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A friend of mine is in his late 50s and is looking to retire in a couple years. He hasn't held a regular job in years, and has mostly supported himself via an eldercare consulting business and his rental income. Between him and his wife (early 60s, still working) they have five paid off rental properties netting them about $6,000/month, after property management expenses, taxes, etc, are taken out. As far as I know, he doesn't have much in the way of investments and the way, while working, is expected to retire soon. He's counting on this rental income to support him in retirement and his philosophy is that what counts is what's in your checking account every month.
Do you agree or know any retirees supporting themselves mostly with rental income? How did it work out?
My 84-year-old mother became a widow at 44. She was left with my father's government pension, a paid off house, and worked part-time retail jobs for several years to help make ends meet. At the same time my father died in 1975, she was left with extra money that she needed to invest in order to avoid taxes. She decided to buy a rental and through the many years since bought several other rentals in Southern California. Now she just has one rental left that pays almost twice as much per month than her pension. Us Kids were considering selling the remaining house as she has Alzheimer's now, but we were advised to keep the house as its a good source of income for her.(and we avoid taxes for now). In my mom's case she was lucky that homes appreciated so much and brought her a good return.
Last edited by smpliving; 06-19-2015 at 11:48 AM..
A friend of mine is in his late 50s and is looking to retire in a couple years. He hasn't held a regular job in years, and has mostly supported himself via an eldercare consulting business and his rental income. Between him and his wife (early 60s, still working) they have five paid off rental properties netting them about $6,000/month, after property management expenses, taxes, etc, are taken out. As far as I know, he doesn't have much in the way of investments and the way, while working, is expected to retire soon. He's counting on this rental income to support him in retirement and his philosophy is that what counts is what's in your checking account every month.
Do you agree or know any retirees supporting themselves mostly with rental income? How did it work out?
They will also get ss when they hit 62, 66, or 70 I suppose. I'm trying to do something somewhat similar with rental partially funding retirement in a year or two. I have 4 paid for houses that I rent out, my house I'm paying on but not sure if I want that big and costly house in retirement, and just bought a vacation rental in Spain. But I will also have a decent work pension and significant 401 K to draw from if I need it.
My projections show that the net rental income we received will provide 40-45% of our expected retirement income. The best risk-free scenario, I believe, is to have them debt-free and keep them in good condition with a generous repair budget of 15% of rental income. You've got to have the personality to have success as a landlord (old school term) and be willing to reach into your fat wallet for the big ticket items that eventually come up like a roof or HVAC replacement.
Unless you have them under a competent management company (as the OP's friends do), you aren't really retired. But that's OK, it gives you something to do.
Investing in real estate is just like most other investments... it has risks both long and short term. But it is also a business that must be run so it may take more time and attention.
While it is not for me I do know more than one person that do very well with property income.
Unless you have them under a competent management company (as the OP's friends do), you aren't really retired. But that's OK, it gives you something to do.
Signed,
"retired" or semi retired since age 38.
I think the property manager takes like 8% and takes care of all the mowing/landscaping, day-to-day maintenance, and for big ticket items, the landlord effectively gets a discount on what he'd have to pay another contractor to do it for. This property manager manages around 400 properties in the area and has plumbers, carpenters, electricians on staff and has enough to keep them all busy apparently.
That's great. Are you sure the PM doesn't pass along the cost of mowing & minor maintenance? Sounds too good to be true.
Our general rule is that if we have the property paid for, expect about 50% of the rent as profit after considering prop mgmt fees, property tax, insurance, maintenance, rental down time.
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