One of the big goals many people have when they get into real estate investing is being able to retire early. And it’s certainly possible. With the right real estate investment training, smart choices, good strategy, and a little hard work, you can retire early. 

But how many properties do you need to make it happen? That depends. The two big factors are how much income you want during retirement and how much income you can get from each property. 

How Much Do You Need?

How do you determine how much income you need in retirement? The typical advice is that you should try to match 70% to 90% of your pre-retirement income might not make as much sense if you’re a real estate investor. You are shooting straight for retirement goals with your passive income, and don’t have a baseline income to compare against. 

Instead, you’re going to experience constant increases in income until you achieve a level where you’re prepared to retire. The median income in the US is around $68,000, but you probably aren’t getting into real estate investing to live a median life, so let’s say you want to have an income of $84,000 a year, which would be a good, healthy income and let you enjoy a nice lifestyle, especially if you’re single. 

You might also consider moving to someplace where the cost of living is lower. Denver has one of the higher costs of living in the country, so you could easily make your money go 30% further by moving. If you did that, you would have to hire a management company, which will increase your expenses. Then again, you might want to do that anyway: are you truly retired if you’re still dealing with the hassle of a rental property?

How Much Income Will You Get from a Rental Property?

So how many properties do you need to make your desired income? Let’s say you pay an average of $300,000 per investment property. (The median home price in Denver is over $400,000 and the average price is over $600,000, but let’s say that your real estate investment mentor helps you find bargains. They are out there.) Then let’s say you rent these properties for an average of $3000 a month. How much net income does that yield?

If you financed the houses at 4% in a 30 year mortgage by putting down 20%, you’re going to have a monthly mortgage payment of about $1150. A property management company might charge you between $200-$300 a month depending on how many properties you have and how well you bargain. Let’s pick a middle value of $250. Add in another $200 a month for utilities and miscellaneous expenses, and your total expenses come to $1600 a month, leaving you with $1400 a month of income. 

Working with our desired income of $84,000 breaks down to $7000 a month. That means you could, potentially, retire with as few as five rental properties. If they’re good houses, and if you can keep them filled. 

But what if you can’t get $3000 a month for your property? In Denver, this should be achievable for good properties in good locations, but let’s say that, despite paying $300,000 for the house, you can only rent it for $2500 a month. Expenses stay the same, but your income drops to $900 per property. At that rate, you would need eight properties to achieve your retirement income. 

What about Condos?

But what if your approach isn’t to buy houses, but apartments? How many will you need to retire? Let’s say you can buy a condo for $150,000. The monthly mortgage payment will be about $570. 

Let’s say you can rent it for the median apartment rental price, about $1600. A management company might charge $130 a month, and add in another $100 a month for expenses and utilities, taking your total expenses to about $800, leaving $800 a month in income. In this case, you would need nine properties to achieve your retirement income. 

Are You Looking to Retire Early?

Depending on the situation, early retirement should be achievable with 5-9 properties. Of course, there are many variables that can affect the profitability of your properties. The clearer you can see those variables, the better your investments will perform. 

If you are one of those considering real estate investing specifically to retire early with passive income, we can help you achieve that goal. Please connect with us today to learn how our mentorship program can put you on the fast track.

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