Becoming Financially Free with Rental Investing
Member since 2023 · 11 posts · 5 votes
Hi All,
One of my biggest goals in life is to achieve financial independence and escape the 9-5 grind. For those who have accomplished this, how long did it take you to reach that point in your life through Real Estate Rental investing? Also, how did you know it was time to quit? Was it the sufficient cash flow to live with for you to sustain a better lifestyle?
Each person will have taken a different path. Recommend you build a spreadsheet and put together a plan to scale. This will help you see hurdles ahead of time and develop a plan. And change course as needed.
Example: Change numbers as needed. $200 cash flow per month after everything. Your take home is $80,000. $80,000/$200/12 months= 33 doors.
Let’s say each door is $150,000. At 33 doors that is $5mm. I’m going to use a weighted 10% for collateral or downpayment= $500,000 you need. Some will cash you out in and other down may be leveraging your equity as you grow.
Example if you cash flow after everything $200 per door. How many doors do you need to cover your W2 job? How will you get that capital? At some stage you will need a team. This means you need more units or you have to do.
Each person will have taken a different path. Recommend you build a spreadsheet and put together a plan to scale. This will help you see hurdles ahead of time and develop a plan. And change course as needed.
Example: Change numbers as needed. $200 cash flow per month after everything. Your take home is $80,000. $80,000/$200/12 months= 33 doors.
Let’s say each door is $150,000. At 33 doors that is $5mm. I’m going to use a weighted 10% for collateral or downpayment= $500,000 you need. Some will cash you out in and other down may be leveraging your equity as you grow.
Example if you cash flow after everything $200 per door. How many doors do you need to cover your W2 job? How will you get that capital? At some stage you will need a team. This means you need more units or you have to do.
Juggling real estate and a 9-5 will delay your financial freedom goal. Going all in on real estate will act as a catalyst to it. Either way, this is a 10 year + plan.
I started in real estate investing right out of college at 23 years old in 2003. I mostly flipped and wholesaled at first, but a 50:50 business partner and I eventually started accumulating rental properties. We also ran into the 2008-2009 Great Recession!
My flexibility, control over my schedule, and income increased continuously over time. But in 2017 I finally took a plunge living only off rental income. My family and I moved to Cuenca, Ecuador for a year for a nice little "mini-retirement." We had 33 properties together, many of which are small multifamily apartments.
I tell more about my story and dozens of other regular rental investors (I call them small and mighty) in my new BiggerPockets book The Small and Mighty Real Estate Investor.
As for doing your own planning, I find it useful to work backwards from a rough goal of how many properties you need. For example, if you need $120,000/yr to cover all expenses and a typical rental house rents for $1,800 and the net operating income is $1,000, you'd need 10 of those houses if they were all paid off (no debt). 10 x $1,000 = $10,000/mo or $120,000 / year.
There are a lot of paths to get to those 10 free and clear properties, and it may take 10-15 years normally. But that can be a sort of compass for you as a reminder that you don't need hundreds or thousands of units to become financially free!
Hope that helps!
Hi All,
One of my biggest goals in life is to achieve financial independence and escape the 9-5 grind. For those who have accomplished this, how long did it take you to reach that point in your life through Real Estate Rental investing? Also, how did you know it was time to quit? Was it the sufficient cash flow to live with for you to sustain a better lifestyle?
I probably could have retired 5 years after purchasing my first investment property but I retired just a little before 10 years after.
I want to point out that I believe the RE investing market is more challenging than when I purchased my first investment property. Even before the rate increase the LTR cash flow was way lower. The rate increase further reduced cash flow for high LTV purchases. The appreciation was outstanding for my 1st 10 years, last year the appreciation was flat. So scenario, purchased a year ago likely with LTR negative cash flow and had a flat appreciation year (nationally, various markets did better and worse). Not the type of return desired by a non-passive investment like residential RE. This implies to achieve desired return may mean not traditional rental (rental other than traditional LTR). STRs are saturated in many historically good STR markets and many jurisdictions are banning or heavily regulating STRs. Rent by room is labor intensive and hard to scale. Finding PM that will do rent by room can be a challenge and if you find one, their fee is significantly above LTR PM rates (and it should be as rent by room is a lot more work than traditional LTR).
Note RE does not always have to be the best investment option available. Are better options available? Recognize residential RE is not passive. 10% return on passive investment is superior to 10% return on a more active investment such as residential RE.
good luck
You might not find the answer you are looking for on here since this is a personal question that relates more to your personal goals as opposed to a set blue metric that others here can provide. Others many be able to tell you what metrics they used or how long it took them as individuals but at the end of the day, it still comes down to what you want to achieve. Some people stop once their consistent net cash flow is able to meet their living expenses and they are content with a leisure life from that point. For some, this can be 100k; others can live off 40k. Still others are driven by consistently scaling and improving their own quality of life as well as leaving a legacy for their family to have an easier life as well. My suggestion would be to sit down and determine what your exact end goal would be and what you want to achieve with real estate. Be sure to include exact numbers within your goals. Once you have those numbers, then you can determine how long you would need to achieve those goals.