How many units does it take to replace 135k annual salary job

Question

Looking for some serious guidance. I have never considered real estate investing until a family member got into real estate. I have the real estate BUG now !!! I am not starting from scratch but can't help but wonder if I can replace my income. I own the building I operate a business out of (owe 110K value275K) and a home ( owe 300k value390K). I have potential for a strong team. My wife is all-in. Why not test the waters or am I missing something. No plans on quitting job for at least 4-5 years. It will be 3-4 weeks before I go back to work. I'm reading, (joined BP today) I have viewed hundreds of hours of You Tube how too's and read several books BP has recommended. Any way i'm ready to get serious and looking for your like-minded opinions!!! Fire Away :) Whats it going to take and how would you start if you were me???

Jim Pellerin · Answer

@Keith Blackmon I think you are asking the wrong question. You need a short term income strategy and a longer-term growth strategy. The evolution strategy goes something like this:

Step 1. Part-time Investor

Step 2. Active Investor

Step 3. Passive investor

Pat L. · Answer

My wife was the one who told me one morning I didn't need to go to work anymore based on the fact our passive income more than eclipsed my 6 figure AFTER TAX W-2 (plus expense account). Eclipsing your professional income will obviously be much different, but the personal time & sanity it affords is beyond anything I know. It only took 10 years of heavy accumulation for us to call it quits & that was in '98. Have NOT had a mortgage or any debt since.

One of my wife's colleagues at the time intimated that his REI was making him more money than his medical practice & our veterinarian spends more time talking to me about his REI than conducting the dogs medical. But he is into NNN commercial with several others, with an 8% CoC return, (they bought small shuttered bank branches). Then again our retired neurosurgeon friend (an avid equestrian) gave up on REI & now makes all her money traveling the world & then importing horse sperm for breeding !!! We have always pushed for >12% CoC & quickly abandoned the exhausting, mind numbing idiosyncrasies of just being residential Landlords, except for maybe 8 properties our kids still hold, for their experience.

There are so many ways & niches to accumulate significant REI wealth & having the foresight to tax defer the loading/then implementing of 401(k)-solo's is an excellent beginning. Sitting here this AM my wife just informed me that ALL our NNN mixed use commercials have direct deposited their May 2020 rents.

Good luck.

Carmichael Lewis · Answer

@KAB, it depends. My target number is 100k. We are in the same realm. I identified how much money I needed to generate per month, which is 10k. All my properties has to net at least $500. Start with the end in mind. You have your target amount, now decide how many properties you need to amount to 135k. You have equity in your building use that to get started. Best of luck!

Lane Kawaoka · Answer

I started with turnkey rentals (bought 11 of them) then went as a passive investor into syndications.

Basit Siddiqi · Answer

KAB$135,000 salary has federal, state, social security, medicare taxes taken out.$135,000 can potentially net you around $70,000 if you are single and in a high state tax.The great thing about real estate is that cash flow from real estate results in no social security/medicare taxes taken out. Furthermore, there potentially could be no income taxes taken out if depreciation covers all the cash-flow.

Kenneth Garrett · Answer

When your replacing your income there are different methods.  One method is to replace it with rentals.  If you had 12 SFH and were paid for they would probably cash flow $1000 each for $12,000.  That’s $144,000.  If your retirement age you can add social security benefits which would probably be 3K.  That’s another $36,000.  If your not at retirement age then more rental units is the way to go.  Whether you investment in apartments, SFH or commercial rentals there is a tremendous advantage with depreciation, property tax deduction, appreciation, etc.  SFH are easiest for exit strategy if you want to sell one.  It just takes time to accumulate.  Apartments will speed up your process, but they are more work from a property management perspective.  Check with your CPA as there are other benefits as well.  You’ll need to take everything into consideration.

Isaac S. · Answer

11.2 ?!

Lynnette E. · Answer

Because of your job, I am assuming you likely have an IRA.  You can use the IRA funds to invest.  There are rules to follow, but search on this site and you can see how others do it and the benefits/pitfalls.

To answer your question, it really depends on how you invest.  Many people put as little down as possible to get as many properties as possible.  Often they end up with a 'profit' each month of about $100 per door, which for single family houses is per house.  If that it your strategy, then you are looking at 112 houses.  That would be a lot of management.

If you buy the houses in cash, your income would be much higher, but so is your initial cost.  This is how I invest.  Say you net about $700 a month on a modest house, you would only need 16 houses to reach $135k.

You would also need to look at the property management.  If you do it yourself you save about 18% of the rent between maintenance oversight costs, turnover clean up and oversight, new lease, renewal lease and monthly fees they charge.

No one will say you need XX houses to earn YYY because it really varies by the rental market and if you have a mortgage to pay out of the rent or if the house is owned clear.

Just from the examples I used the range was 16 to 112.

Charles D Cruz · Answer

How many leveraged units? Free and clear? NYC units? Units in Tennessee?

40 units-500 units

Easier than unit number, assume 7-12% Cash on cash on initial investment. Most properties take 3-5years to start cash flowing really good. This is assuming you leverage.

This is a great time to learn though. If you can survive a down turn. Good economy is cakewalk.

Kab Blackmon · Answer

I did not want my name listed could you please just use my initials KAB. I am a Dentist and dont want patients speculating how much longer til I retire I thing it would negatively impact my business.  Thanks in advance, Keith B.

How many units does it take to replace 135k annual salary job

Most Popular Reply