Living off Rental Income

JD101

Level 2 Member
I'm tired of doing the same job over and over. The jobs are getting monotonous and there is a lot of BSing you have to do especially if you are in manufacturing where the competition is cut throat.

I was wondering if anyone tried to live off of rental incomes?
 

Matt

Administrator
Staff member
I'm tired of doing the same job over and over. The jobs are getting monotonous and there is a lot of BSing you have to do especially if you are in manufacturing where the competition is cut throat.

I was wondering if anyone tried to live off of rental incomes?
Here's some numbers I stole from The Balance:

Cash-on-cash Rental Yield:

Monthly Rental Amount $2,400.00
Percent of Year UnOccupied 5%
Take out for Vacancy for Annual Cash In of $27,360.00

Property Acquisition Cost $300,000.00
Less Down Payment - Cash In $60,000.00
Amount of the loan $240,000.00

Payment Monthly Pricipal/Interest $1,556.64
Annual Insurance Cost $1,200.00
Annual Taxes $1,400.00
Annual Repairs Budget $600.00
Percent of Rent Mgmt Fee of 6%
These expenses total to Annual Cash Out of $23,521.28


Income of $27,360 minus cost of $23,521 = $3839 cash return over cash out

If you wanted to live on that, you might need anything from 5-20 houses....
 

JD101

Level 2 Member
Matt,

Why did you add 6% rent management fee? Are you assuming that this is going to be outside your geographical area? Personally I wouldn't want to be outside 1-2 hours driving distance to my rental property.
 

Matt

Administrator
Staff member
Matt,

Why did you add 6% rent management fee? Are you assuming that this is going to be outside your geographical area? Personally I wouldn't want to be outside 1-2 hours driving distance to my rental property.
I added nothing.

Here's some numbers I stole from The Balance:
However, 6% is peanuts.

The bigger issue is that the management fee changes the taxation from Active to Passive. So, if you are ready to do this yourself it matters, and is impactful. However, you may find that going from a regular job to a full time manager of 10-20 properties that there's an overload of responsibility.

It may be wise to employ a management company for at least your first year so you learn what they do (and what they don't) before you take away their role.
 

El Ingeniero

Level 2 Member
I think where you are matters a lot.

A $300K houses don't rent for $2,400 in my market, excep mayber a duplex. Annual taxes on that house would run me something like $4,000.
 
In SoCal, a home renting for $2,400 would easily cost around 500K. Probably more. And the property tax is at a minimum of 1.2% or approx 6K.
 

redbirdsj

Level 2 Member
I'm tired of doing the same job over and over. The jobs are getting monotonous and there is a lot of BSing you have to do especially if you are in manufacturing where the competition is cut throat.

I was wondering if anyone tried to live off of rental incomes?
Check out biggerpockets dot com which is the most comprehensive non-scammy real estate educational source.
 

kuchbhi001

New Member
The prospect of rental property sounds like easy passive income in the beginning but every independent landlord I have spoken to would were of the opinion that it wasn't worth the hassle and investment (both time and money). I'm sure there are others that find it worthwhile but it is not for everyone.
 

Ttitle

Level 2 Member
I like it. I own a rental property and manage two for my father. I've never thought of myself as handy, but I recently remodeled one of the units and was able to increase the rent by $700.00 a month. It's better to remodel a house you know you don't have to live in :).

Definitely it is all about the renters you get in your place (always do a credit check), but the money is good and it's an investment that increases in value and pays you at the same time.
 

caliang

New Member
real estate investment experience is very localized. there are always opportunities to be find in a less competitive local area. that being said, most big metro area are difficult environment to operate in my opinion. many landlord that operate by themselves don't count their own effort into the return calculation, they often count themselves as free labor, so the return can seem high sometimes.
 
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