Passive income generation and retirement ?

Question

I am a former home builder (thanks 2007- 2008) married to an active real estate agent.  My wife only sells new homes.  During the down turn I took a job with a large insurance company as a large loss (fire, tornado, hurricane, etc) residential property adjuster.  I am always travelling and that is getting pretty tiring.  The job is nice and pays well but I am an entrepreneur at heart.

We have been discussing getting back into the real estate game as investors this go-round but I am still a little gun shy about getting too leveraged. We have already lost EVERYTHING once.  We did retain our credit for what that's worth.

I am interested in generating a passive income to carry us into our old age.  I was thinking that a $100k/yr income would be sufficient to allow for spending and saving.  Based on what I am reading it seems that to generate a personal income of $100k we would need to be bringing in near $200k in rent.  At a rent of $1000/month (way outside the range of mobile homes that I was originally considering) we would need 200 properties.  That seems crazy.  There must be something I'm not thinking about.

This passive income is a future goal and I understand that it will take many years to achieve.  I have no immediate plans of leaving my job but would like to perhaps change jobs in the next few years to something that will keep me home a little more and allow more focus on REI.  In order to do that I will need to generate a secondary income to off set the likely pay decrease.  Who knows what will happen by then though, maybe we find that we have a knack for REI and go full time.  It seems that flipping would have to come into play then just to generate a decent yearly income.

Any advice or insight would be appreciated.

Sorry for the long first post.

Jesse Waters · Answer

@Tim Crumleywelcome to BP.  Great to see others on here from SC.

So, for me, passive income is always to goal.  When I leave a closing I like to make money right out of the gate.  I want the property to cash flow immediately, that is a pretty realistic goal when I purchase an apartment building with tenants already in place.

In REI there is no "right way" or secret formula for success.  Lots of folks started out wholesaling or doing rehabs to generate cash for down payments on rentals.  And with your background in construction, rehabs might be a good way for you to get going.

The only wrong way to invest is to keep doing deals that you loose money on.

When I started out I was ready to take on the world, quit my job & live on easy street....  Then the realities that you mentioned hit me.  If I want $X/year, then I need Y properties cash flowing with an average of Z.... and I got discouraged.

This is not a get rich overnight deal, it is for the long term.  As you get going, you will develop your own strategy, make contacts & accelerate your investing.

We started with single family properties and moved to multi... should have started with multi, but that is hindsight.

I am getting to a point in my investing where, with out really doing anything, cash flow has increased from where we started.  My escrow payments have gone down slightly, we have found a few expenses to scale back on and rents have gone up.  We are also able to start consider doing things like cash out re-fi's to use a down payments of future properties & are starting to realize returns from side investments that we have made, like tax liens, and will roll those into future down payments.

Sorry for the long reply, but I hope that helps.  Feel free to PM me if I can be of further help.