Become a Landlord of 20 Properties
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My Dream is to become a landlord of 20 properties. This dream is to have a better future for my family. My husband is older than me and I will more than likely live longer than him. The two family income would end with him and extra sources of income will be needed. My daughter is autistic and will probably never live on her own without help. If I go before her, she will need funds large enough to maintain her and pay an assistant to help her for the remainder of her life. Again, my plan will need to be a solid and large fund for her and maybe me as well. The properties could be sold off after my death and still be able to have her live off interest alone. With her disability, I worry about what would happen to her if or when I go before her but this dream could allow me to relax and let time do its thing.
Picture from DailyMail ®
The article Should You Use Rental Properties to Fund Retirement? has great advice to see what rental properties entail and if the investments are right for your retirement plan. Some advice brought up by Should I rely on rental property for retirement? states to think of being a landlord as a job but it is “not easy money”. This article also brings up the investment could go wrong if people do not pay rent, damage property, no renters, and major repairs could hurt financially. For this very reason, I think going slow and steady is more my taste but hoping this will all snow ball into 20 properties. I also liked how the author Dan Moisand brought up to protect personal assets by creating a separate entity and financial institute in order to protect yourself from lawsuits. The story from Seth Williams gives a breakdown of how he began and was successful in real estate investing. He states to be able to pay the payments at all times and do the homework about the property and rental environment of the local area. The main thing to remember has to be rental properties can have ups and downs so diversify investments to insure success at retirement. Time is the best thing for investments so if you are 18 to 20 invest even $100 a month into a Roth IRA account for the until the age of 30 and due to compound interest that account without adding anything more will be over 1 million dollars before retirement age (See Ben and Arthur Chart from Dave Ramsey.com). I am a little late in the time game but still have some positive time on my hands and rental are the way I wish to diversify my portfolio.
Chart from Dave Ramsey.com®
The idea first came to me 12 years ago when I did some math about how rental properties could create a source of income. Rental properties do not pay for themselves but require additional income to begin with. The first rental property will have to come either as a duplex or after primary residence are paid off. Primary residence cannot be put into danger due to a renter moving out or not paying. If personal house are paid for, the lack of rental income will not bankrupt the budget. I will choose to buy a duplex and rent out the other side while setting 10% of my income aside for repairs or pay for mortgage in between tenants. The 10% will build, if nothing goes wrong, until enough money has been set aside to do major repairs like roof or update energy efficiency and at that point I will improve on the property. I refuse to be a slum lord. The mortgage minimum payment will be paid by me and any rental income will go directly to the principle of the mortgage for the first year. The remainder of the loan I will pay extra towards the mortgage. This discipline will allow me to pay off the mortgage in 6 to 8 years, give or take any disaster happening, because I got a house at such a low price with great interest rate.
The next stop would be to get another duplex or house to become a rental while I live in the duplex with nothing but household bills. The additional house will have the minimum payment paid by me and the rent from the other side of the duplex and new property will be applied to the principle of the new mortgage. Depending on the price of the property, this house will be paid off in short order, around 4 to 5 years. The first two houses are the most important to get a strong base. Once I have this base of properties, the real fun begins with being able to buy more than one property at a time and maintaining a strict “rent only goes to mortgage” policy. The houses begin to be self-sufficient, and if a renter moves out or the place in empty for a few months, there are enough other income to make up the difference. The 10% rule will apply for the length of this plan and any repairs will be taken care of through this fund. By the time I am ready to retire in 40 years, most of the houses will be paid for and be able to support myself without having to rely on social security. The idea of reaching 20 houses is very large idea to me right now but the idea is to shoot for the stars.
This plan/dream does not take into account any increase or decrease of income, natural disaster, or rentals going a year without tenants. After 3-4 houses, I will need help of a handy man/woman to help maintain the properties and will need to be paid. There is no plan for if extra money comes my way from death of a family member, interest on savings, or investments. Worst case scenario I was only able to have 5 rentals paid off by the time I retire. I would still have 5 rents coming in as income to pay for maintenance, property taxes, insurance, and personal living expenses. This should be enough to sustain me in my older years plus any investment which mature by then. Overall, my dream is to become have the able to live comfortably at an old age plus have a place for my autistic daughter to be taken care of if I go before her.
