Path to success to retirement ready income from RE portfolio

9 Replies

Hi All

I am new to using biggerpockets (though I made an account a while back, I never got around to using it). I listen to various real estate podcasts regularly. One thing about this business continues to elude me. Please help me understand.

A little bit about me, I live in the bay area and am working in a tech job. I don't know the path to really retire on real estate income. Bay area markets are so expensive that the net income is really close to nothing. Almost all the podcasts I hear are about people who have "retired" on their real estate income do one/more of the following:

1. BRRRR strategy - meaning they have time and resource to rehab

2. Buy relatively cheaper homes out-of-state on their salaries (or partner's money) and rent them out. They work full time as real estate professional, so they get really huge tax benefits.

In my situation, I have a tech job that I cannot leave because I love the job. I still like the idea of have a retirement-ready income from real estate portfolio. So, what path should I take? One might say partner with other people but its not as easy and requires trust, working style matches that I am open to, but would like an alternate option that I can follow along with my wife (my wife is my partner). I pay a lot of tax and do not get much tax benefits on real estate portfolio due to my W-2 job. I rehabbed my primary home and that was a nightmare to deal with. Rehabbing investment homes from a distance seems a very difficult thing to do. 

I am sure many people on this forum are in my shoes. Is the path to early retirement for W2 working people like me in an expensive market just this:

- Slowly buy out-of-state homes on W2 income and maybe in 15-20 years, amass a portfolio of 20 homes that will have enough retirement income?

I welcome your suggestions.



Updated almost 3 years ago

What i meant was that I have a small portfolio but the net income is really close to nothing due to various taxes, insurance, warranties, repairs, and high mortgages.

Hi @Rohit Aggarwal ,

I'm pretty new to posting on this forum as well but will share what I have learned from the podcasts and experience so far.

One way to make passive income is the path you described above. Real estate can be a great vehicle to generate passive income and wealth, even buying just one SFH every year.

There are also other options to leverage your time and resources more effectively and retire earlier than 15-20 years, depending on your criterion for retirement.

It seems like the faster path to retirement is to treat your real estate investing as a business.  You want that business to be scalable and to have the ability to grow without you getting your hands dirty with every aspect.  For example, leverage a general contractor to help you with rehab estimates, leverage virtual personal assistants to help you field phone calls from leads, build relationships with real estate agents, inspectors, appraisers during your lunch hours and learn as much as you can every day about real estate.

In time I believe you will find some areas that you are interested in and passionate about and you will also realize other areas that you don't want to do yourself (you can outsource those tasks).  

I am in a similar situation to you, I like my job and it demands much of my time.  I invest with multi family syndications and have been fortunate enough to make anywhere from 15-27% per year on these investments.  These investments are completely passive, I give money to an equity group and the person leading these deals does a new apartment build typically (sometimes a rehab) and  then works on getting my money back to me within 3-10 years.  There is always the risk of loss but so far it has worked out well and allowed me to get some good returns and be a passive player in real estate.  

I currently have a mentor who is going to help me get into the SFH market using property managers to help with the day to day. I am going to also try and find a way to BRRR SFH passively and keep my day job to get more knowledge.

Hope something here was helpful and wish you all the best.

Investing in individual properties is work. Either you do it or you pay someone to do it. I invested in houses because they were cheap and close to me and I like doing the work. I have done very well due mainly to appreciation in the Austin area but the stock market has done very well over the same period. Not sure which has done better...leverage boosts returns in an up market. But I have worked quite a bit and still do.
You, in your location with your income and your appreciating personal residence, may be just as well off in REITs....or just a well designed stock portfolio.
You can leverage a small apartment complex or one house at a time, manage your property manager and pay off the real estate off in x years. I will say that no one cares about your house/investment/money as much as you do so there is that risk, especially long distance. Plus property depreciates because it really does depreciate/deteriorate. I keep an eye on mine but tenants treat rentals like rentals. Mine are mostly college educated and all 4 used to own homes. But a rental is a rental.
Or you invest in stocks and with the proceeds buy an apartment complex or an assortment of sfh’s at the time of retirement...or an annuity for that matter. Plenty of ways to get you there, pick a vehicle...manual or automatic transmission?

@Chris Wi @Marian Smith Thank you very much for your replies. The idea of multi family syndications sounds very intriguing particularly when they are brand new or rehabbed. In the end, a rental is a rental for sure, so a turnkey establishment seems to be best suited for my purposes. 

Investing in bay area locally is not easy and will take years to accumulate wealth for a down payment. Do you know of any companies that do such MF/SFH syndications out of state? Or any groups that you could recommend with which you've had good experience (in terms of rehabbing, responsiveness, dedication, management). Or the only best way there is to reach out to a real estate agent, and grow your network by picking up the phone.

@Rohit Aggarwal Welcome to the forum! I'm a fellow Bay Area resident, living in the city and also working in education technology. 

I hear you loud and clear about not wanting to pick up a second job from real estate just so I could eventually retire. I agree with @Chris Wi here as apartment syndications may be a good route to consider as it allows you to focus on what you enjoy doing (your tech job) while also participating in the benefits of owning real estate through a group. That's personally what my business partner and I are focused on after owning a few rentals in SoCal, and trying to do it ourselves out-of-state by putting a 40 unit complex under contract in Omaha. 

In terms of companies that do syndications out-of-state, there are a few that I know of in the Bay Area (but have never invested with). You'll find interesting being in tech as they kind of make investing in syndications accessible for accredited investors. 

@Rohit Aggarwal If you have an interest in investing in syndications there are any number of options, especially if you are an accredited investor.  Non accredited have far fewer options but an increasing number.  One thing you want to decide is if you want cash flowing investments only - that is where there are regular (month or quarterly distributions forexample); or if ok with tying up your funds with delayed payouts, which can have you waiting for 2-3 years or more before you see any returns of earnings or capital for example.

I have invested in a number of syndications, mostly from self-directed retirement funds, and I have documented the ones - from portfolios of single family rentals to medium size multi-families - I have made with a particular company in my BP blog series:  Have I Found the Holy Grail of Passive Real Estate Investing?

You might find it all an interesting read, as I include the changes over a few years now of investing with them.

@Rohit Aggarwal SFR is NOT passive real estate. Turn Key at worst is scam and at best a bad model for building wealth or generating income.

Get more educated. If you want to have passive income in 20 years you'll need to learn more first.

All the best!

@Rohit Aggarwal which is more important to you, equity or cash flow? If equity is your primary goal then the BRRRR is a good way to achieve that assuming that you have the time, skills and knowledge to renovate a house long distance which can be difficult and risky. Equity doesn't give you retirement income however and most investors don't have enough equity in their properties that would let them liquidate their portfolio and live off the equity--especially living in the Bay Area. If you're goal is to create a retirement stream of income, then equity becomes secondary.