How many rentals to retire?

[Sam Booth]

So I have been investing in real estate in the south since 2021 and now have 5 properties. How do you know how many properties you need to retire? It's hard for me to know how much cap ex and repairs will be in the future as the price of those things goes up. I have a spreadsheet of the rough timeline for when roofs and cap ex items will need to be done. Any help appreciated! Here's kinda what I have: (I usually really front load properties with alot of repairs and painting so that it pushes alot off into the future)

+ Gross rent

- property management 10%

- vacancy rate 5%

- cap ex savings (250/ month?)

- maintenance and repairs (50/month?)

- taxes

= Profit

[Nathan Gesner]

Quote from @Sam Booth:

Find your end goal, then reverse engineer it.

Let's say you want $60,000 net cashflow to live off. This is after all your real estate expenses. This requires $5,000 per month. You need five properties creating $1,000 free and clear every month. Easy, peasy.

Now, what does it take to produce $1,000 per month free and clear? You'll have to do some creative math.

1. Write down your incomes for each property.

2. List all your known expenses (taxes, insurance, utilities, etc.)

3. List all your projected expenses. These are things you know will happen, but you don't know if they will happen tomorrow or five years from now (capex, vacancies, turnover costs, etc.)

4. Once the projected expenses are listed, estimate when the costs will occur. For example, you may project that each property will turn over every 24 months and lose 1.5 months of rent for a vacancy or additional maintenance. You estimate your roof will require replacement in ten years, so you'll need $10,000 when the time comes. Create a simple spreadsheet like the one below to calculate how much you should set aside each month for these projected expenses:

5. Take the total income, subtract your known costs and the projected costs, and you'll know how much remains to live on. If it meets your needs, you are set.