I've heard it said, "Run your rentals like a business." I've used that phrase often myself both towards yours truly and when advising others.

Not too long ago I posted a musing on an article I read called "Can't get rich on rentals." Numerous interesting responses, including some who tried to define "what is rich?" For discussion sake, let's agree that $10 million is "rich"....yes, yes, I know some of us are super frugal (i.e. cheap) and can live comfortably on far less, and others are very satisfied with where they are, and $10 MM in Cali won't buy the same as $10 MM in Missouri...yadda, yadda. But let's take $10 MM as a number we could all agree on as "pretty good money" and I would guess 97 out of 100 people surveyed would agree. Send me the check and I'll cash it!

Here's the question (finally): Have you or do you believe you can get to that level--$10 MM--solely on rental properties? Or did you/do you have business activities that are the primary mover for you in that direction?

Interested to hear your responses. My hypothesis is this: To reach an eyebrow raising level of wealth, it takes more than just buy a house, rent a house, repeat...but I'm willing to learn if that's wrong!

A lot of this market based, like you said CA vs Missouri... but for my market, strictly buying and holding SFH and renting... I say no. Be very hard. You would have to a house or two that you bought at market and then got sold for development for HUGE gains.

Now, if you say, I'm buying multi-units or commercial. Now, I would say you could achieve that 10M goal. Here is my examples to back this up:

First property bought by me, a $35k sfh. Fixed it up. Appraised at $65k soon after. It would have taken 20 yrs to pay off using it own rents.

Bought a 8 unit building a year after that. I have refi that property 3 times, pulling out over a $100k out of it over the last 10 yr period. It will be paid off in 8 yrs, generating 50K/yr+ and worth north of 350K.

Other than trying to make the Top Discussion List,

making $10 MM is a Pipe Dream for (almost) everyone

in this Biz. (That's Reality)

It's a Big World out there. (Once you see beyond yours)

The average Landlord has one Rental Property

and the numbers goes up from there.

The average Landlord (cuts his losses) calls it Quits

after three years.

Having your Youth, Health and Wealth, all at the same

time, is part of that Pipe Dream.

Come to your own conclusion. It's Your Dream.

Given enough time yeah I can do it. I may end up with a few new businesses out of it that are useful to have and whose services my rental company might use (DH just bought a small lawn care business - I'm going to get a great price on lawn care lol). But I figure it can be done so why not do it. I dream big. I don't think I could ever retire with nothing to do. If Warren B can do it so can I. Lol

buy a 100 unit rental complex for say 50,000 per unit. It's financed for 20 year, rents are 600 per month.

fast forward 20 years, you lived on the cash flow, the rents are 1200 per month, it's paid off and the value is 100,000 per unit

No, In most cases the rental business you start would morph a bit into offering more services or having investment arms such as investing on spec in other areas far from your home base.

Let's start that most people don't make that in any business.

You're talking $100 million in assets, not income per year?

I think it can be done, via a snowball effect.

S I D, great question! I say that because more and more I am gearing my training to helping individuals who are serious and want to do go in the very direction you are discussing. When I started teaching in this business, I never wanted to simply teach and not see significant progress by those I am teaching or training. I'm always looking for a way to help real people increase their success in a real way.

One of the reasons I like your question, is because you are clearly challenging your own assumptions. And after all the hype you hear, is real estate investing really the vehicle that can help you reach a certain above average goal. I too like regularly challenging my own assumptions, because life is short and if you are going to do this thing, let's really count the costs and come up with a plan that will work. No time to play with this. The way the traditional landlord operates, I would say the answer is NO. But that's not surprising, because as was alluded to above, most people in general don't come close to achieving the level of success you are talking about. But I for one am constantly challenging myself not to do things in the traditional way and to think outside the box.

The short answer to your question for me is "Yes"! I "know" that it is possible. I'll share in part from my own personal insight at the Convention.

Knowing that property values vary across the country, for sake of argument, I do think, it takes more than 20 rentals or units to make this happen. And the more the rentals (units) the faster the time period to accomplish it.

Over the years, I have seen few people who achieve more than 20 rentals without moving in the direction of running their rentals like a business. That does not have to be full-time endeavor, but in my opinion, it does need to be done in a systematic operation, and involve more than just a one-person operation.

To not take more than 20 years to reach the goal, I also think it helps significantly to have some additional source of funding for the "growth of the business" (other than the real estate assets themselves) to help reach the goal in a faster time period. Whether that funding is a well paying job, an additional business, financing or partnership relationships of some kind, that allows you to help partly fund the growth of the business faster.

While you can get their one property at a time, I do think if you are only going to do single family homes, you have to grow your business at a faster pace in order to reach the above average goal in less than 20 years. I do think adding multi-units to your portfolio can speed up the process. Those are just a few thoughts for now to inject into the discussion. Sincerely looking forward to not just seeing you again at the Convention, but exchanging ideas, learning from you and others and being challenged as we allow iron to sharpen iron.

$10mm in assets or income???

I like this discussion.

Vacation rentals, assisted living, corporate rentals, storage facilities, mobile home parks; these types of investment vehicles all have that neccessary component that is needed - higher profitability- either via lower expenses than typical residential rentals or via higher income usage of s f r.

While earning 10 million via s f r is certainly possible; the 30,000 ft view brings to mind the extreme pricing pressures that the market imposes on landlords.

Also, regarding property appreciation: I have been land lording long enough to recognize that buildings and neighborhoods have a life cycle, and once a point in that cycle is reached, the building is far less profitable/neighborhood is far less desirable. Hence, appreciation slows, stops, depreciation sets in. Buy & Hold is a descriptive terms not to taken literally.

Having $10mm at age 40 is very different than at age 70. But as someone else said, if you are able to acquire a large asset at high ltv and get it paid off in 30years then you can sit pretty.

I don't find wealth particularly interesting. I'd rather have cash flow. After all , $100k a year is the same at age 40 as it is at age 70

I hit that number after being in the real estate for about 25 years. I had to own, invest and manage a mixture of different rentals to accomplish it.

Single family homes are great. One tenant to deal with that is responsible for most of the day to day events. The only down side, when vacant I lose 100% of the income.

Apartments are great. Many units in one area, can have a resident manager take care of small problems.

Commercial retail is also good. Once rented (takes a very long time to find the right fit), the tenant takes care of most problems...part of the lease.

Through the process of building equity, refinance, selling, tax free exchanges -- I was able to sell a home every 3 to 5 years and then move up to something larger.

Sid your market is close to mine. I don't think it is possible by just buying and holding.

A LL in our local group owns HUNDREDS of units and manages probably another hundred. I am sure he is not in you 10MM club. Although his cash flow is sure great!!

Short answer: YES!

With a DREAM to propel you and GOALS which we attack with a vengeance.

If people worked as hard on their RE biz and they do for thier boss, YES it can happen.

It won't just happen on it's own.

Like Dave Ramsey says "You cannot drift into wealth."

To get to 10M with SFH, I'd look at the math. I looked up an exponential growth rate calculator and played with the numbers a little bit.

If you started out with a $10,000 investment and were able to get a consistent 40% return, after 20 years you would have 8.3 million dollars. Anyone out there getting 40% YOY from their rentals?

This process could be speeded up by:

--having more money to invest to begin with (Trump)

--leveraging it (which is another way to "get more money to begin with")

--get a higher rate of return (haven't yet seen a property where the rental income was 50% of the ARV. Borrowing on the property is the only way I see around this.)

I've been playing the Rich Dad Cashflow game online. If the game is true to real life, which I can see it being somewhat, I usually win by buying SFH or stocks and taking my profit to buy bigger deals. The bigger deals being multi-family, businesses, business partnerships, etc.

Step #1: get around people who have done this, like National Convention.

There will be many millionaires and multis in the room.

I'm still asking the question: $10m in Assets or Income?

Sid,

you can try to think of it from the end and back step it.

I was looking at a 44 unit, it was priced at 12 million @ cap 4.3. I can finance it for 9 million for 25 years. Break even.

so that will give me a 12 million asset plus 25 years of appreciation.

I need now a 3 million $ asset to 1031 for the down payment

I saw a 18 unit @ 3.1m @ cap 4.5. Again I can finance it for 2.3 mill for 25 years.

Now I need a 800k asset.

an owner occupied three family @ 700k financed 93% for 20 years.

So free and clear 12 million plus appreciation will take 70 years without much craziness.

If there is crazy appreciation like the last 40 years. Then it can happen a lot quicker.

The pot at the end of the rainbow throws off 450k cash/year or more due to inflation.

EVERYBODY IS CORRECT! But do the math. If you took out a 20 yr loan and didn't take out any money but just paid down the note, guess what?! It is now worth much more AND the tax man doubles your property taxes on it!! And then if you have bought more properties, you can't do it all yourself 'cause you are older and you know, so you have to hire help just to manage the leases.

However, it beats the stock market returns! We have accumulated 20 units over the last 20 plus yrs. All paid for. Lots of tax and insurance. We're retired, well from our 'REAL JOBS", and this rental business keeps us on our feet. We deal mostly w/young professionals in mid-town and did I mention in 2wk we will be on our way to Argentina for a 20 days cruise around S. A. via Cape Horn and the Blessing of God The Almightly?! And our Cash Flow,

WMH :

How many folks in this forum do you think make an average income of $800,000 per month?

Its a nice thought - and surely it is possible, but why do it?

The median family income in my county is $37,000. If you are making 100 times less than what is proposed, you are still have twice as much income as a working family. More over this income is passive.

I suppose someone will speak up and say because you can, can make so much more - but why? Why risk a sure thing so you can be greedy and take on more responsibility. For some folks who are presumably younger, more power to you. As for me, I am sore just waking up in the morning. I wish I had that amount of energy, but that amount of energy is wasted on youth.

I have no plans to reach that level of wealth with real estate...I try to buy one sfh at a time and pay them off aggressively with my W2 income, so as long as I'm utilizing that particular strategy, I don't see time being on my side to catch $10MM even if it were a goal. God willing, I will pass on an amount that will make reaching $10MM a layup for my offspring though, and I'll die a very proud man if my children are wise and responsible enough to accept a wonderful legacy to build upon.

A VERY wealthy man taught me: NEVER assume appreciation.

Enjoy it IF it comes but never count on it.

Me: some areas have gone up and some have gone down. The DOWN folks don't talk about it.

If we had started in this game when we were younger we might have been able to hit $10m in net worth without too much trouble.

Thanks to everyone who took time to respond. I have read your comments and will continue to give them a lot of thought over the next few weeks/months as I make some decisions that may change the direction in which I take my real estate "investing" strategy.

Btw, $10 million was an arbitrary figure. I chose it for the same reason the author who wrote the original article did: it's a big number to pretty much anyone. We could argue for days on end if $1MM - $3 MM is "big". Coastal investors probably don't start separating from the pack until they hit at least $5 MM. I figure $10 MM would put any investor in any market among the top 5% in terms of net worth.

Good call.

I am almost more interested in the business practice rather than the some relative number.

The key is applying the practices to your specific market place in a manner so it makes sense and works for the investor.