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Personal Stats: Yearly income ~$53,000, monthly expenses about $800, and about $10,000 saved up. I live in South Texas, USA. Using Real Estate as a preferred way of passive income, what is the max amount of dollars in loans I should take out as a beginner to put into housing? How much should I put into savings a month to go towards these loans? Around how many houses of $80,000 and $100,000 price range would I need to retire on about $50,000 a year. How long would it take, given that I would be putting most of my money on these investments.

Thanks!

closed as too broad by Kate Gregory, Chris W. Rea, Dheer, Victor, dg99 Sep 15 '15 at 16:03

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

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    You'll need to provide more detail, and be more specific. There is no quick, one-size-fits-all answer to your question. Please have a look around at similar questions to get an idea about the level of detail expected. Start with the help center and then questions tagged 'retirement'. – Chris W. Rea Sep 14 '15 at 22:13
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    You might also mention what country you are in, among other things. Tax rules vary. Retirement plans vary. etc. – Chris W. Rea Sep 14 '15 at 22:32
  • This might be a good related read. money.stackexchange.com/questions/37640/… – rhaskett Sep 14 '15 at 22:36
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    "The fastest way to make a small fortune in the stock market, or real estate, is to start with a large one." – keshlam Sep 14 '15 at 23:39
  • I am guessing you already own a house? There are several good books to read: Landlording on Auto-Pilot, Building Wealth One House at a Time, Investing in Real Estate, Buy and Rent Foreclosures: 3 Million Net Worth.... Start with those then come back and you won't need to ask this question and will be able to answer others :) – Ross Sep 15 '15 at 12:29
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You can't calculate how many houses it will take. To do so you would have to know how much you can charge in rent compared to how much is costs to run that particular location. If the desirability of that location changes, so does the ability to rent the place, and so does the amount you can charge.

It is possible to create a business in real estate that would allow you to generate retirement income. But you would be focusing all your income in your retirement years on one segment of the entire investment universe. The diversification would have to come from spreading the money through different types of real estate: condo, apartments, houses, commercial, warehouse, light industrial. You would even have to decide whether you want them all in one micro-market, or spread throughout a larger market, or an even wider area diversification.

As your empire grew and you approached retirement age you would have to decide if you wanted to liquidate your investments to minimize risk. The long leases that provides stability of income would make it hard to sell quickly if the market in one area started to weaken.

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It is worth noting first that Real Estate is by no means passive income. The amount of effort and cost involved (maintenance, legal, advertising, insurance, finding the properties, ect.) can be staggering and require a good amount of specialized knowledge to do well. The amount you would have to pay a management company to do the work for you especially with only a few properties can wipe out much of the income while you keep the risk.

However, keshlam's answer still applies pretty well in this case but with a lot more variability. One million dollars worth of property should get you there on average less if you do much of the work yourself. However, real estate because it is so local and done in ~100k chunks is a lot more variable than passive stocks and bonds, for instance, as you can get really lucky or really unlucky with location, the local economy, natural disasters, tenants...

Taking out loans to get you to the million worth of property faster but can add a lot more risk to the process. Including the risk you wouldn't have any money on retirement. Investing in Real Estate can be a faster way to retirement than some, but it is more risky than many and definitely not passive.

  • Agreed. Real estate is certainly a legitimate business, but it is a business, even if you subcontract all the day-to-day management tasks (and give up a considerable percentage of the income by doing so). – keshlam Sep 15 '15 at 2:48
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Rule of thumb: To retire with a yearly income of $X, you need to save $(20*X) -- in other words, the safe assumption is that you'll average 4% returns on your stabilized savings/investments. In the case of retiring with a $50k passive pretax income, that means you need savings of $1M by the time you retire. If you want the $50,000 to be real post-tax spendable dollars, and your savings aren't in something like a Roth 401k or Roth IRA, increase that proportionately to account for taxes.

How you get there depends on what you start with, how much you put into it every year, how you invest it and how many years you have before your retirement date. Passive investment alone will not do it unless you start with a lot of money; passive ongoing investment may depending on how much you can make yourself save when.

To find out whether any specific plan will do what you need, you have to work with real numbers.

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    If I start with a comment people complain I should have made it an answer. If I start with an admittedly partial answer -- intended to help the OP understand that what they're asking for is emphatically nontrivial -- people complain that I should have commented. A pox on both houses, in case the complainers go into real estate. – keshlam Sep 14 '15 at 23:34
  • @keshlam: Haters gonna hate! Wholeheartedly agree with your comment (and +1 on your answer!). – Peter K. Sep 15 '15 at 11:44

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