Who has become financially independent from Real Estate?

[Jared Vidales]

It would be great if your guys could answer the following questions
- Were you able to quit your day job and live off cash generated from RE?
- If so, what age did you start investing, and how long after investing did you create financial independence.
- Would it be difficult to manage 6-7 rentals while holding your day job?

[Jon Holdman]

There seems to be this idea that by investing in real estate you can have cash to travel to exotic locations with beautiful members of the opposite sex and not really have to work at all. I guess it those slides the gurus show that creates this idea. I think its a myth. Those gurus show those pictures and tell those stories to suck you into buying their courses. "See, buy my course and bootcamp and mentoring program and you can hang out in Aruba with this gorgeous woman!"

The best way to achieve that goal is to have enough money invested in truly passive investments to give you the returns you want. Passive doesn't include any direct real estate investments, IMHO. By real estate investments I mean income producing properties. Not wholesaling, rehabbing, property management, brokering or any other real estate jobs. Those are simply jobs, the exact thing the gurus denigrate while trying to convince you of the easy riches that will come from their courses. Income producing properties will always have an element of management. Either you manage them directly or you pay a manager. You're either managing the tenants or managing your PM. Not sure which is more work, but directly managing residential rentals doesn't scale and eventually you'll have to hire a PM or employees.

Truly passive investments, OTOH, require very little involvement. Bank CDs or treasuries are the seminal passive investment. Unfortunately, at 2%, you would need $5 million to produce $100K in annual income. Dividend paying stocks, corporate bonds, REITs, and similar investments hopefully pay a higher rate, but have more risk. Or, if you want to be more directly in real estate, investing in someone else' business will produce returns in low to mid double digits. You'll have a line of people out the door if you offer long term (more than a few years) real estate financing at 8%. You would only need $1.25 million at 8% to generate that $100K. Good NNN commercial properties can generate those returns, too, provide you tenant doesn't go belly up. You might manage 12% if you directly make hard money loans. But now you've over into the "job" realm because you have to deal with actually making the loans.

So, in reality most of "real estate investing" is really a self employees job. I'm sure there are numerous people here who fall into that category.

I think managing 6-8 rental properties with a full time job is possible. You're going to be dealing with a turnover every couple of months. You'll have minor items crop up that require you to deal with them on short notice. You'll occasionally have an evening interrupted. But I think managing one unit consumes about 12 hours per year, provided you don't have a major disaster (e.g., nasty eviction.) A big chunk of that is associated with the turnover. So, 6-8 properties means 72-96 hours a year, which is roughly 6-8 hours a month. Some months you'll do nothing but deal with collecting rent. Some months you'll spend all 8 of those hours dealing with a turnover. Once a year you have to get your taxes together.