Realistically most investors won’t replace all income W/ cashflow

[Shiloh Lundahl]

I don’t mean to burst peoples’ bubbles here, but in my opinion, most investors on BiggerPockets won’t get to a place where they can replace all their monthly income with the cash flow of their properties. Some will. But I see that as more of the exception than the rule. Let’s say that you would like $10,000 a month in cash flow in order to quit your job. How many properties on average do you think it takes to get to $10,000 a month in mostly passive income? Let’s say on average you make $200 a door after accounting for all expenses and savings for cap ex, turn over, and vacancy. At $200 a door, it would take 50 doors to get to $10,000 a month and that is if you manage the properties yourself.  Some people have ownership of 50 doors on their own and manage everything themselves but then the income ceases to be passive and becomes active. But most people have partners or employees when they get to that size and then it takes a lot more doors to get up to $10,000 a month when you need to pay other people to help you with the work it takes to acquire and manage so many units  

The reason I am writing this is not to make anyone feel bad, or dash your dreams. Rather it is to give people more of a realistic framework of what making $10,000 a month in passive income really looks like. That way people can be more realistic with their goals. I hear a lot of people say that they want to buy rentals and then retire. But I don’t think they really know how much work and the infrastructure that it takes to own and manage the number of units it takes to get to $10,000 a month.

I’d love to hear the opinions and experiences of others on this topic. Also, feel free to share if you think I am wrong or the work it took you and the money it took to get $10,000 a month in passive income. I’d love to hear your thoughts and opinions.

[Greg M.]

The way these forums push real estate investing, few people here will ever get to the point they can truly retire off the rental income. Look at how many people push the approach that the second you get $1 in equity in a property, you take it out to buy another property - repeat over and over. They boast about having 100 units that each bring in a small amount of free cash every month. What they never talk about is that their job is to service those 100 units. 100 units = 100 times the potential problems + little equity if they ever want to cash out.

I'm taking the approach that I want to have a small number of units fully paid off by the time I retire. With no mortgage to pay every month, I'll stick 80% of the rent into my pocket.