How Owning 22 Rental Properties Can Retire You Faster Than $1M in a 401K


*Note: This is an update to the “How 15 rental houses can retire you faster than a million dollar 401K” article we posted a few years ago. You can view the original article and the accompanying comments on it here.

Or…Saving Your Way to Retirement vs. Building Cash Flow To Retire

First let me say that I prefer the second title to the first because saving your way to retirement is really the concept that I want to attack and hopefully destroy in your mind by the time you finish this article.

Second, let me make a few concessions. Does building cash flow require education? Yes. Does this require courage? Yes. Does this require commitment? Yes. Does this require hard work? Yes.

But let me ask you this. Are you really thinking there is something for nothing out there? Do you think that you are going to get ahead without courage, commitment and hard work? I don’t think so. I think you know this is true. However, because of lack of self-education, you just don’t know what to do so you keep doing what you are doing year after year, decade after decade.

“Formal education (high school and college) gets you a job.
Self-education gets you rich.” -Jim Rohn

According to Social Security, 90% of Americans are retiring at or below poverty income levels. The main reason for this is that they are saving for retirement instead of building passive streams of income. They retire with only social security income and their meager savings.

We will call this Business Model No. 1. It’s scrimping and saving your way to retirement.

Special Note: Remember that a family is a business. It is a business that is supposed to run at a profit. Most people never learn this simple point.

Let’s look at the results of Business Model No. 1 over a nine-year period compared with Business Model No. 2.

Business Model No. 2 is building wealth and passive income streams with real estate. We will keep it simple and only look at single-family property for this example.

Beginner facts

Let’s look at the median income in the US. As of 2011, the median income in America for a family is $50,502 according to the Census Bureau.

If we take a conservative approach and decide to save 10% of our income for investments that is about $420 a month.

I understand that the vast majority of people can’t and don’t do this. They live paycheck to paycheck with no savings at all. That is why the average 65 year old only has $35,000 to show for 40+ years of working 40, 50 even 60 hours a week.

But for this example, let’s say they do it.

What Results will you get in 9 years (and 32 years) with Business Model No. 1?

According to, the average stock market return since the turn of the last century is 9.4% — 4.8% in price appreciation, plus approx 4.6% in dividends. The average inflation for the same period has been about 3%.

At the end of 7 years, you will have saved up about $45,000.

At the end of 9 years, you will have saved up about $70,000.

It will take you 32 Years to save up $1,000,000

Because of inflation, your $1,000,000 is now only worth $388,337.03.

Now you have to start taking out money from the principal effectively forcing yourself to “pray you die before you run out of money.”

Where are the golden years? Travel, grand kids, cars, houses, charity and legacy. Just pulling out the equivalent of $40,000 a year in today’s money means you have less than 10 years worth of savings. What if you live longer?

Now let’s look at Business Model No. 2: Building Passive Income

Take the average of my last 7 deals.
$20,000 Equity Capture
$400 a month cash flow after principal, interest, taxes, insurance (PITI) and $100 a month maintenance and vacancy reserve.
$12,000 down. This is the total down payment including everything out of pocket.

Start saving the same $420 a month but this time, educate yourself in real estate investing and start buying income-producing assets instead of speculating in the stock market.

29 Months to save up $12,000
Now Saving $820 a month ($420 from earned income, $400 from cash flow)
15 Months to save $12,000
Now saving $1,220 a month
10 Months to save $12,000
Now saving $1,620 a month
7 Months to save $12,000
Now saving $2,020 a month
6 Months to save $12,000 and buy another house
Now saving $2,420 a month
5 Months to save $12,000 and buy another house
Now saving $2,820 a month
4 Months to save $12,000 and buy another house
Now saving $3,220 a month
4 Months to save $12,000 and buy another house
Now saving $3,620 a month
3 Months to save $12,000 and buy another house
Now saving $4,020 a month
3 Months to save $12,000 and buy another house
Now saving $4,420 a month

We are now at the end of year 7. Let’s see where we really are.
10 Houses
Picked up $200,000 in equity
$4,000 a month in passive income

Where are you at with Business Model No. 1 in the stock market? You’d have $45,000 and no monthly income.

Let’s go just two more years: You will average about one house every two months over this period.
Two more years and that is 12 more houses.

We are now at the end of Year 9. Let’s see where you are.
22 Houses
$440,000 Equity Capture
$8,800 a month in positive cash flow

Where are you with your savings program in the stock market? You’re at $70,000 and no monthly income.

Obviously there is no comparison financially. Building wealth with real estate is much more effective.

But now let’s see how your life will be different at the end of those nine years.

It’s not the money, it’s the Lifestyle.™

How do your bills come in? Monthly, right? How does $70,000 in the stock market help you pay your bills? It doesn’t. How about that $8,800 a month passive income? All your bills are paid aren’t they? Yes. The average family in the US spends $4,009 a month.

Could you quit your job if you had $8,800 a month in passive income? For most people the answer is yes.

As soon as your passive income meets and exceeds your bills,
you are retired. It has nothing to do with age.
We have students in their 20s that have done this.

How long will you live in retirement?
How well do you want to live in retirement?
Can you enjoy your golden years? Travel, grand kids, cars, houses, charity and legacy.

In conclusion, building wealth with real estate is so much more effective than speculating in the stock market it is not even comparable.

So get out there, get educated and start building passive streams of income for you and your family.


  1. Kinta Nicely says:

    I am very interested in Real Estate,and I would love to get educated on it,however,I can’t seem to get my feet on the ground.I am dead broke and no income what can I do?

    • How do I continue to get loans? I have 8 rentals so far but they quit lending me after 4 mortgages. My passive income is at $2400 a month right now but the bank say Fannie Mae has capped the investment mortgages. Please advise

      • This is not true. While each bank limits its exposure to 4 (this is fairly common), you can go to another bank that will lend you another 4. You need to look around and ask fellow investors in your area for contacts. As well, there are mortgage brokers that will do for up to 10, which I think is the fannie mae limit per person. Beyond that, you may run into resistence, then you can think of commercial loan option if you want to keep doing this. Good luck.

      • Nick McCright says:

        Go to a local bank. A savings and loan, you should be about to get loans that route.

    • This assumes that you can leverage each property as quickly as stated above with no issues; and that you can find enough deals with that high of a debt service coverage ratio, while still being in the market price range to only require apprx 12K down. These are very difficult to find… this market is very efficient.

    • Go to and join as many real estate groups in your area as you can. Then attend them all. See which ones have the smartest people and feed off of them. You can’t learn Real Estate from bs courses and webinars. You’ll have to see how real people deal with state and local real estate tax laws to actually make a profit. You can also team with potential investors if you’re good, or know subcontractors that are, at renovating at the cheapest cost possible. Then you can split the equity and finance your costs as you go along.

    • Ken Kennnemur says:

      The first step is to quit instant gratification spending. With the money save for your first down payment 20% of cost of house. Another little bit for closing . Your first one will be the hardest to get . Now and I assume you will do the research and due diligence to make sure the property will make money . Get to know a good banker that loans on multiple properties not just 3 or four. Save all your properties income for your next it well become faster and faster . It worked for me I kick myself for not doing it earlier .

      • Hello Ken. What if I am a complete begginer to this ? Where do I start? How do I start research? How much money do I need? I have all these question and nowhere to start.

        • This is the most common question that I get as the host of the Lifestyles Unlimited Real Estate Investor Radio Show and the answer is simple. You join a real estate investor group like ours (sorry for the sales pitch) and surround yourself with like and kind minded people.

          The classes will teach you all of the best practices and the correct business model so that you do it right the first time. Making a mistake on a single-family house can cost you tens of thousands of dollars. A mistake on an apartment can cost you millions.

          Then by being around people just like you who are doing it and succeeding, you stay motivated and inspired.

          Steve Davis

    • Unfortunately, it takes money to make money. No one’s going to give you a 100% investment loan. You typically need 20%. If you’re dead broke, I wouldn’t advise you to make that leap anyways, since you’re always going to need a little nest egg for maintenance. Work hard, be patient, and you should be able to get there.

  2. Nightvid Cole says:

    You are over-leveraged with no emergency fund at the beginning. You could just as easily lose it all due to a destructive tenant that is difficult to evict. Suze Orman says you need 12 months of working capital. What is that in your case, $20,000? And that is IN ADDITION to your personal emergency fund.

    You are also neglecting property management costs. And don’t try to pull this whole “But I do it myself!” baloney. You still have to account for the value of your time. By the time you have a few of them, it will be a full-time job anyway. What’s the point of “retiring” if you still have to work full time for income? Is that even retirement at all?

    Finally, you need to account for the lost income during the time you were learning how to do the whole landlord thing.

    Even if you only “pay yourself” $100/month for your work on the first house, you are doing worse than you would in the stock market. Initial investment = $12,000 down + $5,000 closing costs, furniture + $20,000 emergency fund + $2000 lost income to spend time starting up = $39,000. Cash flow = $400/month – $100/month opportunity cost of your TIME = $300/month. Yield = 9.2%

    VS. 1.5X leveraged portfolio of small capitalization stocks @13% return (give or take).

    Now who’s talkin’?

    • Robert Sprive says:

      You’re not factoring in the tax benefits of real estate nor are you factoring in the income factor. Yes you may get an annualized yield of 13% but what is your hold period? what is your maximum draw-down? Both are not easy but to dispel real estate for the stock market is strange.

      • Nightvid Cole says:

        Tax benefits are quite small unless your itemized deductions are much above the standard deduction, and income is available in the stock case, though you might occassionally have to sell a few shares every now and then. Neither of these is much of a reason to prefer real estate over stocks.

        • Krazyrent says:

          I have an Accounting Degree and own about 60 properties the tax benifit is huge for rental properties as you can write off the depreciation, you are limited to the amount of depreciation you can take unless you are a real estate professional, which would be an easy test to meet with multiple properties basically 750 hours a year. Last year I cash flowed 250,000 but had 260,000 in depreciation and I was able to take the loss againts other income. Note: you have to actively and material participat in your rentals to take the benifit go to search exactly how to meet the rules.

          • cary honganen says:

            not only do you have to materially participate (51% of working time towards RE) but you also have to file an “Election to Aggregate” properties with the IRS at the time you start acquiring significant numbers of properties. If you neglect to file the election, then through the 1986 tax reform act the IRS can require you to show 500 hours material participation on each property you own (ex: 10 properties x 500 hours each = 5,000 hours material participation per year w/o filing-impossible). Even though I was a PIG member for several years I was never introduced to this filing. I was audited on my 2007 and 2008 tax returns as I filed as an active RE investor, setting off earned income with RE investing losses. IRS claimed I was passive and could only offset income from properties. I eventually prevailed this past December as I was doing mostly RE investing those two years and could prove it, but it was a VERY painful process. I did eventually file the election in 2011 but that left me open for 2009 and 2010. I have since sold all but two of my rentals (in consultaion w/my lawyer) and invested in a 506 acre timber tract in E. Texas. Way less gov’t intrusion as I was able to get out from the ’86 tax reform act which the gov’t now uses to raise funds as few RE investors know of this filing. And I get all kinds of tax incentives. I logged 55 acres last fall, made about $169,000 and still had a $38k loss on the whole deal. As long as I stay in timber farming I should not have to worry about excessive taxes again. Plus, no property insurance costs and verrrry low property taxes with proper ag exemptions. I paid over $30k in property taxes per year on my rental houses. I pay less than $1,000 per year on my timber tract

            But I have to say, if I was looking for an investment scheme and did not understand the timber business, I would most definitely be back in real estate. But I would make sure to file the exemption and I would also reassociate myself with LUINC. I got the best RE investing education I could ask for from LUINC.

          • how did you get to 60 properties? i just closed on my 6th a duplex and its getting more difficult. now i have to put 25% down have 6 months of cash reserves for each property and the subject property and the lenders are telling me ill max out at 10 loans.

            did you put each home in an LLC? did you bundle a few together?

            i am 31 and don’t want to work 40 hrs a week my whole life so i am looking for a smarter way to spend my cash.

            in this article they say they purchased a home for 12k down in what market is that possible?

          • Michelle Murphy says:

            If you have high ordinary income from your job, the IRS might disallow the offsetting losses from the real estate business. I have my rental properties in LLCs to protect against litigation because I acquired my other wealth from company stock options and investing in a dividend growth strategy combined with other diversified assets. Apparently, I had too much ordinary income from my job, so I was unable to offset this much with my real estate depreciation an expenses and I am the property manager. The new tax reform also caps state and local property tax deductions at $10,000 for 2018, and mortgage interest deductions at $10,000. My dividend growth strategy has an annualized average return of 14.2% since 1977, I get an increase in income each year (without hassling or losing tenants) and i have the advantage of being able to hedge or protect the value of my stock portfolio with stock options during corrections which I don’t know how to do for my real estate portfolio. Also, stock market bear market cycles average 4.5 years. Real estate corrections average 9 per the National Association of Realtors. Real estate requires inflation and demand factors to appreciate. Stocks can appreciate without inflation if the company is well managed and engages in activities that grow revenue and earnings. Real estate investing requires taking on debt (leverage) and risking your creditworthiness for years if you make a mistake or there is a correction. With credit spreads and other sophisticated safe stock trading, I can use other people’s money to build my wealth with lower risk. Most successful investors in the stock market don’t “speculate.” We buy financially sound companies, and they return our original investment to us over time via growing dividends (a share of their profits), and capital appreciation of the stock’s price. The liquidity (ability to sell out of a company) of stock investing is much higher than real estate, and therefore also entails lower risk. Also, I use option and short selling techniques to make money during stock market corrections. I frankly don’t care what direction the market is going. I have invested in learning how to invest in all conditions. It’s harder to make money during a recession or real estate market correction. You might experience loss of rental income, or have difficulty raising rents to meet inevitably rising property taxes and insurance and maintenance costs. Dividend growth stocks typically continue to increase their dividends because many are global and not effected by local recessions. I advocate investing in both real estate and the stock market. However, I view my stock market investing as lower risk because I have the knowledge and skill to deal with periodic corrections and other adverse events. I also have more liquidity and can exit a bad situation more quickly than trying to sell my real estate.

    • says:

      That’s not even close to true.

      I currently have 3 rental properties and I make a profit of 550-575 per month after PITI for EACH property. Yes, you have to pay some expenses in maintenance. Yes, there are some risks. BUT so is anything you do and any business. Are you seriously telling us that STOCKS are NOT risky? That’s a joke right??? I started saving at 25 and invested in stocks. Luckily, I doubled my money (from 5k to 10k) but that was still a huge risk (to me way more than rental properties, plus it took me 3 years to make a profit of 5k in stocks, I make a profit of 5-6k on EACH rental property PER YEAR

      whats better 5k at the end of 3 years
      or in 1.5 years buying 3 properties and making 15k in pure profit in ONE YEAR?

      1) you NEED to do the research yourself, over and over again, you HAVE to be willing to do your own research and do as much as you can yourself, especially in the begging or be great at finding good deals, when I use contractors, I make sure they know I have other properties/am an investor so that they have motivation to give me the best deals and services possible to win over more potential business in the future
      2) buy in areas where housing prices are lower, even if you don’t live in that current state you can still BUY out of state
      3) there are appliance plans from most energy companies that cover you in case of an emergency that basically pay for themselves over time with little monthly costs
      4) consider looking at duplexes /triplexes after your first few properties to capitalize on even more monthly income
      5) before you buy make sure you know your “bottom line” for the property and give yourself “the worst case scenario” , for example, if you think you can rent a property out for $1000/month, budget for 900/month just to be sure, would you still buy it then?
      6)local lenders are the best! do not use big banks, have a good relationship with your loan officer and one who works after hours and weekends if needed (I have one so dont say those dont exist) Youll be amazed how a good lender and officer make a world of difference
      7) I do NOT furnish properties, most of the time they don’t yield a higher return
      8) know your strengths and weaknesses, I personally am terrible as a handyperson but I’m great at business, thus, I search for turnkey move in ready properties, all of my houses that I have bought have been remodeled right before I purchased them…and I still make a killer profit
      9) do NOT quit your day job while buying these properties, having a salaried job to live off of and saving all the passive income lets you buy more properties a hell of a lot quicker and gives you more cushion, I live off my regular job and just save my rental income (once in a while I let myself buy something I want with it – but not too often – sometimes I use it to pay student loans ect)

      I would also suggest instead of webinars, to take a real estate sales person licensing courses, its relatively not that much money depending on the state (70-300 dollars for all the courses), plus if you want to continue further you can just pass the state exam and sign with a broker and get PAID to buy your own properties! (not to mention know a lot more laws and landlord rules to protect yourself). I have been licensed in 2 states and it makes a world of difference in my knowledge. If you dont become an agent find one that specialized in investments in your areas of interest

      Its not easy, you have to SAVE, due research, spend your time and energy building for a future, give up some Saturdays one in a while, ect, if it was easy everyone would do it right? The biggest part is start slow, give yourself cushion, and do AS MUCH RESEARCH as possible

      Also, no it does not HAVE TO ALWAYS BE A JOB, you can truly retire once you get enough properties, you can hand it over to a professional property management company for 8-12 percent of your rental income, its not for the lazy, but I will be able to “retire” at 35 on a 6 figure passive income….that makes it all worth it!

      • Luis Sosa says:

        Wow! Nicely said. I’m about to have my first rental in the next few months. I’d love to pick your brain of you wouldn’t mind. My email address is I hope to hear from you!

      • @ Love #9) its exactly what i do. Live off my salary and save all The passive income for the next one. Which comes faster and faster. Closing on my 3rd rental in 5 years next month. I have a duplex i live in and 2 fourplexes. Buying our dream home next year then will continue to add quality properties every other year at the minimum. Fourplexes for now, keeps me away from commercial requirements and higher then 20% down payments. Already found my portfolio lender that will finance me up to and past 10. Such a beautiful income stream. Started at 24 after owning our first home for 3 years. Sold it and bought our duplex 5 years ago at 3.5 down. The two 4 famiits were 20% down. I self manage and am in CT.

      • Spartan Diva says:
        Can you elaborate on #3 – I’m not familiar with this item. Energy companies give appliance plans for emergencies?
        You are spot on with everything else. Bravo, and continued success.

      • Michelle Murphy says:

        It’s misleading to claim that real estate has less risk than investing in stocks. They both entail risk and there are ways to manage the risk of investing in both. Stock investing has the advantage of liquidity, meaning I can change my mind and sell the stock if I need to free up the cash more quickly and with less hassle than selling my real estate. I can even mitigate any losses or increase my cash flow by using stock options. With both real estate and stock investing you have to invest in acquiring knowledge and skill. I invest in both, but I prefer stock investing because I have more tools to reduce the potential of losses, I don’t have to tie up as much money for long periods of time to make a profit, I can achieve rising cash flow through dividend growth stocks and covered call writing (a low risk option strategy), I can use leverage through margin or options to accelerate my returns, and I don’t have to deal with tenants, insurance and building inspectors, and tradesmen.

  3. I am very interested in working my way up to 22 homes. I already own 4 and am about to purchase 1 more. I do have positive cash flow on some of them. However, many banks that I have contacted for future borrowing for investment homes, limit my borrowing based on DTI requirements and a maximum # of properties. I prefer not to borrow from hard money lenders or private individuals as the interest rates are much higher and the loan durations are much shorter. Does anyone have any recommendations on whether any financial institutions will lend to small real estate investors based on good rental income and positive cash flow of each property and less on DTI? P.S. – My credit scores are very high.

  4. Evil Chaperone says:

    At ground zero, you need to put real estate investing on the back burner. Finish high school. Go to a technical or vocational school to build a marketable profession. Roofing, plumbing, carpeting, HVAC tech, etc.. Get a job starting at the bottom level and bust your ass as hard as you can to become an expert in your profession. Work seven days a week and save as much as you can along the way. Then when you have the capital to kick this plan off, go for it!. Your not just going to crawl out of your moms basement or off your grandmas couch and start investing in real estate. Takes money AND reserves to succussfully pull this off. Be prepared to fall on your ass a few times along the way.

    • cary honganen says:

      Good sage advice. i took a few severe hits along the path of learning, one a six figure loss. Without the reserves I had I would have gone bankrupt. Not all your moves will work out like you think, no matter how good you plan. As the evil one says, become an expert in your craft, save as much as you can, keep your credit scores up, and invest in yourself through education from someone like LUINC. Hang out with like-minded individuals. You will still make mistakes but you will be able to recover from them. And always remember to learn something from your mistakes so you do not repeat them. I look at them as mini-learning events to take to heart, especially when significant money is involved.

  5. This article fails to mention all the debt that has been accumulated in this plan. Real estate is a great investment tool when done correctly but that method isn’t outlined above. Save cash and purchase a rental property then use the cash flow to save for the next one. It won’t take long without a mortgage. Yes, it will take a little longer but you’ll have less risk and stress.

  6. This is great information, however, it seems like a huge chunk of the puzzle in Business Model 2 is left out. My biggest question is: how would you consistantly get financing for 22 mortages? That’s really the only thing making me question this model. Thanks in advance for any input

    • Buy cheap properties. I was cut off at 6 loans. I took my house portfolio to a local bank and got a line of credit. Extra cash included which I used to buy more cheap houses. Then when LC maxed out, I termed it out and got another line of credit. Then started to get loans on duplexes and a quad. 12 years and up to 60 units. I do owe a bunch. But my equity is huge and billing 25k monthly rents.

      • cary honganen says:

        I too used LOC’s instead of conventional loans. I also paid off my house and max’ed out a HELOC (80% loan value, interest only payments only when I use it) that I used to purchase. I still take the same approach buying the timber tracts I now invest in. Sometimes I will refi out or just do a timber cut to raise funds for the next tract. I will retire with over 1,000 acres and a nice six figure income in a couple years.

  7. this is an awsome model, I’m doing something similar but at a slower pace. My question is where are you going to find a bank to finance you all these properties. 2. where are you going to find homes this cheap and with out any appriciation. if you are planning on equity building then every time you buy a home you should also expect to pay more correct. this means you have to put more down. this is assuming all prices stay fix for 9 years. I don’t know maybe i’m just wrong.

  8. Fred benzing says:

    I can’t figure out how this scenario will work on a $50’000 annual income.

    I can’t see any bank loaning this kind of scenario without the investor having the funds to pay for all 22 houses which will all have mortgages against them with an annual income of $50,000

    • If the property makes enough positive cash flow, your debt is basically cancelled out. But it needs to show up on your tax return to be able to be used i believe, that’s how its been working for me. Also, get yourself a good loan officer, they want to get paid so they want to help you close, they will work far more diligently than most bankers that get paid per hour.

    • chrisprice says:

      Rental income counts as income. If you are setting up deals to have positive cashflow, you are increasing your annual income every time you buy a house, not just your DTI.

  9. Robert Rieley says:

    I and my wife are brand new to this. We are both living paycheck to next. We are over 50. I wish to vigorously pursue this yet it is like information overload and working 70 + hours per week it seems it will take months on end to gain enough knowledge to begin. So any thoughts or suggestions greatly appreciated.

    • hi Robert, the ability to buy rental properties comes with knowledge of real estate financing, cash flow, risk and having multiple exit strategies. I think the best place to start is to reduce your overall debts, and save for at least a 6 month cash reserve. Then, if you own a single family home, sell it and buy and live in a 4 unit owner occupied home, using the tenants income to pay for the cost, and putting only a 15 year mortgage against it. (residential real estate, 4 unit, is easier to get financing for than commercial, so this is where you start). In just 7 years, you will be 50% paid off on this house, and can use the equity to buy your next 3 or 4 unit. I think buying commercial properties, of 5 units, or more, 10 units is only possible if you buy them from a bank, as a distressed property, that is under-performing and be willing to turn the property from around over 18 months. That means using private money or hard money as a bridge loan, getting the property to perform, in terms of lowering expenses (separating the heat), or increasing rents, getting rid of dead beat tenants, fixing up the apartments, or all of the above, and then refinance into a conventional loan later out of the hard-money or private money loan. So you can do it over 18 months turn around a 10 unit building. The only way to get your income up is to buy two 10 unit buildings and so forth. If you paid off your owner occupied 4 unit in 10 years (15 year mortgage but extra principal payments), your owner occupied 4 unit becomes all cash. You then find a 10 unit distressed property, and have a turn-around plan. Get a bridge loan using your paid off owner occupied 4 unit as collateral, or sell of your 4 unit. Get the 10 unit and owner occupy it and rehab it. Once you have it cash flowing and you have regular money against it, not expensive money, go get your next 10 or 12 unit building and so forth. In other words (a) save capital and get real estate education first (b) get an owner occupied residential,not commercial property with a short mortgage to build equity faster (c) get a distressed commerical 10 or 12 unit, using cash from your paid off residential property, (d) improve the cash flow in the distressed commercial property and stabilize it and finally (e) get your next 10 or 15 unit property and repeat the process.

    • Robert, just dive in & purchase your first one !! Your desire to succeed will drive you to a successful start. Make a good, common sense purchase & don’t be afraid. You will learn so much more from this hands-on experience than any reading,advice,etc will ever teach you !! Give it a shot. I was also nervous at first. Now 4 years later, it seems easy. Good Luck !!

  10. I own and manage 8 units. For all of the questions from the folks regarding obtaining financing, I can certainly help with that. The first 4 or 5 properties will be a cake walk because you’ll be within guidelines that allow lenders to give you a 30 year fixed rate note and resell the mortgage on the secondary market (a conforming loan). After the first 4 or 5 properties, you’re going to have to start getting creative. First, be prepared to put down a minimum of 10% per property. Second, be sure that you have adequate reserves. In a lot of instances, this means 6 months worth of piti payments on the properties that are currently financed. Third, DON’T rush the process. Feeling pressured to buy properties quickly because the market is heating up only leaves you vulnerable to mistakes. Fourth, talk to local banks/lenders. In my experience, the banks that will work with you are not going to be the national institutions, but are going to be local banks. Fifth, forget the notion that you will be able to positively cash flow on every property that you purchase. As the market recovers (like it is currently doing), you will be forced to accept ever smaller profits on each property. Most local banks that will work with you are not going to offer you 30 year notes for financing and that will definitely have an impact on your cash flow. My lender offers me 10 year notes with a low fixed rate and 10% down. This is one of the best deals in my area, but leaves me very little for cash flow (often cash flow is negative) and so I’m left with the choice of cash flow negative or wait till I have more saved to put down. Do you need 22 properties to retire? Probably not. I certainly don’t. My goal is somewhere around 10-12 because I intend to get the properties paid off as quickly as possible. My retirement comes when the properties are paid for, not when my monthly passive cash flow has exceeded my monthly expenses. Good luck!

    • wow. If you are getting negative cash flow then you should have no business buying any properties whatsoever. If the positive cash flow is not where I want it I simply do not buy! I will switch to doing secondary tax lien foreclose and flips or private lending until things improve as far as rental properties go. I put 20% down on all my purchases MINIMUM. Credit is fine and I have 6 months reserves for every financed property. Thing is now I am only doing cash buys from here on out using rental income and other income I receive. I only have 4 properties financed even though fannie mae will allow 10! I don’t plan on financing again unless i have to. This way I am not over leveraged AND i will get more cash flow with free and clear properties. You putting so little down and carrying negative cash flow could very well put you in a bind before it is all said and done. good luck!

    • You are not forced to accept small returns nor are you forced to accept negative cashflow Sam. Sounds like you are doing lots of thing WRONG PAL.

      • Finally someone has the PERFECT approach. Derek I applaud you for your candor.
        Listen people there are two basic ways to make money in real estate. Capital Appreciation (higher risk) and Cash Flow (lower risk). If you are investing for primarily for CA then you might be willing to accept negative cash flow since you Think your property will signifacantly go up in value by the time you sell. Ok I get that! But my friends, if your primary goal is cash flow then you should absolutely not invest in properties UNLESS you are expecting a positive cash flow year one!!!
        I happen to love Duplex investing as I think it is easy to understand and the cash flow is great. As far as multiple tenant properties, duplexes are probably the easiest to enter into with the least amount of issues. There are two many good cash flow investments out there to not make positive cash flow a requirement.
        To invest in real estate you need to be financially sound, if you are not then you will risk losing not only your money but your time. Additionally, if you have a bad experience you probably will not give it a second chance. If you are not financially sound then you probably lack financial discipline and that my friends is a recipe for disaster. Investing in real estate gives you the ability to leverage your money but done incorrectly can ruin your day. So get some discipline in your life, get a emergency cash reserve and then if you are at that point meeting these minimum requirements, consider buying a duplex to live in and rent out the other side. If you able to do that successfully then your ready to expand. For those of you who might own a home and have demonstrated good discipline, but are new to real estate as an investment, I would recommend starting by buying a duplex.

        • Agreed Joe. I mainly buy for the CASHFLOW! I have no problems getting 30 year mortgages on all my financed properties. Like Bryan said I think Sam is in the wrong market.

          • Jackson Grey says:

            The point that I believe Sam is making is that he is willing to operate initially at a slight negative cash flow, but is limiting his Risk to 10 year loans. Sure he could get a 30 Year fixed and net more monthly cash flow, but his concept of retirement is debt free. Understood that you are not acquiring properties as quickly, but if the market should tank or times become lean, he is insulated because he owns his income properties outright.

    • I don’t understand why you would put yourself in a hole like that with negative cashflow. My only assumption is that you’re buying in the wrong market. High profit deals in the price range this article is suggesting are everywhere (outside the most desirable MSAs anyways.)

      If you’re waiting for the properties to be paid off before retirement, that’s fine, but know that you’re limiting yourself in ownership and cashflow.
      I think too many people see retirement as a goal. Just because I won’t need to work and earn a salary, does’t mean I will ever stop purchasing property. I’ll do that till the day I die.

      I have older clients who have millions in the bank and cashflow heavy each month. These guys are still buying properties and setting them up as assets. They are what you would call “Operators”. They are darn good at what they do. They are an inspiration to keep moving forward. I follow their lead.

      • Jackson Grey says:

        Concerning your older clients that have Millions in the bank, they are insulated as well since those millions self insure them from unseen circumstances. I agree that you should follow their lead in that you should limit exposer to debt, continue reinvesting, and be prepared for these unforeseen expenses while investing.

    • do you recommend to open a business account and deposit all the rent into the same account? tax season should I tell them that I have a business account?

      • Steve Davis says:

        Real estate is a business and should be treated as one. Whether you own one house or a 600 unit apartment complex, it is a business. I keep a separate account for my single-family properties, and of course, a separate account for each of my apartments.


  11. This is awesome! I know I need to get into the real estate game, and I love seeing examples like this. Can’t wait to get started! I’m saving this page for future reference.

  12. I love this advice! The biggest trap for those wanting to plan their retirement is a 401k. A 401k certainly has some attractive characteristics, especially if the offering company provides a contribution match. However, a 401k simply should not be used as a primary retirement savings vehicle. Instead, folks should focus on creating their own cash flowing asset portfolio, like investing in rental properties like you suggest. Great post…in fact, I just linked to it in a article I posted today.

  13. This is a terrific article. I set up my retirement on the exact same principals outlined and actually the same price points. Well Done

  14. I have done both, save and buy rental property. make no mistake, rental property can be a great way to cash flow, I have well over 6-figures of after expense cash flow.

    I have 24 properties, and they generate more than any $1M portfolio could provide.

  15. Gary C says:

    I own over 20 rental properties. My net return is about 8% (or about $400 per unit / month). I expect a market appreciation of about 3% per year after the initial appreciation after renovation. My real estate holdings out perform my stock market portfolio. I buy foreclosed properties that need total renovation, do most of the work myself and (except where licensed electricians are needed). The renovation part is not for the faint of heart & there is a lot to learn when you get started, but you learn, and you can find good contracting help as you get more experience. The managing part is a bit easier, there’s s lot of down time, but you need to be on call, all the time. Once you have a going concern, you’ll need to factor in vacancy and repair rates. And, don’t forget liability insurance too. You could hire s property manager, but typically they charge around 10% of your gross. I’d say, self-employed is a better term than retired, but able to retire is also appropriate. Good luck & be sure to make the proper analysis when buying & renting!

  16. Tim Chan says:

    I just bought my fifth property. Since I still have a full-time job with a little bit over 6-figure yearly, I don’t aim positive cash flow as my top priority or Uncle Sam will have taken my profit. I use property management and buy landlord insurance policy for each of them. I always end up break even or small profit/loss. Any comment on my strategy? My real goal is not to work in corporation any more, but have stable income.

    • Stephen Davis says:

      Tim, congrats on your success so far with your 5 houses. Sorry if this comes across as harsh but your strategy is ineffective on many points.

      You should run your own properties, you should always buy for positive cash flow and if you ever want to quit your job you have to have cash flow. Don’t worry about the taxes on your cash flow. Most of your cash flow is tax free if you know what you are doing.

      My son runs 11 rent houses and it takes him less than 3 hours a month. He makes about $5000 a month in profit (cash flow.)

      Have you taken a course like our on real estate investing yet?

      Stephen Davis
      Host of the Lifestyles Unlimited Real Estate Investor Radio Show

  17. I currently have my primary morg. in which I owe about 310k, House is worth about 600k. I also am about 3 payments away from paying off a condo that I rent out. The condo is worth about 220k. I am looking to buy another condo in the same complex – distressed property for 200k and will bring in 1600.00 per month. My question is, do I borrow the 25% down by taking a loan on my condo that is close to being paid off or do I pay off property and use savings as down payment on next property?
    It was suggested that I can take 100k out against condo and buy 2 more properties with that money.
    suggestions would be greatly appreciated.

    Thank you so much

    • Lee,
      Please keep an open mind as I say this. We don’t ever pay off our real estate. That is dead equity with a low rate of return. We also don’t like condos much. You have a lot more options than you even mentioned. Please call me to discuss your other options (including apartments) at 713-201-7784

      • I had planned on doing cash buys once my financed properties had the cash flow to start knocking them out which in turn produces more cash flow because they are paid off! I understand the dead equity and low cash on cash return. Some properties are not worth financing especially if they are really cheap yet still good investments. I disagree with you on property management. All markets across this country are different. The cash flow where i live has not been great for years. Managing your property is a waste of time here with no cash flow to begin with compared to other cities across the USA. You have to go where the money is. If i can still make killer cash flow with property managers i’m fine with it. Less headaches as well.

  18. I am attempting to duplicate this same model. I have 3 properties and 7 units (two duplex and one triplex) all financed. My monthly payments are just under $3,000 and gross rents come in to $5,800. I enjoy doing this and enjoy the property management end as well. However, I have been very sternly warned by fellow investment mentors, tax professionals, and real estate professionals that I am, “investing money that I don’t have”. I understand the risk, but do not want to stop purchasing more properties. Several comments on this thread mention “over-leveraged”. Can someone help explain why I am being told that this may be unwise?

    I do have the reserves, which seem excess at times, but I don’t touch them. I do put money else-where in investment accounts. In other words, I am not putting all eggs in this one basket, but my favorite part of this is passive income. I have not paid a rent or mortgage in 4 years because of this positive cash flow and owner occupying these properties.

    • You are actually doing the right thing with your real estate investing. You are doing the wrong thing by asking those people what to do next. You need someone on your team that owns a lot of real estate like our mentors. Do any of the people you are getting advice from live off of their real estate investments? I bet they don’t. They are not qualified to advise you. Also, you may be ready for apartments as your next step. Have you seen our free introductory workshop on that?

  19. So I have the 12k mentioned in the article but if you are required to do a 20% down payment that would put you with a home for about 60k?? Or is there a loophole in the down payment so I don’t have to put 20%?

  20. Pretty good read

  21. I’m impressed, I must say. Rarely do I encounter a blog that’s equally educative
    and interesting, and without a doubt, you’ve hit the nail on the head.
    The issue is an issue that too few folks are speaking intelligently about.

    I’m very happy that I stumbled across this in my hunt for something regarding this.

  22. There is no doubt that cash flow is king. What good is a 401K if you can’t access the funds now or leverage those funds. Yes it’s true that you will need 20% down on a rental, but it’s worth it to save up or partner with someone else to come up with the money. I’m 47 and have $102,000 in cash flow a year. If I decide to pay off my loans I will have $200,000 a year by retirement. I consider myself retired because of the cash flow I have, yet I’m still working so that I can save up to buy even more property.

    • LUI Web Team says:

      Way to go John! Success in passive investing takes an active approach! Keep it up and let us know if we can ever be of service. :)

      LUI Web Team

  23. For everyone who is broke, I would recommend starting with an owner occupied rental. You can take a loan out for 3% down and if you are vetaran as low as 0%. This will get you in the game with the option of converting to a conventional loan later. You can only have one FHA loan at a time and this would allow you to purchase another property within a year or two using FHA again. This strategy does require living in the property and a willingness to move every year or two.

    Also, going in with a business partner can help raise capital, reduce risk, & save time managing the properties.

    Another way to get capital as a first time home buyer is to pull from retirement savings. With a Roth IRA account, first time home buyers can pull out up to 10k one time for a down payment without any penalty.

  24. Hi , I enjoy reading everyone feed back.

    I own 13 units at the moment. I hired a management company. but what i have been noticing is that management companies seem to, charge very high maintenance fees.
    My goal is to get 17 more units in the next 2 years or less. Take some management courses and manage myself.

    The units i own are free and clear except 5 unit and commercial property.

    my goal is to net 200 to 300k in the next 3 years..

    • LUI Web Team says:

      Hello Jerry,

      Thanks for reaching out! If you’re not already a member, we’d love to connect and help you reach your goal in the coming years! If you are, lets keep you moving in the right direction. We’re happy to do whatever we can to help. :)

      LUI Web Team

  25. A little advice for the hive – I am having a difficult time getting financing for properties. I have 7 rentals a the moment and cash flow about $3500 a month. I make over $500K a year and am looking to replace this income and cut back, etc. My goal is to get 5 more a year for the next 3 years or so, but I am being limited by banks. I know that I can get up to 10, but what then. How do I get more properties without paying off the ones I have? I feel that most of the bang for your buck is in the leverage and don’t feel like buying properties cash makes sense. I know that there are portfolio loans, but the interest rates they offer are so high that it halves my cashflow. Any advice is appreciated.

    • LUI Web Team says:

      Hey Lane,

      Thanks tremendously for reaching out with the question. There are many ways to exceed the 10 property cutoff. We have many private mortgage lenders in our Vendor Program for example who don’t sell their loans to Fannie Mae, so they are free to focus on the terms of your deal to determine whether they will fund it. Also, we have courses which can teach you how your spouse could help you get around the 10 property cap.

      Many more options abound beyond the portfolio loan, which should not effect your cash flow too much if you’re using leverage (this of course depends on how drastically your interest rates are changing though).

      Whatever the case though, we’d love to help you reach your passive income goals. We’ve sent an email to the address you provided and would love to chat more!

      LUI Web Team

  26. Great read!!!!!

  27. I have been a investor for 23 years, started buying duplexes with no money down and walking away from closing with money in my pocket, worked a factory job and 2 years ago left that job to manage all my properties. Today I have 33 units which consist of duplexes, houses ,4 plexes, and a 16 unit apartment complex. All bought with no money down. I feel like I am semi retired and loving it. Still learning and looking for more properties currently have 1.7 million in property and a great cash flow.

    • LUI Web Team says:

      Wow Dave! That’s incredible! It never ceases to amaze us how effectively the rental real estate model can change lives. It seems like you may also be transitioning into multifamily as well with the 16 unit. Keep it up buddy! It’s all about the natural progression of the real estate investor and scaling up to financial interdependence.

      Thanks for the share! :)


      LUI Web Team

    • I applaud your strategy and congratulate you on your success but I must ask. Did you create an S Corp? How did you structure the entities. How did you pay no money down

  28. This article was definitely a great read. I too am looking for a starting point and create enough (5000) passive income in the next 3-5 years to be able to stop working a 9-5 and allow me to focus more on realestate. Where do you start?? How do you buy with less than 20% down? Looking to start small, single family home graduating to duplex then to apartment units. Are tax auctions a feasible way to go? buy land, build a house and sell?

    • LUI Web Team says:

      Hey Lorina,

      Thanks so much for reaching out! We’ve sent an email your way with some great avenues to answer your questions and to get involved. Happy investing!

      LUI Web Team

      • I’m in the same boat as Lorina. I’d like to get started, but have no idea. I’m a 9-5’er, a bit of savings, but live paycheck to paycheck right now.

        I’d love some baby steps… :)

        • LUI Web Team says:


          Thanks for getting in touch as well. We’d be happy to get you setup with some helpful baby steps. We just emailed you to get a conversation going. Have a great day!

          LUI Web Team

        • Hello! Im from Mexico, so the markets and access to crédit are completely different, but i guess the same principles apply. When i was 23 and up to 27 i was making 800dollars a month working long hours in my field of choice. Adjusted to your standards it would be like making 20,000 a year or maybe even less.

          Anyway. After someone suggested me reading Rich dad poor dad i became aware of the importance of cash flow. At 25 i cut my expenses to the most basic, and after a lot of research decided to invest in two land lots; one of them was in a newly created residencial conmunity but they offered very good payment options that even i could afford. The other land lot was very very cheap as it was out of the urban land mass. I borrowed some money and bought it and paid it like in six months.

          I also took my first credit card and started using it moderately to create my credit score.

          At 27 i found a very nice apartament, in which the rent surpassed what i would be paying to the bank (assuming i lived in one room and rented the other one out). In this case i didnt have access to credit yet because where i worked i was paid in cash with nothing resembling 401 or insurance. so i asked out for help in this one, but granted, had i worked in better condition i would probably could have access to a mortgage

          Fast forward 7 years. The first piece of land increased its value 5fold. I sold it and invested in an apartament complex. Now i have two units there, fully paid.

          The other land lot (the cheap one) has increased its value almost 20fold as the city finally reached there and a major street was built 50meters away). Yes i really did my research!. This will be used to finance yet more apartament units when the right oportunity comes or have it as a back up should the need arise.

          One year after the apartments operation, i saw a Downtown house in mint condition.

          By then i had been able to increase my income since i started my own practice. Remember that i started using credit cards? Well, it happenned that i have the highest score, since i have been such a good pay. Walked in the bank and had my credit authorized with 10% down in 20minutes. Now i live in this house, have my Office in there, and Rent the rest to other people.

          I wont stop there and ill keep doing this. Four units and a land lot may not sound as impressive as some of the other guys around here :) but my point is that even starting with very little it can be done, granted with some research, a lot of living well below your means, and patience.

          Wish you the best in this endeavor!

  29. Great read! I currently have one rental, $500 profit per month. I have around $90k of equity in it. I am wondering if I should take out an equity loan to buy one or two more rentals? Or just keep saving for my next down payment. Currently saving $2-$3k a month. Thanks!

    • LUI Web Team says:

      Hello Justin,

      We’re glad you liked the article and thanks for reaching out with your question. The Lifestyles Unlimited investment model focuses on getting dead equity working for you. So, our short answer is that the cash-out refinance would be a good idea while continuing to save for more rental homes as well. That said, let us send a follow-up email to get a larger dialogue doing. :)

      LUI Web Team

  30. I am intrigued in the idea of owning rental properties, but not sure where to start. If I have the ability to pay cash for properties, is that the way to go or is there a reason that everyone seems to take out multiple loans?

    • LUI Web Team says:

      Hello Michelle,

      Thanks for the question. Yes, there is indeed a reason that everyone you see, including our members especially, uses financing. It is a large part of our model of investing and it’s truly the preferred methodology for a variety of reasons, which we’d love to teach you! If you’d like to know more, we suggest taking our Free Introductory Workshop. It’s a free two hour class that is offered in person and online that will walk you through this aspect of our investing and more. Coincidentally, this is also a great place to start for your investing.

      Here is the link for that class:

      LUI Web Team

  31. What you say in your article is exactly what I try to explain sometimes to people but not many really understand the concept. I think you did a great job laying it out for people to truly understand it.

    In regards to the profit, are you taking in consideration interest paid, taxes, repairs, utilities, insurance, etc.? or this after all expenses?

    I currently have a single family and a duplex with the mindset that paying these off quicker will save me $5000+ in interest costs thus why I’m paying ~$800 p/mo in additional principal rather than think of it as profit. Should I be saving this money to further invest but in return pay more interest on the current loans?

    • LUI Web Team says:

      Hey Chris,

      Thanks a ton for the read! We appreciate the compliment and your thoughtful questions. We’ve sent a follow-up email to discuss our concepts further.

      LUI Web Team

  32. ive been thinking on seeling my house nad been opening this website they always give great offers

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