Successful on just Rental Properties?
Real Estate Investor · Oklahoma City, OK · Member since 2008 · 126 posts · 2 votes
Just a Question to people that like to buy houses and rent them out and others that have and still do but also, Buy and sell, Wholesale and all that good stuff. Are you able to be really successful in only Owning houses and renting them out? Nothing else but that? How many houses do you think you would actually need to be able to pay bills your own bills, fix anything the current tenants damage and still have left over "spending money"? 20? 50? Any info or thoughts would be nice. :type:
Honestly it only took me 8 rental properties to "technically" hit that, and of those 8 only 1 was a multi (3 units). However, I aggressively (obsessively) bought extremely low and within that time also acquired a residence for myself for cash (no mortgage) and I'm just not a very materialistic guy. When you don't have a mortgage and a car payment, becoming financially independent is a lot easier. Moving forward from that position, everything I buy - I buy the asset to buy it for me first. I haven't applied for any type of consumer loan for almost 3 years now.
It's a highly disciplined lifestyle that requires you to ignore the marketing to "buy now, pay later" that is all around you.
That being said, for me this is only a stepping stone. I'm on to buying my first cashflowing business next.
That's nothing more than guru gibberish! I actively manage several dozen rentals AND do all the maintance and still only work 12-16 hours per week. That leaves at least 152 hours per week to 'look for other investment properties, negotiate new deals and the like.' Do you really spend so much time looking for deals, negotiating new deals and the like that you need that other 16 hours to be successful? That's hard to believe.
Mike
While I don't own any rentals at the moment I know several people who do. I have a friend that's a contractor and does all his own rehabs, property management, repairs, etc. He doesn't have 50 but with how efficiently he runs it he certainly could.
I also know a guy that has several rentals in the same area and he is constantly working on the properties. The difference between the two is the first guy I mentioned can be "hands off" to a point because he takes the time to make his rentals clean and reliable. When he rehabs he goes through the whole house and makes sure everything is in working order. The other guy cuts corners everywhere he can trying to save money and then ends up spending all his time fixing things. Both are contractors.
That said, if done right and managed efficiently I could see the right person managing 50 or more units alone. I personally wouldn't want to collect rent and wouldn't mind paying for management. Just my opinion.
Jeff
The comparisons used here are like apples to watermelons. Mikeoh compares managing 50 rentals to managing 50 employees. Huh?? If you say you can manage 50 on your own(some are apts)I imagine there might be another human being that could also manage your 50. Not me.
I also like having another level between tenant and me, the owner. I don't want to get caught up in sob stories from Tenant. I prefer being the bad guy, that mgmt can blame me for the decisions needed.
I also don't "manage" the manager. I just hire and fire. I also buy and own in multiple areas for different reasons. It would be impossible for me to do an adaquate job. Maybe, if I only owned in one city or area, it might be doable, but I would prefer to pay an employee to do the mgmt, lawns, pools, painting, etc. My time is better used and more profitable doing other things.
I still don't know anyone that would enjoy doing the mgmt. himself , if it wasn't required for his cash flow. It is not an enjoyable job, just busy work. After owning well over 1000 sfrs personally and thousands of apts (individually and jointly) my mind won't change. Rich.
Rich you just summed up how I feel about owning rentals with the statement above. I don't know how comfortable I would be with tenants knowing I was the owner, and I certainly would not want to go around and collect rent. I know it can improve your bottom line but for me personally I think it would increase my stress level more then the extra money could benefit.
I tip my cap to MikeOH for being able to do it and stay focused, profitable and sane. Good job.
Jeff
Rich/Josh/Chris,
Thank you for the kind words. It has been an eyeopener beyond compare living life like this.
Tim
I wanted to address the questions asked in the original post in this thread.
Can you really exist just on having rental homes? ABSOLUTELY. I've been doing that for 25-30 years
How many do you need? 20, 50, 100? I had a chapter in my book called one a year for 20 years. I had actually researched and used my own experiences to determine if someone could buy 1 home per year and retire in 20 years and never work again. The answer was YES, based on the avg. appreciation over the last 50 years, on avg nationwide. Those #'s would be scewed now because of the huge downturn.
I still feel the 20 years would be pretty close. I think most the real investors on here would tell you that if you had 20 free and clear homes, your rent would be adaquate to live nicely. However, you'd be giving a large portion to IRS, and that is why I prefer to have another bucket full of properties NOT free and clear to offset the income with depr, etc. Rich.
Thats always good to know. This would be in another discussion lol, but I hate when the money you make, some has to be given as taxes. I mean, they are earning my hard work lol and not doing anything good with it. But thats that lol. More with the answers, keep em coming if you have something new to add. Thanks :type:
KKnack1010: The reality is a lot of investors get good cash flow tax deferred an some I know pay very little in current income tax. The game is to make your pre-depreciation income equal to your depreciation allowance. Net $0, tax wise, but they maintain good cash flow.
Yea I hear ya. I do like the answers here. Very encouraging to know that one can live off of just Rental properties. It is a nice thing to do if you are retiring from the average job. Still got work to be done but as pointed out in the answers here, that is not hard to maintain. \m/@.@
How many properties can a person manage? Back in 1982, I managed 100 SFR units in Orange County, California. I had no computer, no fax machine, no cell phone, my car had an eight track player in it. :roll: I had a handyman for repairs I couldn't do, but I did rent collection, evictions, lock outs, all the bookkeeping, etc....
But I also had a 2 year old drown in the pool of a rental I was managing. I had to let the DEA in to do business on another rental. I found marijuana in the backyard of another rental. I got physically threatened when I asked for $10 for a credit check. So when it came down to getting a C&C license or hiring out the management, I chose the later. Some people actually enjoy the owner/tenant interpersonal relationship. Others, like me, treat the investment like stock, we don't visit the factory or office of the company we own stock in, we just look at the financials. Both of them work just fine! Let me repeat, there is more than one way to skin a cat! At the end of the day, if you make enough money to enjoy life, then you are successful.
I do currently manage 3 of my units, so I keep my hand involved in it. But they are my highest rental amount rentals, one duplex is on a golf course, the other is the proverbial "Seville on the Hill" rental.
KKnack1010, of course the other way to live off of rentals is to become a professional property manager... or better, to own a property management company... and collect commissions. A couple 100 unit apartment buildings, 100 SFR, and you can earn a living.
top line: 2 * 100 *(600*.06) + 100 *(1000*.06) = 13,200 /month
Yea that seems like a great Idea, I will have to think of that much more.
Right now my plan is to reach total 50 units in 6 years. I am planning on doing the property management during that time so that I can have more cash to keep buying. Once I reach my goal, I plan on turning the management over to PM's and using the Income to pursue other endeavor's like buying a golf course!
Sounds like a great plan. Good luck. Rich
My husband (and business partner) and I are running calculations to determine how many properties we need to buy to replace his income so he can retire very soon and join me in this work (which I do full time). We have a certain amount of cash to invest and we've applied a little formula to try to keep us on track to achieve good cash flow on our properties:
Rent = 1.5% x my investment.
So if I have to invest $50K in a property, I must get at least $750 in rent. This seems to work for us whether we pay cash or finance the place.
Anyway, like I said, we're running scenarios to see how many properties we need to get to retire my husband early. We're running the numbers without financing and with financing. With financing some of the properties, we can acquire more properties, obviously, so we'll grow faster, which definitely has its advantages. But I've also been trying to get him to see that if we just pay cash and never finance, we may acquire fewer properties, but those fewer properties may be enough to do the job. I'll let you know how it turns out.
As for management, I think I could handle up to 20 properties myself. Of course, let's see how that works out when I get there. I currently manage 4 rentals VERY EASILY. Because we rehab them very carefully and thoroughly, there are few repairs needed. I have very little turnover because I focus only very attractive 3-BR SFHs in good family neighborhoods (no warzones, no hardcore low-income areas--I've gotta feel safe working at these properties alone, y'know?). We do all management and repairs ourselves (except HVAC and appliances--we're clueless there). I am trying to get away from doing the rehab work ourselves because it takes my focus away from what I'm good at: making deals on new acquisitions and landing good tenants.
I'm happy to try to flip, but it's not really my focus in this market today. I'm working harder than ever to take advantage of this market and expand my rental portfolio.
So, that's my take on this, for what it's worth.
Happy to see this thread get resurrected. Great thread. How many rentals to live just on rent? Reminds me of the Tootsie Roll Pop commercial "How many licks does it take to get to the tootsie roll center of a tootsie pop?" The owl takes 2 licks, then bites into it and says THREE!
I have an acquaintance who owns a Free and Clear rental in San Diego, California that pays $10,000 a month rent. Some people could live on that rental alone, unless it became vacant.
Different answers. Folks like MikeOH and others don't mind knocking on a door and collecting rent. Others, like me, want to own but NEVER even see the house or tenant.
But the answer to the original post is definetly YES. You can make a really good living on just rental properties. I bet Trump is pretty happy with his Trump Tower Rental income.
Good for you Terri. And thank you. I don't know how much of a "hero" I am but I'll take it...lol Seriously though, deal with what your comfort level is. I don't invest in war zones either because before I got these current rentals, I did too many insurance claims on vacant houses on the south side of Chicago and couldn't justify the cost of upkeep of a property in a war zone. I stick to the low income blue collar areas. Most of my tenants are some sort of service industry employee, but in all fairness "low income" scares some people so whatever works for you.
Still looking for that cash flowing business. I've got a coffee shop/wine bar and a motel I'm discussing owner financing terms on. We'll see what happens.
I feel like I'm piping in from the peanut gallery over here as we only have 4 rentals including the one we just bought and are getting ready to work on. So 3 that are rented.
Anyway, Tim I like the way you think!!
Terri, I like you already. You and your husband's plan sounds VERY similar to ours.
And Rich, where you said: I think most the real investors on here would tell you that if you had 20 free and clear homes, your rent would be adaquate to live nicely. However, you'd be giving a large portion to IRS, and that is why I prefer to have another bucket full of properties NOT free and clear to offset the income with depr, etc. Rich.
I'm sure my husband knew this...but I just had an Ah..HA moment. Makes perfect sense. Out of our 4 houses, two are financed and two we paid cash for.
As far as managing ourselves. We do that now. But at some point I think we have a cap number in mind before we'd probably have to think about having someone else manage them. At some point...some day we'll get too old to manage them and do repairs. Only in our early 40's now so that's a ways (hopefully) down the road. So far we haven't had to "collect" rent. It's mailed to us instead. But I'm sure there will come a day for that as well as evicting, etc.,
The way I see it is in the next 2-3 years I'd like us to have 10 rental properties. We started Jan of 2009 and have the 4 already so I think that's realistic. Looking at another one tomorrow as a matter of fact.
I would love nothing more than to get to the level where we could retire on the income if we wanted to. Though I doubt my husband would fully retire. He'd probably still do consulting or law to some degree and I would probably still do my internet businesses. But for him not to have to work 50 hours a week or more for someone else would be GREAT! We could travel more and just have a new level of freedom. I wonder if he'd get on my last nerve though if he was home too much? LOL! J/K (sort of). :mrgreen:
I currently make a respectable living on my rental properties. I am in the process of adding an apartment complex and expect to have something over $100K after debt service and other expenses.
I have accumulated our properties over 15 years. Every purchase cash flowed. We have bought some properties to hold with the long term intent of further development. In the meantime they cash flow quite well.
We do all of our own property management at this time, but eventually will hire a property manager. Not ready for that just yet and we still have the freedom to travel and do what we want to.
Mike M- I was in orange county in mid 70's, Fullerton. What part were you in?
Charles- Is that 100K AFTER taxes? If not, be sure to include it in the calculation. Can be a huge obstacle to Creating real Wealth. Rich
p.s. Great to see so many posters with actual plans and goals.
Richard, yes that would be after taxes. My investments actually help shield much of my CPA income as well, so there is a net tax savings from investing. Part of the benefit of my wife and being full-time real estate investors.
People are using unit and rentals interchangable. I own close to 50 units and manage them myself. I am on almost every maintence call also helping or running for parts. I am also continually buying more rentals and doing the rehab on them (some of these are nasty REOs). I get some help from my mom who is a tax lawyer and some help from my dad on the weekends landscaping. Other than my handy man, I am a one man show. I look at new properties to buy, manage, rehab, meet with vendors, rent units, and do repairs.
I am very young and do not have a family so I can afford to work 7 days a week 365 days a year. I average a 10 hour day. I have been thinking about growing my business, and I think that at some point there will come a time when I will need to hire a right hand man to help with management tasks. The hard part is this eats into profit and it might take several units to just pay for this guy to get back to my previous income. I figure I can do about 125-150 units (within 5 miles or eachother and home depot) before I need to hire someone full-time.
I have only been doing this a few years and someone who is much better at this than I am could probably do much more. THE KEY IS A MASTER KEY! I learned this the hard way.