Based on MYOB's comments on the Dave Ramsey thread, I'm curious. What's your target number of units? Based on the ones you have, what number will sustain you - without any other income? When can you quit the W-2 job?

For us, in our area and based on our rents, we've found the optimum number is around 30 units, give or take 1 or 2. And actually, it's less than that as 4 of those are held in an IRA and we don't distributions yet. So 25-27 units to provide for us and maintain them as well.

based on my calculations, we have enough income to replace one of our w2 incomes. we do need at least one w2 income for health insurance etc.

Instead of QUITTING the W2 job, I use the passive income from my rents to allow me to take risks in the W2 job that I otherwise couldn't.

For example, aggressively pushing for flexible work hours, work from home, taking my vacation time without restrictions. Not having to work nights or wknds. Just saying NO to the bossman

I can take the risk and push for all those things to make my W2 much like a hobby than a JOB.

WMH that's tough to answer as you get older and have less needs. While carrying all the mortgages we needed every property (80) to pay expenses. We also had no real employees. We called in specialist when we had to but did most of the reno work ourselves. WMH that meant 24/7 -- we hardly had any time off for 16 years. Every day off and vacation day was used to work investment.

Mechanics I worked with laughed out loud at me-- and my RE investing. I retired 17 years ago at 50-- they are 68-70 and still having to work as mechanics. My wife and I have been on 85 cruises and travel all the time now. You can't do that with just 9 properties. One other point about only 8 to 10 property's. You don't stay up to speed with that. If your going to go big you have to be in it every day.

We cashed out 17 and refied and paid off what we could. Our number/goal was 60 SFH's with only one full time man and we would fill in to work when necessary. 63 is just right for us. We pay our office man -- who does collection / court and tax work a pretty darn good salary. We take a draw when needed from the FLP and pay our MMan 1K a week minimum. We supply work van and all equipment. Anything over 40 hrs is $38 per hr. We hand out bonus whenever we see there's going to be taxes to be paid-- why pay taxes when I can claim a deduction and give our people a bonus? Oh! I should rather pay taxes? So there is NO PROFIT. We spend everything.

WMH I know your saying that's crazy but what do i need cash for? 100K in checking and 8 million in equity. What emergency could I have that requires more cash?

I haven't worked a W2 since my 45th birthday. We have 15 units and we are earning double we did when we were both employed. But the cost of properties here is much higher than many parts of the country.

DH's target is about 30. Then we'll transition from "aggressive expansion" mode into "well, why not another one?" mode.

I want about 20 in our town, and about 10 in our surrounding communities, due to our local economic fragility. The rentals represent our retirement, and our kids' college fund. We keep ending up with more places in our town, because we can't say no.

Suppose our average rent is about $500. For every 10 houses we have, it would potentially gross about $60k, presuming 100% occupancy. Now suppose you take half of that, and put it towards taxes, insurance, turnover, major repairs, vacancy, whatever. So every 10 houses would, conservatively, bring us $30k free-and-clear.

We bought our first renovation at Easter in 2010, and had our first tenant in early November. We've gotten to 17 working right now, plus one owner-financed, plus five in the renovation queue. (I hope to transition to 18-1-4 before April 1st, woohoo.) Right now, every penny is getting plowed back into the biz... and a lot of our personal pennies as well. We took out a loan of about $30k against a paid-off house back in 2011, when we could afford to purchase, but not renovate, a batch of houses in a reasonable amount of time. All we could get was a 5-year loan, and it was the most annoying thing in the world. They dictated what kind of insurance we had to carry-- the expensive kind! --and we had to give them annual updates as to our personal assets, etc. It was always looming over me, and some months were pretty tight. I paid it off in under 4 years, and swore never again... so we're very fortunate that I'm able to borrow a few personal pennies on occasion. I look forward to paying us back... :)

We've done pretty well in less than 9 years... unless something unfortunate comes up, we should easily be at 20 in 10 years.

Actually MYOB I don't think you are crazy at all. Totally agree with doing good locally for your people rather than writing a check to the IRS! That's one of the benefits of RE: every dime you pour into the properties is taken off your income.

I quit my w-2 job before I had any real estate. I knew I wanted to do RE and went in head first. 24 yrs old at the time, no kids or wife. I worked nonstop with and for investors and did House after house until I got some of my own and kept buying more.

I lived like a pauper in a scrappy little 1 bedroom apartment. Lived there until I had 13 units of my own before buying my own 2 bedroom primary.

Now it's a matter of buying RE to fulfill the goals I want. My goals aren't huge and I certainly don't seek extravagance. Right now the goal is to flip a house and buy my wife a new used vehicle.

On average, we gross about $1k per unit.

We also might have higher-than-average repair costs than some (nor'easters and hurricanes and flooding being a factor here) so we figure a full 50% set-aside for insurance, taxes and repairs-not-covered-by-insurance-because-the-storm-was-named-Norman.

So net $500 a unit is what we want, or we won't play anymore. Not worth the work.

What's your target number of units?

20

Based on the ones you have, what number will sustain you - without any other income?

Have 7, I think I need 20 so that is my goal

When can you quit the W-2 job?

Well the plan is to quit in 10 years so add 1 house to year.

Hopefully have 17 to 20. After the sale of business add another 4 maybe and pay off some notes.

"Totally agree with doing good locally for your people rather than writing a check to the IRS! That's one of the benefits of RE: every dime you pour into the properties is taken off your income."

WMH, that's not how income taxes work! If you have $100 in income, the IRS takes 25 or 30 or whatever and you left with 75 or 70. If you spend that $100 on deductible expenses, you are left with $0 and whatever that expense got you.

W,

Great question. Number of units, debt, and income are all intertwined. Me? It’s solely based on profit, not number of units.

Debt means we had to go deeper in debt to buy more and work harder to get a little more profit.

The magic number is what money do we need to support our family. 3 younguns at the time, then braces, college, weddings... now they’re on their own and our family expenses have gone down. And our home is paid off.

When I retired we had and needed 88 units to cover our needs AND the debt. Had to be that many because the bank was making more than we were. Debt was controlling us more than my job did.

Too many people live in bondage of fear of health ins costs. I realize some face large health problems. But youngsters and others are staying in jobs for only a few hundred a month. Many paychecks have a portion already taken out for health ins so they are paying some now.

My thoughts.

I consider bonuses to key independent contractors a great investment in my business it lowers my income which lowers my taxes but it helps keep good people around.

Same with our Christmas Luncheon spending money on govt offices staff.

My church likes my giving! Rather they get the money than the IRS.

David, it seems to me that real estate income is different that W-2 income when it comes to taxes.

Let's say you owe $1000 in taxes.

In real estate, you can either write the check to the IRS or you can spend the money on the business: improving properties, throwing Brad's Luncheon, buying tools, etc.

If you spend that $1000 in approved ways it comes directly off your income in a dollar for dollar way on your Schedule E, doesn't it?

With W-2 income, you owe the IRS $1000. Let's say you are in the 25% bracket to make the math easy. You write a check to charity for $1000 and you get a $250 deduction. Spending $1000 to save $250 doesn't make sense, I agree (although it's good for the charity so there's that.)

WMH,

My goal is to have enough houses that it creates a major problem for my kids when we die!

Seriously, I want enough profit from the rental income to cover the cost of 2 beds in a nice nursing home.