"Retired" on rental income alone?

[FrozenAssets]

Anyone retired or retiring on all/mostly rental income and care to share what that looks like for you?
We are getting close-ish, think we are a couple years out (kids educational expenses and schooling are keeping us in a HCOL area for a bit yet), and I love reading stories and learning from from FIRE'd folks whose investments and RE cash flow are from real estate.

[Metalcat]

I'm diversified into real estate, but I personally wouldn't put everything I to real estate.

However, I do have friends who do.

The biggest thing is that you need some kind of exit strategy if you're all-in on real estate. You don't want to be managing properties forever, and even if you have a management company, it's still a certain degree of work and responsibility that may get cumbersome as you age.

Also, you need a metric by which you decide when a property as an asset is no longer best used as a rental. What will you do if the value goes up and the rents don't? At what point is selling smarter than keeping a unit as a rental??

And what will you do with the cash if/when you sell??

These are all really basic things that you probably already have thought of. Perhaps if you specify more what kind of info you're looking for, folks here can help you better.

[Omy]

We had two rentals that just about covered our expenses for our first 4 years of retirement. I joke that the rentals were our "crutch" so we didn't have to actually withdraw anything from the market - we had close to a 0% SWR for our first 4 years of FIRE.

We sold one rental in 2023 because the tenants moved out and it made more sense to sell than fix up and rent again. We will likely sell the second rental when our current excellent tenant decides to leave (probably in the next 1-3 years). At that point social security becomes available and would cover our basic expenses.

We also have a lot in the stock market. It's been nice not having to withdraw much in our early years of FIRE - having rental income has greatly mitigated sequence of return risks in our early years.

I should mention that this approach has worked well for us because we've had great tenants, no vacancies, and a large cash fund just in case. It has eased us into FIRE (though some would argue that you aren't truly FIREd when you own rental properties.)

[GilesMM]

You won’t find many on here despite the fact it can be a terrific short cut to financial freedom. One of the moderators here retired in less than ten years doing real estate, mostly outside his home state and entirely managed by third parties.

[Freedomin5]

You may find more pure real estate investors on the Bigger Pockets forum.

We have two rental properties that will likely cover 1/3 of our expenses when we retire in about two years. We have amazing long-term tenants who are pretty much entirely hassle-free, and have had no vacancy. We also buy very solid higher-end units in great locations. That means we attracted higher quality tenants who take good care of our units. The trade-off is a slightly lower ROI (our properties don’t meet the 1% rule), but we also experience strong appreciation and less hassle. Less hassle is important to us as we self-manage and live abroad.

Personally, I also would not live solely off rental income. Research suggests that the wealthy have at least four income streams, which is what I aim for. So in FIRE, we plan to have rental income, dividend income, business income, and possibly part-time income from DH’s hobby. That way, if anything goes sideways, we are not up the creek without a paddle.

[clarkfan1979]

Anyone retired or retiring on all/mostly rental income and care to share what that looks like for you?
We are getting close-ish, think we are a couple years out (kids educational expenses and schooling are keeping us in a HCOL area for a bit yet), and I love reading stories and learning from from FIRE'd folks whose investments and RE cash flow are from real estate.

Retiring on 100% rental income can be tricky, as others have suggested. I think 75% rental income and 25% index funds is much more realistic and easier to model out to cover fixed living expenses.

My wife and I averaged 85K/year of W2 income over the past 12.5 years. If we didn't have rentals, our FIRE timeline would be 30 years. However, because of rental real estate, it is 15 years.

[iris lily]

I'm diversified into real estate, but I personally wouldn't put everything I to real estate.

However, I do have friends who do.

The biggest thing is that you need some kind of exit strategy if you're all-in on real estate. You don't want to be managing properties forever, and even if you have a management company, it's still a certain degree of work and responsibility that may get cumbersome as you age.

Also, you need a metric by which you decide when a property as an asset is no longer best used as a rental. What will you do if the value goes up and the rents don't? At what point is selling smarter than keeping a unit as a rental??

And what will you do with the cash if/when you sell??

These are all really basic things that you probably already have thought of. Perhaps if you specify more what kind of info you're looking for, folks here can help you better.

Well, there’s rental properties, and then there’s rental properties!

My cousin who has mega assets  started selling off his multifamily units many years ago and buying farmland. He’s thinking of the day his daughter will inherit all of his assets and he doesn’t want her to have to manage residential real estate.

It is relatively easy to lease out high-quality farmland.

[Metalcat]

I'm diversified into real estate, but I personally wouldn't put everything I to real estate.

However, I do have friends who do.

The biggest thing is that you need some kind of exit strategy if you're all-in on real estate. You don't want to be managing properties forever, and even if you have a management company, it's still a certain degree of work and responsibility that may get cumbersome as you age.

Also, you need a metric by which you decide when a property as an asset is no longer best used as a rental. What will you do if the value goes up and the rents don't? At what point is selling smarter than keeping a unit as a rental??

And what will you do with the cash if/when you sell??

These are all really basic things that you probably already have thought of. Perhaps if you specify more what kind of info you're looking for, folks here can help you better.

Well, there’s rental properties, and then there’s rental properties!

My cousin who has mega assets  started selling off his multifamily units many years ago and buying farmland. He’s thinking of the day his daughter will inherit all of his assets and he doesn’t want her to have to manage residential real estate.

It is relatively easy to lease out high-quality farmland.

I don't know if OP has any interest in farm leasing, but yeah, that's my point, there has to be some kind of plan in place for what on earth to do with all of the properties.

[Jon Bon]

Present

I probably have half my wealth in RE and half my wealth in equities.

I would say my RE portfolio produces about 60k a year. I do my own management. It is not passive, but also not active. Like I am doing showings this time of year, its annoying, but not that bad. Generally you always get to pick your hours. I work really hard the month of July when everything turns over. So that is a bit of a grind.

Revenue can be lumpy, Generally the summer is lean and the winter is fat. I do lots of capital intensive projects in the summer and move out, and then make a bunch of money in the winter.

Exit plan? No idea, it pays well for very little work. So right now its pretty sustainable, if we have a low income year we might sell one going forward, but it fits very nicely into our lifestyle right now. Technically I think we could live off the 60k that we make from rentals and have zero other income. SO has a solid w2 job with good hours and great PTO so we are heading towards fat fire right now.

Our kids have gotten pretty expensive. In the last month we did all the summer camp stuff for them, it was more then $2000. So that is a big thing that has changed for us. Our spending is way up, some is inflation, some is lifestyle creep, but mainly I think its having kids. So we are "coasting" right now adding to the pile nicely.

Getting a loan is a massive PITA btw. Banks cannot figure me out whenever I try to borrow money, so just be aware of that. Its gotten to the point that I just go hard money now when I see an investment I am interested in. I have the track record that folks will gladly write me the check and dealing with banks is a disaster. The underwriters have a brain aneurism when they look at my application. "Wait this guy has HOW MUCH mortgage debt?!"

It sure beats the pants of working 60 hours in an office though.....

[FrozenAssets]

What will you do if the value goes up and the rents don't? At what point is selling smarter than keeping a unit as a rental??
And what will you do with the cash if/when you sell??

These are good questions. I'm not sure, and we haven't really considered an exit strategy while we've been in the building/growing phase. We originally intended to purchase and leave a property to each kid (4), now we've surpassed that and we have no plan in place. I guess I figured we'd die with the rental properties and leave it all to the kids...

[FrozenAssets]

Exit plan? No idea, it pays well for very little work. So right now its pretty sustainable, if we have a low income year we might sell one going forward, but it fits very nicely into our lifestyle right now. Technically I think we could live off the 60k that we make from rentals and have zero other income. SO has a solid w2 job with good hours and great PTO so we are heading towards fat fire right now.

Our kids have gotten pretty expensive. In the last month we did all the summer camp stuff for them, it was more then $2000. So that is a big thing that has changed for us. Our spending is way up, some is inflation, some is lifestyle creep, but mainly I think its having kids. So we are "coasting" right now adding to the pile nicely.

Getting a loan is a massive PITA btw. Banks cannot figure me out whenever I try to borrow money, so just be aware of that. Its gotten to the point that I just go hard money now when I see an investment I am interested in. I have the track record that folks will gladly write me the check and dealing with banks is a disaster. The underwriters have a brain aneurism when they look at my application. "Wait this guy has HOW MUCH mortgage debt?!"

It sure beats the pants of working 60 hours in an office though.....

So much this! Our kids are so expensive right now!

And we've decided DSCRs/hard money are the way to go, on paper or through an underwriter's eyes we look like an absolutely no go. We're thinking we may be done buying at this point.

We net roughly $75K/yr on the rentals which will be more than enough when it's just us, but while the kids are still home and $$$, we're still working our other 1099 "jobs". We've spent a ton the last few years on property improvements to ensure that they are all fairly well set for a while. For the amount of effort it takes on our part (maybe 5-10 hours a month?), I expect we'll continue to self manage until it's not feeling like a hobby anymore, or if we want to travel and be completely unavailable.

I'm not sure exactly what I was looking for in starting this thread, either, mostly just curious if anyone live off of rental income and what that looks like for them. Not pursuing a specific WR, but rather aiming for a cash flow number... it seems a bit rare on this forum and interesting to see other people who are doing that!

[PMJL34]

I will be retiring this year and plan to live off of rental income. Age 37, VHCOL, and family of 4 with children aged 14+10. Net rental income will be about 70-80k (not including repairs/capex/vacancy). Yearly spend will be about 50-55k. Cash reserve of about 75k and retirement stache 550k. Mortgages pay off is 27+ years away. I have a small pension @ 50 of about 1.2k/m and social security @ 62 of about 1.3k.

I do plan to sell as soon as financial able and put it all in index funds. This most likely won't be for a while though.

I'll let you know how it goes!

[FrozenAssets]

I will be retiring this year and plan to live off of rental income. Age 37, VHCOL, and family of 4 with children aged 14+10. Net rental income will be about 70-80k (not including repairs/capex/vacancy). Yearly spend will be about 50-55k. Cash reserve of about 75k and retirement stache 550k. Mortgages pay off is 27+ years away. I have a small pension @ 50 of about 1.2k/m and social security @ 62 of about 1.3k.

I do plan to sell as soon as financial able and put it all in index funds. This most likely won't be for a while though.

I'll let you know how it goes!

Can't wait to hear more and follow your journey! When do you plan to pull the trigger? We are thinking 2 more years to get one more kiddo graduated, that'll leave 1/4 at home/still in school when we plan to move (back) into one of the rentals and tiptoe into RE.

[ca-rn]

Rental income (once its paid off) will cover majority of expenses but never planned to rely on this income alone.

My main reason for becoming a landlord was to afford a place to live in a HCOL city.  Having tenants to help pay for mortgage/housing costs helped me to max invest w2 money into pretax savings and brokerage accounts to get to FIRE faster.

I do plan for 1 rental to cover property tax, insurance, utilities w/a bit let over to flow into repair/maint bank.  The second unit will pay for healthcare and some taxes for converting 401k into RothIRA. 

That's the plan but won't know how it turns out until its put into action.

Once I get too old (70's???), I think I'll sell, move into assisted living or something for aging.  After taking max depreciation and paying taxes for appreciation- the net won't be much but by then I'll be closer to death and should still have a healthy stache to care :/

[monarda]

We are about 50% in real estate in our portfolio. We own two rental buildings, 5 units total. medium-HCOL area. Our day-to-day expenses, including our home's PITI are all covered by the net rental income. One building's loan will be paid off soon, which will give us $900 more per month of cash flow.

[SeattleCPA]

You don't want to be managing properties forever, and even if you have a management company, it's still a certain degree of work and responsibility that may get cumbersome as you age.

+1 on this comment. I'm a fan of considering including direct real estate in your investment portfolio. But you want to think about how it works in the last chapters of your story.

There's the step-up in basis thing that can let your spouse or heirs avoid income taxes on the gains you've accumulated over the decades. And that's very attractive.

Also it is nice to have a page in your tax return where you can easily take tax deductions.

But you want to be careful about trying to manage (or manage the managers of) rental properties in your 80s. (The obvious work around is to have kids willing and able to help.)

[Omy]

+2

We guessed we would want to sell our rentals around age 70 to relieve ourselves of the physical and mental burden of being landlords. Instead, at the first vacancy during FIRE (and closer to age 60) we decided to sell a rental rather than repair and re-rent.

It has been such a relief to get out from under one of our rentals. We are now hoping that the next vacancy will come sooner rather than later so we can sell our other rental property. Getting out of the rental business will simplify our responsibilities and taxes significantly.

[WVstache]

Regarding an exit plan...

Why not group all rentals in a single sale - 1031 that into a super high end home - then live there for a few years (3 of 5 I think) and then sell it?  I think if you are married, you get $500,000k in tax free gains.

[twinstudy]

My partner and I intend to retire off rental income alone. The advantage is that you benefit off rental income while leaving the actual assets (which have also appreciated considerably) to the next generation. I will teach my kids that the houses we own are not to be sold or touched - they are just left there, like little tokens in Monopoly. I still expect my kids to work for their own assets and to add them to the family pool.

The most important thing is diversification - buy different kinds of properties and, crucially, buy them in different states and under different entities. Doing so shields you from progressive land taxes which are the biggest threat to property investment.

[clarkfan1979]

Regarding an exit plan...

Why not group all rentals in a single sale - 1031 that into a super high end home - then live there for a few years (3 of 5 I think) and then sell it?  I think if you are married, you get $500,000k in tax free gains.

A 1031 is for investment properties. You can't "exchange" an investment property for a primary residence.

I agree that many landlords sell in their 60's & 70's and it's probably a good move for quality of life. However, I personally don't think it's because property management is that much of a hassle. It's more based on the fact that the landlords now have a shit ton of money and they have won the game. Any sort of minor inconvenience becomes somewhat unnecessary.

For those who got a late start in life and want to start investing in rental property at age 50 and retire at 65 with mostly DIY skills, I would say go for it. Property management and repairs in your 60's, isn't going to be the most fun ever. However, it's going to be better than staying at a desk job into your 70s.

For me personally, I would probably hire out more repairs as I age, which I already do. The property management piece seems to be pretty easy. Even though I do my own property management, I occasionally pay people to show the property. I do all the applications and screening.

[monarda]

For me personally, I would probably hire out more repairs as I age, which I already do. The property management piece seems to be pretty easy. Even though I do my own property management, I occasionally pay people to show the property. I do all the applications and screening.

64 year old. We self manage 5 units. We hire out for things we don't feel like doing, but we still do a lot of the little things ourselves.

[srad]

I have to add that if you are able to retire on rental income alone, you aren't adverse to work.  You've already built a larger portfolio of doors and knocked out the hard part of this process.  Which is accumulating properties and getting them rent ready.  Maybe its just me buy i seem to only buy properties that are in crappy condition so there's a lot to get them ready.  Once a property is rent ready, its just fill them and keep them maintained. You can easily hire out the maintenance for things you don't want to do.  I'm over replacing toilets and repairing fences, but I will still paint a room or two and I will always be in charge of filling a vacancy.  The amount of work on a well maintained rental is is pretty minimal for the profit collected.  I can't see that changing as I reach my 70's.

That being said, as I age, I expect I'll sell off a property every couple of years just to simplify life. But that wont be for 20+ years, so who knows what will really happen then. My current plan is to live mostly off of our 10 rentals and tap the stash when we want to do fun (expensive) stuff.

[WVstache]

Regarding an exit plan...

Why not group all rentals in a single sale - 1031 that into a super high end home - then live there for a few years (3 of 5 I think) and then sell it?  I think if you are married, you get $500,000k in tax free gains.

A 1031 is for investment properties. You can't "exchange" an investment property for a primary residence.

Completely understand - but nothing says you can't 1031 exchange a portfolio for a high end lake house - with the intention to rent it out.  Then a year or two later, decide to make it your primary.

[clarkfan1979]

Regarding an exit plan...

Why not group all rentals in a single sale - 1031 that into a super high end home - then live there for a few years (3 of 5 I think) and then sell it?  I think if you are married, you get $500,000k in tax free gains.

A 1031 is for investment properties. You can't "exchange" an investment property for a primary residence.

Completely understand - but nothing says you can't 1031 exchange a portfolio for a high end lake house - with the intention to rent it out.  Then a year or two later, decide to make it your primary.

Sure, you could buy an investment property with 25% down, a 1% higher interest rate and $5000 of extra closing costs with a 1031 exchange and then later claim it as your primary. However, when you sell your primary, the entire tax obligation from the 1031 exchange will be due, which pretty much makes the transaction worthless.

Around 2011 the government changed the rules on people moving in and out of rental homes to avoid capital gains. Prior to (about 2011), someone could buy a primary, live in it for 2 years, then rent it out for 26 years, then move back into the home for 2 years, then sell and avoid the capital gains. Now with the new law, the capital gains is pro-rated. Because you lived in the house as a primary for 4/30 years, you get to avoid 13.33% of your capital gains bill, not 100%.

Any tax people want to add to this? I'm not a CPA, but I've bought 4 primary homes and converted 3 of them into rentals. I've been following this law since 2010. 

[Pookie]

I live off of my rentals but I have my investments accounts which should cover me in retirement. I have a PM because I just got tired of managing renters. I do think it is possible to retire solely on rentals but I would have a large reserve set aside.

I live in a very low-cost area but everything has gotten so expensive (repairs, contractors - if you can find one) and I just don't have the desire to work on my properties anymore. It's exciting during the accumulation process - or was for me. I enjoyed remodeling. Now, I see why so many older folks just can't do it anymore. And in some places, tenant rights are just over the top.

Like a few said, have an exit strategy. Remember that appreciation is captured if you sell and that is a hard pill to swallow. Repairs can sometimes take half a year or more of rent. The ACA cost is determined by your income/sale of property. Insurance is going up.

I wouldn't do anything differently in regards to buying real estate to provide a good income/retirement. Time is valuable and it has afforded me lots of free time to do the things I enjoy.