Five year plan for Rental Passive Income with $50k/year savings

[Ryan H.]

Hi everyone, I’m putting together a five year plan of investing in rental properties for passive income and would love to get some feedback.

I live and own businesses overseas. I’ll be saving $4,100 per month, which is approximately $50,000 per year after taxes.

I don’t own any property, so I’m starting from scratch. Since I live overseas, I’m not interested in fix or flips. I’m focused on turnkey properties, either single family or small multi family.

So, let’s assume an investment rate of $50,000 per year, and all rental income goes right back into buying more properties.

What is a conservative plan with low maintenance rental properties each year and what income can I realistically achieve after five years?

I’ve been thinking it over for some time now and I want to put together a detailed plan to follow.

I would love to hear your plans and thoughts.

Thanks everyone!

[James Wise]

Originally posted by @Ryan H.:

Hi everyone, I’m putting together a five year plan of investing in rental properties for passive income and would love to get some feedback.

I live and own businesses overseas. I’ll be saving $4,100 per month, which is approximately $50,000 per year after taxes.

I don’t own any property, so I’m starting from scratch. Since I live overseas, I’m not interested in fix or flips. I’m focused on turnkey properties, either single family or small multi family.

So, let’s assume an investment rate of $50,000 per year, and all rental income goes right back into buying more properties.

What is a conservative plan with low maintenance rental properties each year and what income can I realistically achieve after five years?

I’ve been thinking it over for some time now and I want to put together a detailed plan to follow.

I would love to hear your plans and thoughts.

Thanks everyone!

 You'll probably spend roughly half of your scheduled rents on maintaining the properties. So it's fair to assume that that if a property rents for $1,000/mo you'll probably earn an average $6,000 a year on that property.

Since you are investing out of state you'll probably want to look at the turnkey markets. In no particular order I have listed some of the most popular markets for out of state investors

• Cleveland, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.