How best to generate $400K passive income within 20 years

[Warren Dresner]

I have an aim to retire in 20 years time with $400k of annual passive income.

I currently own a home worth $1.5M with a $700k mortgage. I have one investment property worth $700k with a $400k outstanding loan that generates about $8k per year in cash flow.

I also have about $150k cash that i can use to start to invest more in property.

What would be the best way to reach my goal? I’m not sure about single family homes, because based on my current investment property i would need to buy 49 more to reach my goal.

If i pay off the loan in full on the investment property, it would generate about $22k annual cash flow today. Maybe in twenty years time that would become about $40k. So would the strategy by to buy 9 more similar properties that i hold free and clear?

[Joel Owens]

In 20 years 400k a year is not going to be worth 400k a year. Likely 300k or 280k in todays dollars with inflation.

At a 10% return pre-tax you would need about 4 million to generate 400k. 

Single family homes are not scalable. You will likely find you can't keep track of 40 different year built houses, with vary issues, different tenant bases, in different areas, with different jurisdiction landlord tenant laws, and vary property management companies that only serve certain areas.

You didn't mention your annual income from your job or business and whether you are an accredited investor or not. You could invest passively with other syndicators or move into commercial real estate where larger assets generate more income potential and equity growth over time.

Most investors I see might make a few million in SFR if they even start there and then they move to commercial as they outgrow the SFR space for their goals and scalability factors.