How many rentals do I need to retire?

Uncategorized Jan 23, 2021

Achieving a vision starts with creating one. As a high paid stressed out corporate couple with children, one gets used to a life that is defined by steady paychecks with a promise of a few percent of increase in pay each year and a few weeks of vacations. But if you think outside the box, there is a whole new world waiting for you to explore. 

When I was working at my corporate job as a mechanical engineer for 16 long years, I realized that I was not building any other wealth at that job. Yes, the salary was high, but  my ceiling was fixed and defined by my superiors. I did not have the control of my own destiny. I wanted a path where I could define my own growth.  And Real Estate investing has been that and so much more.  It not only allowed me to build wealth and replicate my six figure income, it allowed me to explore my own fullest potential.

As you start your journey, use this formula to figure out the number of rentals you will need to retire.  It will help put a number to your vision and make it more tangible.

Here, use your take-home salary per month divided by cash flow per rental, and the answer will be the number of rental properties you need to retire.

Take note: your take-home salary in the numerator must be the amount AFTER TAXES because your cash flow will be offset by depreciation.  That’s one of the many reasons Real Estate Investing is so amazing!

Now of course, this is a very simple formula and there are so many nuances to this.  You may  want to put this in a spreadsheet and place all your assets and liabilities.  You may consider adding your company’s retirement plan and bonuses, the debt paydown from your real estate investments, appreciation of your assets and all of the details that are specific to your life.  

In my case, when I decided to retire, I added childcare expenses because my goal was to spend time with my kids. And to tell you the truth, I ended up with a deficit. I decided to quit my job anyway because I felt the need to do it in my bones. I wanted to spend time with my family and grow to my fullest potential.  And I took the leap of faith - so glad I did!


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