living solely on rental income

[aggiecrew]

is anyone out there to the point where they started with basically nothing, borrowed essentially 100% for each property, using property management companies for each property, and able to make enough positive cash flow (assuming you are having to use rental income money to pay back part of your loan for each property each month) to be able to live off of and not work another job?

if so, please tell how you got started and got to that point.

thanks!

[black95gt]

I dont think that it is possible to do this if you are doing 100% financing on each property, well at least in my area.  Right now i am trying to buy propertys so that i make at least $100-$150 positive cash flow using 25-30 year loans on 100% financing.  I am not trying to make a living doing this, but to hopefully pay the mortages off in 10-15 years and then have an income where i dont have to work, or if i choose to work, have a much higher income.

The best way for you to live off of real estate investing is to buy houses, fix them up and flip them and make 10-15k per house, do 3 or 4 a year and you will do ok.

[kdhastedt]

There are several folks in this forum that only work on REI (reoconsultants comes to mind as one...).  It's VERY possible.

black95gt...stop for a moment and consider that you buy properties with a $150 cashflow.  What if you bought 5 of these a year for 20 years...now you have 100 properties generating $150 a month (probably more...fixed rate mortage + rental increases)...that's $180K free and clear income plus all of the accumulated equity.  Now sell 1/2 and use the proceeds to pay off the other half.  Now you have 50 free and clear generating probably $500+ a month free and clear -- that's $300K a year and I could live on that!

This is a VERY realistic scenario - and VERY 'do-able'!

Keith

[black95gt]

Keith, i agree totally with you, and i plan on trying to do this.  But like you say, 5 propertys per year over 20 years, so that would be a long term to make $180k per year and cut that down to 5 years and i could live off of $45,000, but in the short term starting out, you would have to keep some kind of job till you had 25 properties or so.


Also like you say, sell half of them and keep 100% rent for your income, but in the short term, save the $150 per month while your working full time, and pay off 1 of the houses after 3 or 4 years and have that $500 per month plus your $150 per month from the rest of the houses and you could  quit your fulltime job after about 5 years or so.

Im only 26 now and i hope to be able to be retired and living off rentals, or flipping houses in between 35-40 if not sooner.  Im just trying to figure out what is the best way for me to do this.

[kdhastedt]

I figure that I can retire when I'm about...ohhhh...135 or 140.

Remember that the whole time you are doing this, you are socking away an income stream on top of the properties escalating in value and you're buying down the principal on each -- but, CASHFLOW is the KING!  The appreciation and the tax benfits are side advantages.

Keith

[Dan732]

Cashflow is King! I couldn't agree more. I never bank on appreciation, it might be more or less, I don't care. Just show me the monthly income. I always take a proactive approach, I try to double mortgage payments, get 15 year loans and such. Since I have other businesses to attend to, I look at the Real Estate as a retirement vehicle.

[black95gt]

ditto on the retirement

[aak5454]

dan, you say cashflow is king, but taking 15yr. loans/making double payments kills your cash flows; granted it builds equity and can improve cash flow in the future, but I would rather have those dollars available for other purposes (investments) and pay the 6 or 7% interest to do so.

BTW, i agree with you that far too many people on this board bank on appreciate; I look at it as "gravy"

Mike in SoCal

[telarsen]

Disagree with me if you want but at 100% financing, you'd be lucky to make 10-15% return. Now you're going to pay a management co. 10-15% to manage? You'll never make money this way - can't be done.

[Dan732]

dan, you say cashflow is king, but taking 15yr. loans/making double payments kills your cash flows; granted it builds equity and can improve cash flow in the future, but I would rather have those dollars available for other purposes (investments) and pay the 6 or 7% interest to do so.

BTW, i agree with you that far too many people on this board bank on appreciate; I look at it as "gravy"

Mike in SoCal

Yea but once you get that property paid off, you have big cash each month. Lot better than letting a bank take your share.

[kdhastedt]

<<Disagree with me if you want but at 100% financing, you'd be lucky to make 10-15% return. Now you're going to pay a management co. 10-15% to manage? You'll never make money this way - can't be done. >>

Again, no disrepect Ted, but this totally depends on the market that you're in!  I could 100% leverage, pay normal local management fees, and still be in the black.  The area where I am has low purchase prices and high rental income...it's actually kinda nice!


Keith

[aak5454]

if you put addition dollars towards paying off the loan on a rental property, you rate of return (by definition) for those incremental dollars is the interest rate of the loan (for me usually <7%).  If I wanted to make 7% on those dollars I would invest in tax-free muni bonds.

As for being cash flow breakeven, it is possible, but very tough to do at 100% fianancing, but even as recentof last year I was able to buy places in Southern Calif. that were cash flow positive with 20% down (using 1031 exchange).  I spend a lot of time looking and liek to buy places that need work and have upside rent potential.  I buy 1-2 properties a year so I take my time and find the right deal.

[propertymanager]

Yes, it is absolutely possible to do this in 90% of the United States (except those hot markets on the coasts).  About 18 months ago, I started on a plan to acquire 50 rental properties at the pace of 10 per year.  My goal was for each property to have a positive cash flow of $200 per month and at least 30% equity.  Under this plan, at the end of the five years, I'd have $10,000 per month positive cash flow and $1,000,000 in equity.  Now, eighteen months later, I have 23 rental units with a positive cash flow of nearly $5,000 per month and nearly $500K in equity.  

All of this depends on buying the property well below market value.  This is relatively easy to do in most of the US although it does require working at least half the day (12 hours).  If you buy at a big enough discount to market, you not only do this no money down, but get cash back at just about every closing (buy at 50% market value and finance at 70%).  

I do all the management myself and work like a dog every day, but I can do this for another year or two to meet my goal.

I know a lot of other investors who have done the same thing.  However, if you are asking if you can spend 3 to 4 hours per week like the gurus say on late night TV, let someone else manage the properties, and retire rich in a year or two  -  dream on!

Mike

[telarsen]

Hey, Keith, where are you at? Sounds like you DO have the best of both worlds there! No disrespect taken, that is what a discussion board is for!

Take care!

[kdhastedt]

Ted,

I am in NW Louisiana...

Keith