Anyone out there achieve $10K/mo passive income after tax?
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
Hi BP,
I know this may seem like an odd question and one I don't expect many people to answer for privacy concerns and not wanting people knowing your personal finances.
I would like to know if there are any people out there who have exceeded what my personal goal is: ($10k/mo. passive income from rentals). This is the smallest my goal will be and it will only grow as I get older but it would be cool to connect with people who have done this or are close to it. If speaking about it on a public forum is too revealing, feel free to message me.
Disclaimer: I am only 23 and I am looking to reach this number by my 30th birthday. I can no longer think and talk, I must take action. I hope to read some inspiring stories! Thanks BP!
Investors that believe paying off a property enhances the bottom line are missing the true value of equity. Every income property has two separate income streams one being the property the other the equity. When you pay down or pay off a property the increased cash flow is not from the property but rather the equity. That return can be earned anywhere that cash is invested and does not need to be in a labour intensive vehicle like rentals.
If you have 10 properties each worth $250,000 all paid off you have 2.5M in equity. @5% return it would generate $10416/month. Most likely that would be the total positive cash flow the property would generate. Therefor the property itself is generating 0 or at best very little.
In that case there is no financial advantage to actually owning the property and it would be far easier to simply invest in something truly passive.
This is the reason leverage is the true value of owning income investment properties. Paying cash steals cash flow from the property and in real terms is only saving the prevailing mortgage rate which today is negligible. Your equity is being undervalued, wasted, dead and buried.
My money is worth far more than the meager returns it would earn buried in a rental property but to each their own.
Bumping this to see if it's happened.
@Craig Moore I share your goal. I am not there yet, but when I have 10 houses clearing $1000 per month, then I can reach my goal. My goal assumes the properties are paid off. I am on my way and I can assure you it is very attainable.
@Craig Moore I share your goal. I am not there yet, but when I have 10 houses clearing $1000 per month, then I can reach my goal. My goal assumes the properties are paid off. I am on my way and I can assure you it is very attainable.
Do you prefer to own them outright? What are the drawbacks of cash flowing $1k/mo. even if you still owe on them? How close are you if you don't mind me asking?
@Craig Moore I share your goal. I am not there yet, but when I have 10 houses clearing $1000 per month, then I can reach my goal. My goal assumes the properties are paid off. I am on my way and I can assure you it is very attainable.
Do you prefer to own them outright? What are the drawbacks of cash flowing $1k/mo. even if you still owe on them? How close are you if you don't mind me asking?
I would like to own them outright, but I don't right now. I know many people would argue to use leverage to get more doors, but my goal is to make the most money possible with the least effort. More doors is more effort. I am probably 10 years away from my goal.
@Craig Moore I share your goal. I am not there yet, but when I have 10 houses clearing $1000 per month, then I can reach my goal. My goal assumes the properties are paid off. I am on my way and I can assure you it is very attainable.
Do you prefer to own them outright? What are the drawbacks of cash flowing $1k/mo. even if you still owe on them? How close are you if you don't mind me asking?
I would like to own them outright, but I don't right now. I know many people would argue to use leverage to get more doors, but my goal is to make the most money possible with the least effort. More doors is more effort. I am probably 10 years away from my goal.
I have to say I agree with them. I don't care to own them. Besides, owning more doors leads to a quicker half life. Am I right? Let's say you get more doors, and those cash flow. Wouldn't it be easier to slowly pay off the first several doors or so?
It is doable and attainable if you work at it one step at a time.....best wishes.
I am also 23 and my goal is 60k a year. I am only 6 years away from hitting my goal. I believe in leverage but I believe in paying off units. I don't want a bunch of doors because as mentioned above, more doors is more work and I want to make a more passive income, I know it'll never be totally passive but the least headaches as possible.
I share your concern about having "too many doors". I think it's easier if its a 10 unit Multi than 10x SFH. My strategy is to keep folding them into each other while maintaining 5-10 physical properties. Sell off the earlier SFH or duplex and get 4-6 units. Then fold those into 10-12, etc. You can even start your own management company to take care of them when they reach a reasonable size. All while making some extra money as PM for other third parties which would help with keeping things "passive"
good luck!
I am also 23 and my goal is 60k a year. I am only 6 years away from hitting my goal. I believe in leverage but I believe in paying off units. I don't want a bunch of doors because as mentioned above, more doors is more work and I want to make a more passive income, I know it'll never be totally passive but the least headaches as possible.
Here's my idea. The more doors you have = the easier it is to pay off the previously existing doors. Having more cash flow does increase your doors (hopefully), but it also increases your ability to pay off the doors you had before. If you only own 5 houses now, and leverage to buy 2-3 more over the course of however long, the additional income from those 2-3 houses will make it easier to pay off several of the first 5. And once the first 5 are paid off completely, then you can pay off the 2-3. At least that's what my plan is.
Investors that believe paying off a property enhances the bottom line are missing the true value of equity. Every income property has two separate income streams one being the property the other the equity. When you pay down or pay off a property the increased cash flow is not from the property but rather the equity. That return can be earned anywhere that cash is invested and does not need to be in a labour intensive vehicle like rentals.
If you have 10 properties each worth $250,000 all paid off you have 2.5M in equity. @5% return it would generate $10416/month. Most likely that would be the total positive cash flow the property would generate. Therefor the property itself is generating 0 or at best very little.
In that case there is no financial advantage to actually owning the property and it would be far easier to simply invest in something truly passive.
This is the reason leverage is the true value of owning income investment properties. Paying cash steals cash flow from the property and in real terms is only saving the prevailing mortgage rate which today is negligible. Your equity is being undervalued, wasted, dead and buried.
My money is worth far more than the meager returns it would earn buried in a rental property but to each their own.
Hi Craig,
10k is a lot of income AFTER taxes AND operating expenses. This will take time, a lot of work but can be obtained if you really put your mind to it. You will need to make sacrifices and be very diligent and savvy.
I got started at your age. I bought my first property which was a 4 family @ age 22. The rest of my properties are all smaller (combination on 2 families, single families and more recently condos)
I am 43 now and have a portfolio of properties that throw off nice cash flow every month. I self manage and I am still in the accumulating phase and still am using leverage to my advantage. I also work full time so it can definitely be challenging! I only have a couple properties paid off. In this low rate environment you should take advantage of leverage and utilize it the best you can. These interest rates can really boost your net return.
Good luck!!
Chris
I don't understand why people are hesitant to owning more doors. If what you want is passive income, then why are you managing the properties at all?...that sounds like work! Screening tenants, renewing leases, answering phone calls, evicting clients ect is all something that I wouldn't want to do except when first starting out with those original few doors to save money.
Leverage is the biggest reason why real estate is so profitable. You can't go ask the bank to loan you 80% of 100k because you want to invest it in the stock market. Why would you want to remove or reduce your biggest advantage?
If you start having more doors than you want to manage on your own, then hire someone and start a property management company. Before you know it you have truly passive RE income, and also a successful growing management team that can easily take on additional clients besides those that you own.
Hi Ben,
Sometimes it's not as easy to turn things over to a management Co. I honestly feel that NO ONE will look after my properties as well as I do, or will have my best interests as much as I do. Sometimes it's the small things that matter I also like having a pulse on my tenants and property as I can foresee things before they happen . This is just my personal opinion and I am not saying a management CO doesn't add value as I am sure it does. But for me I am not there yet and still trying to maximize my cash flow while working full time so I can hopefully retire early and at that point when the bulk of my properties are paid off or down I can enlist the services of a management Co as I will be cash flowing substantially more then I am now and can afford to pay 7,8, or 9% of gross rental income to a management Co so that I can enjoy retirement.
Sure it's hard work sometimes and sometimes there are days when I curse and yell but at this point I feel it is important to be on top of things and work harder now so that I can take it easy later.. I am 43 now and hope to be able to quit my day job at ~ 55
Just my opinion...
thx,
Chris
I don't understand why people are hesitant to owning more doors. If what you want is passive income, then why are you managing the properties at all?...that sounds like work! Screening tenants, renewing leases, answering phone calls, evicting clients ect is all something that I wouldn't want to do except when first starting out with those original few doors to save money.
Leverage is the biggest reason why real estate is so profitable. You can't go ask the bank to loan you 80% of 100k because you want to invest it in the stock market. Why would you want to remove or reduce your biggest advantage?
If you start having more doors than you want to manage on your own, then hire someone and start a property management company. Before you know it you have truly passive RE income, and also a successful growing management team that can easily take on additional clients besides those that you own.
How many doors do you have? Have you found that using property managers makes it totally passive?
Investors that believe paying off a property enhances the bottom line are missing the true value of equity. Every income property has two separate income streams one being the property the other the equity. When you pay down or pay off a property the increased cash flow is not from the property but rather the equity. That return can be earned anywhere that cash is invested and does not need to be in a labour intensive vehicle like rentals.
If you have 10 properties each worth $250,000 all paid off you have 2.5M in equity. @5% return it would generate $10416/month. Most likely that would be the total positive cash flow the property would generate. Therefor the property itself is generating 0 or at best very little.
In that case there is no financial advantage to actually owning the property and it would be far easier to simply invest in something truly passive.
This is the reason leverage is the true value of owning income investment properties. Paying cash steals cash flow from the property and in real terms is only saving the prevailing mortgage rate which today is negligible. Your equity is being undervalued, wasted, dead and buried.
My money is worth far more than the meager returns it would earn buried in a rental property but to each their own.
Your example of $250,000 properties only generating 5% means you have a poorly performing investment. Regardless of equity, you should be getting higher returns on $2,500,000 worth of property. Lets say your rents are a 1% of property value, then each should be grossing $2500 per month or $25,000 per month for all ten. Either you have high expenses or low rents on your properties.
5% is very low but I use it because so many investors respond with the comment that "you can not generate more than that in any guaranteed investment. I would never accept a return of 5% myself and easily get 10-20%. The reality is equity in a property is only saving the cost of the prevailing mortgage interest rate so that is the real return difference between leverage and equity. If they could invest even with a 10% return, with mortgage rates at 3%, their equity is losing 7% return sitting dead in a rental property.
I was just making the point that it is illogical for a investor to settle for the poor returns they get with cash as equity.
I bought my 1st 2 family in Dec 2013 and a couple of single families afterwards. I live in my 2 family, but after I move on from here into a single family home, I should generate $700+ in cash-flow monthly after all expenses including vacancy and management are taken into consideration. The 2 family is in the Bronx, NY. The 2 single family rentals generate a minimum of $250 cash flow each. That would put me at $1200/monthly. I also just purchased what would be my first flip. The goal for me will be to flip a few and then buy larger multi unit rental properties. I also take percentages of my commissions to put towards what will be our future real estate investment properties. If you focus, and start working on building your portfolio you should be able to get there. I've got away to go, but I've gotten more serious and have put a more aggressive plan together focusing on larger properties. I started at 31, I'm hoping to be at 15k monthly by 40 yrs old. Good luck!
@Craig Moore I am not there yet, but on that path. Assuming similar numbers to what I get now, and that they are all leveraged, I need 30 properties or so to get that kind of cash flow.
Managing 30 properties is certainly not passive. At some point I will probably hire a property manager (which would mean I would need even more properties to reach the income goal), or do what others have suggested and start paying off mortgages so I would only need to have 10-15 properties to meet the cash flow goal.
If you already envision yourself you'll hit the goals you've set, chances are, you are going to hit them. The best suggestion I can provide is always to make sure the math is correct, by your standards.
Hi BP,
I know this may seem like an odd question and one I don't expect many people to answer for privacy concerns and not wanting people knowing your personal finances.
I would like to know if there are any people out there who have exceeded what my personal goal is: ($10k/mo. passive income from rentals). This is the smallest my goal will be and it will only grow as I get older but it would be cool to connect with people who have done this or are close to it. If speaking about it on a public forum is too revealing, feel free to message me.
Disclaimer: I am only 23 and I am looking to reach this number by my 30th birthday. I can no longer think and talk, I must take action. I hope to read some inspiring stories! Thanks BP!
I started about 5 years ago and I am up to about 7K per month (with great underlying appreciation as well). For me this is probably only going to be a part time thing so I would be happy to get to 20K since I will likely have some other sources of income. I recently started investing out of state to reach my goal, because where I am at prices are way to high in the SFR arena to make sense, and I was getting a little sytmied by it all (had not bought anything new in a couple of years until this June).
My concern is that it has been almost too easy so far to make money and it may start getting much harder as price and rental appreciation rates begin to cool. But I guess everything is a challenge to overcome. Sounds as if you are plenty young enough to get where you are going if you remain focused and are able to push yourself during periods of slow progress which everyone runs into sooner or later.
Hi BP,
I know this may seem like an odd question and one I don't expect many people to answer for privacy concerns and not wanting people knowing your personal finances.
I would like to know if there are any people out there who have exceeded what my personal goal is: ($10k/mo. passive income from rentals). This is the smallest my goal will be and it will only grow as I get older but it would be cool to connect with people who have done this or are close to it. If speaking about it on a public forum is too revealing, feel free to message me.
Disclaimer: I am only 23 and I am looking to reach this number by my 30th birthday. I can no longer think and talk, I must take action. I hope to read some inspiring stories! Thanks BP!
I started about 5 years ago and I am up to about 7K per month (with great underlying appreciation as well). For me this is probably only going to be a part time thing so I would be happy to get to 20K since I will likely have some other sources of income. I recently started investing out of state to reach my goal, because where I am at prices are way to high in the SFR arena to make sense, and I was getting a little sytmied by it all (had not bought anything new in a couple of years until this June).
My concern is that it has been almost too easy so far to make money and it may start getting much harder as price and rental appreciation rates begin to cool. But I guess everything is a challenge to overcome. Sounds as if you are plenty young enough to get where you are going if you remain focused and are able to push yourself during periods of slow progress which everyone runs into sooner or later.
7k/mo after 5 yrs is awesome progress. You're saying you only want this to be part-time whilst bringing in $20k? That would be cool to achieve/see someone achieve for sure.