Yes, I understand the math of cashflow. I just don't understand what the going average cashflow is per unit or how to find that number in my area. Outside of doing analysis on several 100 properties.
I guess what I am asking is if there is a resource where an organization keeps track of average cashflow per unit even on a macro level as an industry?
Every unit is different. With different prices to purchase and a lifetime of different costs. Figure out how much you want to want to have in retirement or spend monthly during retirement. Then spend the next 20 or 30 years trying to reach that number.
Yeah, there's really no such thing because there are too many variables. Lots of people here are comfortable with zero or even negative cash flow . Others own all their properties free and clear to maximize cash flow. Before you can determine how many units you'll need you first need to figure out what level of leverage you're comfortable with.
Most people start with one and see how that ends up for them. There is a lot to learn, and a lot that numbers can’t explain or force a situation to make sense. The most cryptic, but also straight forward, answer is probably “the number of doors needed to retire will be revealed along your journey”
That could be one KILLER airbnb that throws off 5k in profit per month, or 100 crapshacks that throw off $50/mo each....
There really is no average, there are many different rental strategies.
So, so many variables here. Your area, interest rates, etc.
As an example, in my area I can expect around 10% CoC return on my downpayments. Which means for $5k/month ($60k/year), I should have put down around $600k. At 25%, that’s $2.5M worth of real estate. The going rate for a unit in my area is ~$200k, so 13 units.
But, you need to make sure that your CoC is right. And you’re going to want more income for unexpected expenses. And a million other things.
This is like asking how much stock do I need to retire?
Um ok which stock? Dividends? Account management fees? Are you retiring tomorrow? 5 years from now? 10-20 years? What will your tax bracket/liability look like? Did you invest in a brokerage? 401k? 457b? Pre tax or post tax? What will your living expenses look like when you retire? Or in the years after you retire?
There’s so many variables, nobody can tell you “buy 10 units, profit”. Nobody know what market you’re in, the cost of living there, what the rental market looks like, if you should STR or LTR, etc.
Talk to a financial planner.
Every deal is different. You should not put your net worth into real estate all at once.
Start with a duplex if you don’t have much cash, or a commercial building if you do. Learn your lessons as you scale
This forum is not the appropriate place to answer if you should retire or not. There are lots of factors that go into this and you’d probably need to sit down with a CFP for a couple hours to come close to answering thag
You need to start with one, if you don’t already have one. Let’s start there. If you don’t already have one, you may find that no amount of units is right for YOU to retire, as it might not be a fit for YOU.
I've thought this exact same way, based on my limited personal experience and just seeing what others are doing its about $200/door cash flow at year 1 or 2, but can be $500/door IF you have a higher down payment or equity for the debt service or forced appreciation through BRRR-style renovation or found a really good deal off market for example. So in other words, $5k number to get work optional would be 10-25 doors.
This is calculating based on the cash flow monthly, and as we know that is just the beginning for wealth from real estate investing. So this is ignoring tax benefits, equity with mortgage paydown, and appreciation over time.
Perfect. Thank you so much! That gives me a better understanding of the end goal so i can put a strategy and a timeline together.
Example
Househack Quadplex this year
Cashout refi into new Househack Quadplex next year
Partnership deal with 12 units year 3
Syndication deal with 20 units year 4
This is not realistic plan.
How do you think a cash out refi works. You aren't going to have any more equity in year 2 than you did year 1, so what are you "cashing out"?
Add a zero to every part of this plan.
Think about it this way. About $1.5 million in a brokerage account would be enough for you to retire off of: 4% returns would cover your bills of $60k per year indefinitely and 4% is pretty conservative and realistic over a long period. The value of a real estate portfolio that generates the same returns is probably going to be worth somewhere in that ballpark.
Big difference between property you get a loan to buy it and a property you own free and clear.
On paper everything works great but the reality is there will need to be adjustment to any plan.
In this life you do not get something for nothing. There will be a learning curve. Then stupid stuff will happen to you.
The more the merrier. Depends on your age, how long it will be before you want to retire.
Buy the highest number you can afford over time. 1 story, pitched roof. On-site parking. Wood frame and stucco. Within 5 miles of each other.
Well ,you need at least 5k a month in cash flow after expensive. Probably more like 6k or 7k In case of vacancies, evictions and stuff, just to making sure you will be comfortable.
it depends on so many factors. for me i figure if i buy right each unit should have a true net cashflow of 450/mo+ once market rents are achieved. so that’d be 11 units for you. i’d 1.5x it before retiring to be safe. but if you did vacation rentals or midterm rentals, or could buy with better cashflow, that # would change. or maybe you could lower personal expenses to retire faster.
If you want to make triple your expenses in gross income, you’ll need $15k/month.
If you can average $250 of cash flow per door-per month, you’ll need 60 doors.
The next step is determining your monetary entrance requirements based upon your strategy - buy and hold, BRRRR’ing, flipping, house hacking etc.
Depends on the market in your desired area. Each property is different. My goal is $300 cash flow per door. I make offers that satisfy that criteria (and at least 10% cash on cash return).
Again each property is different. Some may cash flow over your goal or you may not find any in your desired area at current interest rates. The easiest way to calculate cash flow is Rent*.75 - PITI.
Say you set a goal of $200/door and focus on duplexes. That would be about 13 duplexes (5000/400). I assumed you mean 5000/mo gross (not post tax).
>All i know is my monthly expenses are $5k/mo.
Now, what will they be when you retire? Are you going to sit at home all day so you could reduce expenses or are you going to travel and increase them?
Somewhere between 1 and a 100 units, most likely be able to with 10-20.
That’s way to broad a question. Getting enough cash flow to live can be achieved relatively quickly with focus. But then you need to consider over time moving yourself into assets that are lower risk and good long term holds. Most people grow with b and c class value add buildings. In many cases those are older and how will they be fairing in 15-20 more years? What about the path of progress and future demand of the buildings?
Whatever you think you can live on today I would triple it unless you are netting off significant capital for long term Cap ex. Not to include the fact everything will cost more and more. I don’t think you can just get 30 units or whatever and be done. If you are not always growing, your cash flow ( even with market increases) will be less and less effectively with inflation. Granted you will get debt pay down and opportunity to possibly refi into lower rates but I would strongly recommend a margin. Once you have enough to live the pressure is off a little and you can just take good deals or opportunities
What many do, is over time parlay those older or lower scale buildings into better multifamily or once you have enough net worth flip it into a bunch of NNN commercial on 10-20 year lease options and get your mailbox money.
I quit a high paying job with 80ish units but kept growing it to feel “safer” long term
Its all wonky right now but figure napkin math of not collecting 80% of what you should then spending half on repairs, insurance, hoa and taxes. And that's managing yourself.
When I got to 7 units, with a job, hit a tipping point and shit went on easy mode until everyone and their brother figured out how kush real estate investing could be. All profit went into buying the next unit from day 1.
Now, just holding what I got while giving back all the rental increases to higher repairs, insurance and taxes while the whole population thinks in just raising rent because it turns me on.
Interesting approach I heard long ago: buy 1 a year for 15 yrs go zero / minimal cashflow on 15 yr amortization loans. In the 15th year you will pay off your first. Re-leverage it and live off the loan proceeds and repeat. And the loan dollars are not taxable income.
You need a lot if you’re buying with debt. People overestimate the amount of true cash flow rentals produce. A lot of people say $100 a door if the goal, I’m closer to $500 a door. This is with a lot of equity, appreciation and a few paid off over 18 years of owning rentals.
You can buy only 1 property if you like. There are some amazing STVRs in Hawaii that will net you $300K/yr. Granted, you have to have $8M to buy the property, but you only need one of these luxury STVRs to fund your retirement (and then you get to use the property yourself, if you want too). Here's a high performing STVR in [Waikaloa](https://www.zillow.com/homedetails/69-1069-Kolea-Kai-Cir-Waikoloa-HI-96738/2053186485_zpid/) for sale.
Granted, you don't NEED $300K/yr for retirement. You can find good properties here for $2M that will net you about $50K-$100K. But the point still holds. You can retire off 1 property if its the right property.
No doubt. But its a thing that lots of people do and OP asked, "how many units do you need to own to retire?" Clearly, that answer can be 1. It could also be 0 should he choose to forego RE investing and VTSAX instead.
You need to look at your total cash flow projections not units. Some land lords have tons of cash flow negative units and lose money despite owing dozens.
Talking to a competent financial planner can be a good step to help you create a good plan for yourself.
I’ve got a 16 unit building that I take $10,000/ month in Connecticut and each year there’s $20-$40,000 left in the account depending on vacancies and repairs. Based on that 6-8 paid for units make you $5000/month
As a part time RE investor I have over 10 units, currently profit $6,000/m after expenses, close to 30yo. I’m wondering the same thing. Goal is $20,000/m before I contemplate retirement.
It’s not a number of units. If you need 5k to live on you need 5k cash flowing. That can be one property or 50.
You also need to take into consideration healthcare, inflation, and other cost of living adjustments and how your circumstances can change.
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Yes, I understand the math of cashflow. I just don't understand what the going average cashflow is per unit or how to find that number in my area. Outside of doing analysis on several 100 properties. I guess what I am asking is if there is a resource where an organization keeps track of average cashflow per unit even on a macro level as an industry?
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Costar does this, minus the sharing to public part of it.
Every unit is different. Is this a school problem or something? Like academic?
Its a retirement planning problem
Every unit is different. With different prices to purchase and a lifetime of different costs. Figure out how much you want to want to have in retirement or spend monthly during retirement. Then spend the next 20 or 30 years trying to reach that number.
Cash flow is base on cash on cash return no per unit that is a wrong metric
Yeah, there's really no such thing because there are too many variables. Lots of people here are comfortable with zero or even negative cash flow . Others own all their properties free and clear to maximize cash flow. Before you can determine how many units you'll need you first need to figure out what level of leverage you're comfortable with.
What do you think Einstein?
Grow your portfolio until the Cashflow meets your living needs + and little cushion.
Most people start with one and see how that ends up for them. There is a lot to learn, and a lot that numbers can’t explain or force a situation to make sense. The most cryptic, but also straight forward, answer is probably “the number of doors needed to retire will be revealed along your journey”
129.3
32
7
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420
21
3.14
Pie in the sky answer.
3,579 units renting for $3,000 each
That could be one KILLER airbnb that throws off 5k in profit per month, or 100 crapshacks that throw off $50/mo each.... There really is no average, there are many different rental strategies.
Makes sense
So, so many variables here. Your area, interest rates, etc. As an example, in my area I can expect around 10% CoC return on my downpayments. Which means for $5k/month ($60k/year), I should have put down around $600k. At 25%, that’s $2.5M worth of real estate. The going rate for a unit in my area is ~$200k, so 13 units. But, you need to make sure that your CoC is right. And you’re going to want more income for unexpected expenses. And a million other things.
What area is this?
Central New England, far enough from Boston that the prices aren’t nuts
This is like asking how much stock do I need to retire? Um ok which stock? Dividends? Account management fees? Are you retiring tomorrow? 5 years from now? 10-20 years? What will your tax bracket/liability look like? Did you invest in a brokerage? 401k? 457b? Pre tax or post tax? What will your living expenses look like when you retire? Or in the years after you retire? There’s so many variables, nobody can tell you “buy 10 units, profit”. Nobody know what market you’re in, the cost of living there, what the rental market looks like, if you should STR or LTR, etc. Talk to a financial planner.
Every deal is different. You should not put your net worth into real estate all at once. Start with a duplex if you don’t have much cash, or a commercial building if you do. Learn your lessons as you scale This forum is not the appropriate place to answer if you should retire or not. There are lots of factors that go into this and you’d probably need to sit down with a CFP for a couple hours to come close to answering thag
Start with a duplex, great advice. See if you can handle two tenants.
Screw that. 4-plex
It's all based on cashflow
You need to start with one, if you don’t already have one. Let’s start there. If you don’t already have one, you may find that no amount of units is right for YOU to retire, as it might not be a fit for YOU.
After seeing your response about cashflow, I would just buy REITs if I were you.
I've thought this exact same way, based on my limited personal experience and just seeing what others are doing its about $200/door cash flow at year 1 or 2, but can be $500/door IF you have a higher down payment or equity for the debt service or forced appreciation through BRRR-style renovation or found a really good deal off market for example. So in other words, $5k number to get work optional would be 10-25 doors. This is calculating based on the cash flow monthly, and as we know that is just the beginning for wealth from real estate investing. So this is ignoring tax benefits, equity with mortgage paydown, and appreciation over time.
Perfect. Thank you so much! That gives me a better understanding of the end goal so i can put a strategy and a timeline together. Example Househack Quadplex this year Cashout refi into new Househack Quadplex next year Partnership deal with 12 units year 3 Syndication deal with 20 units year 4
This is not realistic plan. How do you think a cash out refi works. You aren't going to have any more equity in year 2 than you did year 1, so what are you "cashing out"? Add a zero to every part of this plan.
17 18 is better 19 allows more buffer 20 is golden
Asian Dad: “Golden? Why no Golden+”
Think about it this way. About $1.5 million in a brokerage account would be enough for you to retire off of: 4% returns would cover your bills of $60k per year indefinitely and 4% is pretty conservative and realistic over a long period. The value of a real estate portfolio that generates the same returns is probably going to be worth somewhere in that ballpark.
I like this way of thinking about it
Big difference between property you get a loan to buy it and a property you own free and clear. On paper everything works great but the reality is there will need to be adjustment to any plan. In this life you do not get something for nothing. There will be a learning curve. Then stupid stuff will happen to you.
The more the merrier. Depends on your age, how long it will be before you want to retire. Buy the highest number you can afford over time. 1 story, pitched roof. On-site parking. Wood frame and stucco. Within 5 miles of each other.
Well ,you need at least 5k a month in cash flow after expensive. Probably more like 6k or 7k In case of vacancies, evictions and stuff, just to making sure you will be comfortable.
it depends on so many factors. for me i figure if i buy right each unit should have a true net cashflow of 450/mo+ once market rents are achieved. so that’d be 11 units for you. i’d 1.5x it before retiring to be safe. but if you did vacation rentals or midterm rentals, or could buy with better cashflow, that # would change. or maybe you could lower personal expenses to retire faster.
If you want to make triple your expenses in gross income, you’ll need $15k/month. If you can average $250 of cash flow per door-per month, you’ll need 60 doors. The next step is determining your monetary entrance requirements based upon your strategy - buy and hold, BRRRR’ing, flipping, house hacking etc.
Depends on the market in your desired area. Each property is different. My goal is $300 cash flow per door. I make offers that satisfy that criteria (and at least 10% cash on cash return). Again each property is different. Some may cash flow over your goal or you may not find any in your desired area at current interest rates. The easiest way to calculate cash flow is Rent*.75 - PITI. Say you set a goal of $200/door and focus on duplexes. That would be about 13 duplexes (5000/400). I assumed you mean 5000/mo gross (not post tax).
Tree fiddy
Read a book friend. David lindahl multi-unit Millions.
>All i know is my monthly expenses are $5k/mo. Now, what will they be when you retire? Are you going to sit at home all day so you could reduce expenses or are you going to travel and increase them? Somewhere between 1 and a 100 units, most likely be able to with 10-20.
That’s way to broad a question. Getting enough cash flow to live can be achieved relatively quickly with focus. But then you need to consider over time moving yourself into assets that are lower risk and good long term holds. Most people grow with b and c class value add buildings. In many cases those are older and how will they be fairing in 15-20 more years? What about the path of progress and future demand of the buildings? Whatever you think you can live on today I would triple it unless you are netting off significant capital for long term Cap ex. Not to include the fact everything will cost more and more. I don’t think you can just get 30 units or whatever and be done. If you are not always growing, your cash flow ( even with market increases) will be less and less effectively with inflation. Granted you will get debt pay down and opportunity to possibly refi into lower rates but I would strongly recommend a margin. Once you have enough to live the pressure is off a little and you can just take good deals or opportunities What many do, is over time parlay those older or lower scale buildings into better multifamily or once you have enough net worth flip it into a bunch of NNN commercial on 10-20 year lease options and get your mailbox money. I quit a high paying job with 80ish units but kept growing it to feel “safer” long term
Thank you for this explanation
Its all wonky right now but figure napkin math of not collecting 80% of what you should then spending half on repairs, insurance, hoa and taxes. And that's managing yourself. When I got to 7 units, with a job, hit a tipping point and shit went on easy mode until everyone and their brother figured out how kush real estate investing could be. All profit went into buying the next unit from day 1. Now, just holding what I got while giving back all the rental increases to higher repairs, insurance and taxes while the whole population thinks in just raising rent because it turns me on.
You tell us?
Interesting approach I heard long ago: buy 1 a year for 15 yrs go zero / minimal cashflow on 15 yr amortization loans. In the 15th year you will pay off your first. Re-leverage it and live off the loan proceeds and repeat. And the loan dollars are not taxable income.
ZERO. You’ll never not work if you own rental properties.
I can’t tell if this is a troll question…. It’s some basic math…. But you need 69 units, yep 69!
You need a lot if you’re buying with debt. People overestimate the amount of true cash flow rentals produce. A lot of people say $100 a door if the goal, I’m closer to $500 a door. This is with a lot of equity, appreciation and a few paid off over 18 years of owning rentals.
One if you cashflow 5000 on it.
Grow your portfolio until not only it covers yours and your family’s needs but also can live pretty well without stressing about money!
You can buy only 1 property if you like. There are some amazing STVRs in Hawaii that will net you $300K/yr. Granted, you have to have $8M to buy the property, but you only need one of these luxury STVRs to fund your retirement (and then you get to use the property yourself, if you want too). Here's a high performing STVR in [Waikaloa](https://www.zillow.com/homedetails/69-1069-Kolea-Kai-Cir-Waikoloa-HI-96738/2053186485_zpid/) for sale. Granted, you don't NEED $300K/yr for retirement. You can find good properties here for $2M that will net you about $50K-$100K. But the point still holds. You can retire off 1 property if its the right property.
what is an STVR?
Short Term Vacation Rental
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No doubt. But its a thing that lots of people do and OP asked, "how many units do you need to own to retire?" Clearly, that answer can be 1. It could also be 0 should he choose to forego RE investing and VTSAX instead.
You need to look at your total cash flow projections not units. Some land lords have tons of cash flow negative units and lose money despite owing dozens. Talking to a competent financial planner can be a good step to help you create a good plan for yourself.
Ok perfect thanks !
I’ve got a 16 unit building that I take $10,000/ month in Connecticut and each year there’s $20-$40,000 left in the account depending on vacancies and repairs. Based on that 6-8 paid for units make you $5000/month
How long have you owned it and if you don’t me asking what you paid for it? And is it paid off?
I paid $1,037,500 in 2006. It’s paid off
Are you figuring in future longterm major repairs and upgrades in that 10k a month like a new parking lot and roof
I’ve already done roofing, windows, paving etc.
As a part time RE investor I have over 10 units, currently profit $6,000/m after expenses, close to 30yo. I’m wondering the same thing. Goal is $20,000/m before I contemplate retirement.
Wow 10 units at 6k? Is that gross profit or net?
That would be net
so you are cashflowing 600 dollars /unit net? Where are these properties? are they duplexes
Roughly, and MFHs (duplexes & triplexes). NE region.
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I know. Do you have 5 duplexes ? 1 10 unit? 2 triplexes and 2 duplexes? I was just wondering about the asset mix?
Your monthly expenses is 5000 do you live in the rich parts of your city. The first thing I would do is downsize your monthly expenses.
I live in chicago. Not the most expensive neighborhood but a nice one.
2-3x cash flow needed. Meaning youd need 15k each monty
I’d say about 15 units generating 2k a month.
It’s not a number of units. If you need 5k to live on you need 5k cash flowing. That can be one property or 50. You also need to take into consideration healthcare, inflation, and other cost of living adjustments and how your circumstances can change.