Are you living off the rent you collect?

Question

So, I hear many times, I will live off of the rent from my properties.

That seems to be the goal for many.

It’s such a variable income with repairs, vacancies, rising cost of insurance and taxes, declining rents, etc. I know you set aside percentage amounts to cover such expenses, but do you make enough on the rent to have the lifestyle you want?

You add more properties to make more income, but with that comes more expenses and chance.

I’d like to hear stories about those of you actually living off the rent right now and what your experience has been.

Nathan Gesner · Answer

I am making enough right now that I could live off my investments. However, I don't spend a dime of it. I save it and invest in more rentals to continue growing my portfolio towards my ultimate goal.

Yes, the income and expenses are variable, so you need to factor that in. If you study the BRRRR method, they suggest setting aside a certain percentage for vacancies, maintenance, insurance, and other expenses. If you have ten houses that are fully paid off, each renting for $1,000 a month, that will bring you $10,000 monthly income. However, you would still set a portion of those funds aside to cover future expenses. Once your fund is large enough to cover 6-12 months of expenses, then you can consider using that "extra" money to fund more investments or a new Tesla.

I currently net about $12,000 a month from my investments but I continue to invest in new properties. Once I am netting $20,000 a month, I will aggressively pay off the investments until I'm mortgage free. Once that's done, I should be earning about $30,000 monthly. I will live a very comfortable life with $10,000 a month. I'll maintain a healthy line of credit or reserve fund to handle emergencies. The rest goes to charity. And if it's a bad month with a lot of major repairs, less will go to charity without impacting my lifestyle.

Jill F. · Answer

We started our buy and hold business 50 months ago. We are now living off our rents and our income should increase significantly once we are fully rented and we pay down our renovation debt. We are still renovating eight units in value add purchases.

Aaron K. · Answer

The more properties you have the more they average each other out and the more consistent the income is, I don't know where you are seeing declining rents, but that seems like just a poor market you shouldn't invest in to start with.  Insurance doesn't rise by much, taxes are somewhat predictable and can often coincide with rent increases.  Repairs and vacancies are unpredictable but average out.

Bjorn Ahlblad · Answer

@Cory S. I could not afford my lifestyle without rents. My wife and are both retired. Me because I am old, she retired to PM our properties. She gets HC through our LLC. and we are REI pros so we pay a lot less income tax.

We live in a beautiful house that never made money as a rental, being waterfront, but works perfectly as a primary.

Life is not perfect-it never is, I have to get my own drinks and feed the dog, and even PU the poop.

We have reliable trades, the code enforcers, inspectors etc know us to be reputable land lords so we get great service from the County. We have had issues with a neighboring property, weeds, garbage, car parking etc. we call the City and they resolve it with the property owner.

Sure we have expenses like any multi property owner; but we know how to landlord and underwrite properly.

Stick to a reliable screening process, make no exceptions, have a team, and know your numbers-you can scratch out a living and even do well. One more thing..........never be forced to sell!

Jennifer T. · Answer

Technically I could swing it on just my rental income.  I wouldn't feel comfortable quitting my W-2 job yet, but I'm getting into the ballpark.  I think I have decent job security for about the next year but, if I ever do get laid off, I don't think I'd look for another job.  Or at least not another f/t one.  Plus I already do some gig work that varies, but typically brings in another $1,000+/month.  I could probably bump that up a few hundred more if I didn't work f/t.

My goal is to be at $5,000/month net rental income, which needs to already account for all mortgage payments, rental expenses, and an 18% set-aside for Capex/repairs/vacancies.  I'm at around $3,700/month.

In the meantime, while I've been waiting to "retire to only working for myself", I've enjoyed so much more financial security and have also allowed myself a higher standard of living.  With that said, I'm still fairly frugal.  By keeping my own personal living expenses low, I can get to my goal of "no f/t W-2" job faster.

I buy cars I want (within reason), but never new and usually for cash so I don't have a payment.  And I keep cars for years.  Until a repair is more than the car is worth!  The mortgage for my personal duplex is only $720/month.  Oh!  But then I make $1200/month from the rent on the other side.  My husband and I don't care as much about "things" or having the "latest and greatest".  So our spending every month is primarily just typical bills.  Our "splurges" are restaurants and travel.  The restaurants can be $200-$300/month and the travel, which still isn't excessive, is $3K-$5K/year.  Usually 1-2 weeks away somewhere else and a couple long weekend trips.  Though travel has been ZIPPO for this year, for obvious reasons.

Nam Trang · Answer

Thanks for sharing this @Nathan G. I hope someday I can have this much for a net per month. Always move forward thats my goal.

Cory S. · Answer

I'm planning on retiring from my current career in 2023 when I turn 53. That year also is the year when our residential property and car will be all be payed off.

I'll have a pension of about $3,000 a month and our properties after expenses (and when there are no repairs or surprises) bring in $2,610 a month.

So, $5,610 a month to live on, which is way more than enough for our lifestyle. (We are very frugal). I also have over $100K in stocks and MF's as well that I will not touch until I have to.

Again, that is if all goes to plan as the rental income is not very consistent in my experience.

I'll probably never fully retire as I plan on working part time, just looking to downsize on the work load and hoping my rentals can even things out on income for expenses.

Douglas Holden · Answer

@Cory S.

Not currently. If you want to grow your portfolio more rapidly, reinvest you rental income as long as you can.

Steven Foster Wilson · Answer

My wife works full time at a PTA bring home about $4,000/month. I am a full time student, and new agent so no money just yet. We live comfortably off of the $3,200 in net passive income added to my wife money. Of course we have factored in vacancy and cap ex reserves

Jake Soper · Answer

I like @Nathan G.'s Perspective here. Form your business around your goals and not your goals around your business. There's lots of ways to get creative to reach your goal. Just because 50 other people are doing something and killing it, doesn't mean its going to get you where YOU want to go any faster.

Are you living off the rent you collect?

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