How many SFH's to quit job

[Gabe G.]

A stupid question, but how many SFH rentals, do you think you would need to confidently quit your day job? I live in the Midwest, so an avg/decent income is 50k a year.

I have 2 currently, that gross cash flow, 500 a piece, after mortgage,taxes, and insurance. Obviously that doesn't take into consideration vacancies and repairs.

Interested to hear thoughts

[Duncan Taylor]

First, if your goal is to quit your day job and live off your rentals, I'd encourage you to make the transition to multi-family as fast as you can.

Your immediate goal appears to be to quit your job and manage your own properties. In that scenario you will have some self-employment tax.

Taking your current $50K a year example, when you add things like health insurance, retirement plan and employer paid taxes, you are closer to a $75K number than the $50K number.

Now, many will say they don't need to worry about retirement because that is what these properties will provide. But, they forget those assets are not growing as fast as they could because you are pulling money out of them each month. They also tend to forget rentals have to be rehabbed on a cyclical basis to be competitive in the market. This is over and above heavy maintenance items like roofs, hvac systems and water heaters. They also forget if something happened and you couldn't manage the properties, you'd have increased expenses to hire someone to do it for you.

So, you need enough properties to consistently generate about $6000 each and every month. That is after property management, all expenses, vacancies, lost rent during evictions, mortgage, property tax and insurance payments. In the example you gave in your post, I doubt you have more than $200 going toward that $6000 goal with your two current properties.