How many apartments to quit W2 work

Question

Michael Blank mentioned that people leave W2 work after owning 3 apartments.

Would you please share how many apartments do you own when you quit W2 work?

I adopt BRRRR method on distress property in Bay Area. It can cash out only about 30%~50% downpayment after refinance. Now, the positive cash flow can cover the minimum cost of living. However, in order to make business grow, I still rely on my W2 if I only partner with my friends and don't use other people money.

Alfath Ahmed · Answer

I own 30 rental units here in my market. I owned 7 units when I left to become an investment real estate broker for out of state investors.

I used to work for a consulting company after graduating from my engineering job at osu. The brrrr method and house-hacking here in the midwest is what helped me scale and recycle my capital. I sell around 100-120+ properties to OOS investors every year.

Henry Lazerow · Answer

Really nearly all your returns come from cash out refi appreciation, trying to retire off highly taxed cashflow rarely works. If we are talking class A at moderate leverage you can even swing it with 10 apartments. If we are talking some midwest cheap areas might need 50 plus and it would be a full time job managing even with managers.

JV Kaufman · Answer

To raise money to continue to grow your business you might consider flipping some houses. It's no game, but if you're astute, you could build quite a large war chest doing those.

Chris Seveney · Answer

This is a loaded question because someone may own ten  $50,000 rentals and one person may own three $500,000 rentals. It is not about the number of doors you have. It is always about trying to replace your income.

I always recommend that you have over one year's worth of your annual compensation in savings and passive income is 150% of your W-2, as there will be expenses and other things that unknowingly come up.

Assuming an 8% return on an investment/equity for $100,000 in passive income, you most likely need between $1,000,000 and $1.2 million in equity. If you assume you have 50% equity in your properties, that would be between $2,000,000 and $2.5 million in assets. These are just roundabout numbers, but it is typically a much bigger number than people think or realize.

Richard F. · Answer

FWIW, the smallest, pure PM companies I worked for, and others in the region, have always needed around 100 units to operate profitably with basic staffing. Actually, if you can get into the wild and wonderful world of HOA/COA management, there are huge economies of scale to dramatically increase profits. There are of course, other elements that do take up significant time depending on the overall health and stability of the project, and Board meetings and preparations can be significant, but still nowhere near as much effort as pure rentals.

G. Brian Davis · Answer

@Zhenyang Jin, it's not really about the number of apartments, but the amount of passive income that reliably covers your expenses and then some. I used to own 15+ rentals and sold them all in 2018 to invest passively. Many people find it difficult to scale active investing to replace a high W2 income without significant capital or time. I'd focus on building strong cash flow and diversifying your income streams beyond just active rentals.

James Flores · Answer

@Alfath Ahmed where are you in the mid west ?

Garret Rumbea · Answer

Im in large multifamily, currently have about 423 units, 114 of which I'm just a co-GP on, and the rest I'm a lead sponsor on with my two partners through our company Westline Equity.

There's a big difference between getting into deals and actually earning meaningful income from them. In my opinion, most people can get into deals by simply raising capital, but unless you can raise millions over and over again, it's not likely that you're going to replace your income if that's all you're doing. But even if you're the lead sponsor on a deal, depending on your role, it's possible but that would mean consistently doing multiple deals year after year.

Hypothetically speaking, at first your acq fees could potentially sustain you, and eventually AM fees could contribute to that too, and then when you exit with the bigger payout. That's a perfect picture. But I'm sure others would agree that if a sponsor is needing acq fees to survive, there could come a time where they're just doing deals (even when the deal or the environment doesn't make sense), which could get you into trouble and leave you belly up like we're seeing a lot these days.

So I'd think long term on this and all of the variables that go with this. There's nothing worse than NEEDING to do a deal just to make ends meet. Not good for your mental sanity and definitely not good for your investors. Just my thoughts.

How many apartments to quit W2 work

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