Like many other real estate investor, I seek to buy and hold real estate, and enjoy the cash flow and any possible appreciation. However, since my target properties are lower end properties that often requires rehab before I can attract the best tenants at full market rent, I find myself doing a lot of work. The work consists of not just hiring contractors to fix up the properties, but also of a property manager: marketing/vetting for great tenants, repairs, paperwork and tax preparation for my LLC (or researching if I should even use an LLC)..etc. It's a full-blown business - it's not passive income anymore in my opinion. It's work, and it's work on top of my already full-time job. I'm in awe that some own and manage 100+ units. My question to all of you veterans in this business: what is your income range, and how many hours/week do you work for this income? If you could start your response with the following 2 pieces of info, it would help me (and a lot of others who think real estate is easy BIG and FAST money after going through their guru-course) : 1) Annual revenue (pre-tax) of under $100k, $100k-$400k, over $400k 2) # of hours/week spent for this income From my estimates, I would need to own 50+ single family homes, all paid for free and clear, and all rented before I can even start sipping anything on the beach and not worry about finding a full time job to support me in addition to rental income. Although it's possible to own 50 units fairly fast, to own them out-right with no debt would take many many many years. Or am I just a failed guru-course student? ...and the problem with taking many years to do this - 10 to 30yrs in my calculation - is that many low-end properties are already 100+ years old. How long can a home possibly last? How much left is left on these homes, where I can pass them onto my kids as an "asset" instead of a crumbling pile of 2x4s?

Sorry, financial independence at the 100-200k level in 2-5 years through real estate is an absurd assumption unless you are starting with a very large sum of money. Real estate is a a great way to generate real wealth but it is not a get rich quick scheme. IMO your timeline should be at least 10-15 years. I started investing 13 years ago and I am just now getting to the point that the income is becoming significant enough that my friends have stopped asking me why I was even bothering with this. That said, there are A LOT of ways to streamline your systems and a lot of ways to maximize your efficiency. For now I'd suggest you work on figuring out what your strengths and weaknesses in this business are and find a way to hire help in the areas that are your weakness (for me, that was property management and accounting).

Like that Sonic commercial, I read the front and back of this thread. First thought, unrealistic expectations at 100K a month, with low valued SFDs you'd probably need to own them all. A bigger picture, specializing in low value properties have other issues that haven't been touched on, probably. Obviously the property isn't in the economic growth area, I doubt new homes are popping up across the street. What is rentable today in some acceptable neighborhood will usually in time become less desirable. Rents stagnate in mature neighborhoods (NBHs). While you can put lipstick on, change carpet and paint color, floor plans become dated, boring, less functional, if you begin in a 75 year old property, you'll have a 100+ year old property in an old section by the time you get it paid off. Inflation may take rents up, but only to a point in relation to the cost of living and incomes increasing, particularly incomes rising in lower wage jobs. Another issue with matured and outdated NBHs, the tax base for that area isn't at the most economical use of land within that community. City planners look at natural attrition rates of inventory, areas for rehabilitation, redevelopment and rezoning. Infrastructure becomes dated too, sewers and storm water must be maintained, water lines must be maintained and streets resurfaced. You expect a return on your expenses of changing out cabinets and countertops, municipalities must expect the same thing, the tax base must justify serving that area at a break even point. Costs of your maintenance will go up and so does the city's expenses. There is then an economic pressure on a city to revitalize areas, low end properties become identified and may be classified as blighted areas. Most here in big cities will think of a blighted area being a slum area, abandoned buildings maybe with gang activity, but that is not necessarily a "blighted area" as the definition is more to a low economic potential or performance of an area as well as conditions. I could go on to tax credits to improve these areas, but while one owner may benefit, it isn't the best approach to revitalization, condemnation is. In that case you'll be getting the FMV arrived at based on depreciating rent levels and market value, you may not get much more than you paid for it 20 years ago. On the government side, I purchased properties having the powers of condemnation and eminent domain. You'll also find that building reg types, fire marshals and other government officials can apply "selective enforcement" just as a cop doesn't give a speeding ticket to the old guy in the truck following the young blonde in the red sports car ahead of him who does get a ticket. Older properties will be given more scrutiny by officials as well as general areas. At some point "slum lords" will be under the microspore, the owner may not be aware of being identified but, take my word for it, you're on the "list". This leads to more time and expense in management, attention to ordinance compliance and other matters. All this effects the long term hold plans of such properties. You need to take a close look at the maturing nature of NBHs, direction of growth, past zoning changes is an indication of what may be on the City Planner's top secret mapping of future city growth. (It really is rather top secret, because public knowledge will influence property prices artificially and is not in the public's best interest). This is why owners need to pay attention to economic indicators, growth and maturity stages and the bigger picture when selecting an area, you should be looking at the area before you look at a specific property. Next, look at the tax benefits of holding a low income property, they will be less but, the depreciation schedule will be behind actual and physical depreciation. You'll also see that the most beneficial holding period falls around 7 to 12 years after that the amounts to depreciate begin to decrease, factor in inflation after taxes and you'll receive less of a benefit. So, the idea of holding a property for 30 years to a payoff, while is fine for retirement income, isn't the best strategy business wise for single family dwellings. Turning your inventory becomes necessary if you are to keep up, just to stay in the same mode of leasing middle income or upper-low end properties. If you generally drive a 3 to 7 year old car as the most economical approach for you while not feeling like you need to wear a mask to retain your pride, you need to but a 3 year old car and trade it in 4 years for another 3 year old car. Same thing in real estate turning your inventory, but it's not so much of a prideful concern. Most here already know the difficulties of financing low valued properties, if you end up in a stagnate property, selling will be more difficult as well. You or your borrower may get hit with higher interest rates, higher interest rates at a fixed payment amount means less in the loan value that translates to a lower price. If financing can even be obtained in the future. You'll make more by improving a property, leasing over it's economic life, selling taking the profit and moving on than sitting on a property for 25, 40 years or longer......most generally. To beat that, you're knocking on the door of speculation more than being a landlord. So, when you look at playing with your calculator trying to figure out where your break even point is with low valued properties you need to adjust your expectations to reflect reality, will these types of factors or some event effect or influence the viability of your plan? Sorry it's so long! :)

Wow this took awhile to get through. I am small time compared to most here but here is my story from growth and income. @Bao Nguyen I started investing in real estate as a means to make money, not because I moved out of my house, 20+ years ago. Me and another guy scraped up $1,200 and bought a property from a guy for the outstanding tax liens on it. My partner and I rented it out for many years. There was a fair number of cheap houses around but we were too broke to afford a down payment. We acquired a property with 3 houses. The biggest fancy one was like a small mansion that looked like it would collapse. We fixed up the 2 small houses on each side and rented them. Occasionally we would sale a property to a renter and get an infusion of cash to help buy another property. Once in awhile we would put a thousand or 2 in from our savings to help buy another property. My partner was running a real estate office under a local broker and would make commission from the purchase and sale. He branched out into a small contracting business, and did most of the repair and fix up of properties and made a little money doing that as well. We never took any money out of the business, it was intended to build and grow and eventually provide either income or a retirement supplement. We both had full time jobs, and it was hobby we both worked at. A fair bit of work was done by us on the properties. My partner had been a contractor who went bust when the economy crashed. After about 12 years he went back into contracting and moved to a more active area. I took over running the business mostly by myself. After another 7 years of that I bought my partner out by selling a few properties and refinancing other properties. So properties that had 50% equity were refinanced back to 80% equity with longer loans. There was a little cash left over after the sales and refinances. For the last 3 years I poured all of the extra money and about $40K of my own money into acquiring more houses and added 7 last year. We used mostly 15 year loans but one or two were 20 year loans. We would get a property paid down and refinance it for the money to put down on another property. We normally showed a loss of a few thousand dollars a year, sometimes when we sold a property we would have a profit. I now have about 18 houses and about 12 apartments. So for your comparison I have a full time job. Luckily for now I am the boss. I spend about 15 to 20 hours a week during the summer and maybe 10 to 15 hours in the winter working with rental stuff. I do a lot of work myself. My wife spends about 15 to 20 hours a week taking payments, paying bills, making deposits, and doing the accounting. My gross income from rentals was about $120K last year, this year will be a fair bit more. All extra money is used to fix up properties or buy new properties. This year I only added one property. Due to a local economy bust I am concentrating on fixing up big ticket items. Properties were bought distressed and fixed up to rent. I hope to pay down mortgages aggressively the next 2 years and when I see the local economy begin to recover use the accumulated equity to buy more properties at a deep discount. I then plan to retire. I have saved aggressively the last 8 years from my salary and put it in a small portfolio of stocks. I would say that I would retire in 5 more years if I could figure out health insurance. The idea of waiting until 65 to retire to get medicare is depressing. Right now I am paying down about $3,200 of principle on loans per month. That will increase each month as interest payments decrease. I plan to cash flow at least $2,000 per month in 5 years, then add in my state retirement pension, and firefighter pension. That will be more than my net money after taxes now. My income from rentals will grow each year as more units are paid off. In 10 years I should be netting $4,000 per month off rentals, and in 15 years I should be netting over $6000 per month in rentals. If I had accelerated my investing 10 years sooner I would be retiring about now. The properties I plan to buy in 3 to 5 years will be for the benefit of my children and grandchildren. I plan to gross around $140K this year and maybe $170K the following year. I have gradually moved from lower end C- properties to C+ or B properties. In my area the nicer the house the less it makes me. I lose at least $100 per month on my two nicest houses. They are the easiest to rent, but price rent ratios stink. The bigger you get the easier it is to grow more. Good luck.

@Joe Villeneuve, That's great that you are doing so well. I am not trying to argue about theoretical returns, (or I suppose I shouldn't call them theoretical since it's been easy for you to hit those numbers...). I am just trying to answer Bao's actual questions about his struggles with the realities of finding the time to build his business while employed full time. And let him know what most non-wizards might expect in terms of an amount of time to grow actual passive income from a real estate portfolio. Your comment "It all comes down to what you have to work with" is right on. My own timeline to success may seem glacial to you, but to me it's something I am quite proud of :)

Bao, to answer your question: 1) Gross Revenue $165,000 net about $90,000 depending on how you figure it. 2) Average 10 to 15 hours a week. That is active managing taxes to toilets. This is on 9 properties, 20 units. I owe about $625,000 on properties worth about $1,500,000. I've been at this for almost 20 years. I've never been to a guru's class and I'm not claiming to be all that smart. I spend the rest of my time and more than half of my net on the acquisition of new rentals. I very rarely sit on the beach and sip anything, but I wish you all the best.

Financial independence from passive rental income: how long does it take?

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Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes

Financial independence from passive rental income: how long does it take?

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