash flowed great. Then we bought another and another. Slowly, but surely we have been buying a small multifamily or two every year and they are usually fairly substantial reno projects. Each time we finish and rent out a house and the dust has settled from the refinance and such, we allocate a bill or 2 to be paid by the cash flow. The first major one was our own house note. Then some groceries. Health insurance. Now tuition for 3 little ones. We still work (jobs that we enjoy), but as our expenses grow with our family, the financial pressure hasn't. At some point, the rental income will go beyond our expenses and I can absolutely see that light at the end of the tunnel. But, for now, we have the freedom to spend lots of time with family and friends, travel how we want and generally not worry about finances. We have also kept a very reasonable level of leverage and a good amount of untapped equity. When the time comes, we can tap that as we see fit.

    3Reply
  • Carrie Matuga
    Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes
    2y

    @Jeff S. From personal experience, trying to live on your passive income while you scale changes how you invest. Cashflow vs. appreciation becomes much more important and it can be a balancing act to make sure that you are not (only) seeking out low cost properties in turning neighborhoods. I think that easing into it in a hybrid way or waiting a little longer helps you make smarter long term decisions that walk the balance between cashflow and appreciation. It also leave you a lot more possibilities with how to invest and where to invest.

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

    @Greg Jeanfreau The house is a late 19th century barge board shotgun double. It is called barge board because the strucural components are comprised of boards taken from barges that floated down the Mississippi River in the 1800's. The boards are about 2X10ish and sit atop an often questionable fountation. Sometimes, the homes were only 1 or 2 rooms each side

    Great story about your progress and super interesting about that "shotgun double" I read in your bio.

    There is something very satisfying about bringing places back to life. I like working your jobs AND doing all that too.

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

    @Carrie Matuga From personal experience, trying to live on your passive income while you scale changes how you invest. Cashflow vs. appreciation becomes much more important and it can be a balancing act to make sure that you are not (only) seeking out low cost properties in turning neighborhoods. I think that easing into it in a hybrid way or waiting a little longer helps you make smarter long term decisions that walk the balance between cashflow and appreciation. It also leave you a lot more possibilities with how to invest and where to invest.

    And it had to be rough when they banned daily rentals in Laguna a few years back. Those places aren't cheap can't imagine having a few of those leveraged. Good thing it was a strong market for sales. 

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  • Greg JeanfreauPro Member
    Real Estate Agent · New Orleans, LA · Member since 2015 · 146 posts · 127 votes
    2y
    Quote from @Jeff S.:

    @Greg Jeanfreau The house is a late 19th century barge board shotgun double. It is called barge board because the strucural components are comprised of boards taken from barges that floated down the Mississippi River in the 1800's. The boards are about 2X10ish and sit atop an often questionable fountation. Sometimes, the homes were only 1 or 2 rooms each side

    Great story about your progress and super interesting about that "shotgun double" I read in your bio.

    There is something very satisfying about bringing places back to life. I like working your jobs AND doing all that too.


     Thanks! Some folks run away from historic homes. I run toward them.

    0Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    2y

    @Jeff S.

    Anything is possible...but too many variables come in to play. For example, the cost of living in your market, do you have a family to support, monthly expenses, how tenacious are you, what lifestyle you want, etc.

    I'm about to hit 6 years in this business and just left my W2...and know many others who left their job in under 10 years.

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

    @Account Closed

    Anything is possible...but too many variables come in to play. For example, the cost of living in your market, do you have a family to support, monthly expenses, how tenacious are you, what lifestyle you want, etc.

    I'm about to hit 6 years in this business and just left my W2...and know many others who left their job in under 10 years.

    Like you say anything is possible. I had a friend who had 10 houses very little debt who sat down and figured out she could sell everything on contract and retire nicely. This was right after a large upswing in the market. I saw her about 10 years later she was looking for work inflation ate her lunch and she wasn't any younger. I was in the same position but decided to keep mine and keep working. Glad I did.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Jeff S.

    As many have mentioned it’s extremely rare for someone to retire off rentals. Now that’s not to say when you are 60-65 years old and want to slow down you don’t have passive income from either real estate or some other income producing asset but people undershoot how. Much is needed

    Not only that but most people won’t know what to do with their lives.

    Start with one and make sure you enjoy it after 3 years - then decide what you want to do. We also see many people quit a w2 they don’t love hoping to hit it rich in real estate only to do the opposite

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

    @Chris Seveney and most older housing providers I am talking with have kids who helped paint and mow and clean when they were young and now have good jobs and want nothing to do with rentals. With the increasing government interference these older types are discouraged and are just selling and either going into DST's or just plan on selling them slowly as they age out. Not a bad place to be actually but as far as passing on the business doubtful the kids will work their fingers to the bone as their parents did and will just let it slip away and spend on whatever.

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