Investing in rental property is not just a good way to give you peace of mind, but if it scales appropriately, it can provide a continuous stream of passive income that can be passed down as an inheritance.
Mr. Haley, founder of Moving Astute explains that one of the benefits of having real estate rental is the financial benefit of those assets, while the expenses you pay are owned by someone else. So, how many rental properties do you need to have to retire? Continue reading and you’ll find out more:
When you retire just by relying on taxable earnings, all you need is a couple of equations.
- The monthly amount needed for retirement ÷ The cash flow per rental property = The number of rental properties you will need.
- Cash flow = Income – Expenses.
For this purpose, your income is primarily from rent received from your tenants. The expenses involved are the mortgage payment, the accrued interest payments, taxes, maintenance, vacancy, and all the associated expenses.
Here Is An Example to Answer
Suppose a fictional character: George. George needs to make a monthly income of $9,000 per month to be able to retire order to keep his current lifestyle better.
George bought several rental properties, and he estimated that $500 in cash revenue was the average monthly cash flow per rental. How many properties does he need to amass to be able to retire comfortably? (He has acquired many high-end properties, so, $500 a month is a very conservative number).
$9,000 ÷ $500 (per rental property) = 18 properties
George has almost enough for his future retirement if he gets 18 properties. He must factor in a number of factors adjoined, such as costs and major events. For this many properties, he’d best secure additional landlord insurance coverage in order to mitigate risks!
Ideally, you would like to invest in a property that will yield the highest return on investment. It is worthwhile to compare the costs and rental rates of properties across the country and think about the most profitable area. On top of that, think about what level of involvement you want to have with your rental properties.
Keep in mind that rental prices will differ depending on the intensity of the season (supply and demand of rental homes in the area and other considerations). To estimate your rental income, use the average annual rent rate of similar properties instead of the current rate (as that may have a stronger influence on the season, changing demand, and other factors).
Figuring out rental market issues and considering them when buying a property as a rental property can help you make a successful investment as a landlord. Taking the time to decide on what sort of rental properties you want and where is very important.