How many cash flowing properties do you need to retire early?
From an investor’s point of view, rental properties are great ways to invest money, especially in today’s real estate landscape when it’s an uphill task to sell without a realtor. Cash flowing properties provide several benefits including steady cash flow, huge returns and tax advantages. Now, before you want to calculate how many cash flowing properties you would need to retire early, there are some factors that you must take under consideration.
- How much you can make out of rental properties: The returns vary significantly based on the location of your property and the price you’ve paid for, among others. For instance, you own 10 properties for $75,000 to $100,000 and you receive $500 from each property. That makes it $5,000 in total per month. Cash flow properties not only help you to receive a steady income but also undergo price appreciation over time. If you can leverage the properties in proper manner, then you’ll be able to pay your mortgage and at the same time, gain equity.
- Why rental properties are better compared to conventional methods when it comes to early retirement? Say you heavily invest in mutual funds, stock market or other bonds but in reality, you don’t have any actual control on your investments. Though you can always select the bond or the company to invest in but there is no guarantee that the bond or company will perform as expected. Once you have invested your money in, you can practically do nothing but hope that the bond/company performs well. In contrary, you enjoy total control with rental properties. Generally, you buy the property below market value. What to repair or how to finance it is entirely at your discretion. Then you rent out the property. Though you can always hire a property manager to manage these tasks on behalf of you, especially when you’ve a number of properties, you would still be having ultimate control.
- How many cash flowing properties do you need for an early retirement? First, you need to decide on the amount that you would be requiring each month for a happy and successful life. Now, consider the amount you’re receiving each month from each of your rental property. For instance, you want to have around $10,000 per month upon retirement and currently you’re receiving something between $400 and $500 from each of your property. So, you need to have at least 20 such properties to fulfill your retirement dreams.
Finally, it’s important to note that cash flow on these properties will gradually increase over time because rental rates generally increase. Also, remember that though everyone has different aims and needs upon retirement, it’s imperative to chalk out your goals and work toward achieving them.