How Many Rental Properties to Retire?

You’ve probably wondered, “how many rental properties to retire?”

It depends.

Isn’t that always the most helpful answer?

I hate that answer, so I won’t leave it there on you. I will break down why and how it depends.

Mainly, it depends on which strategy you’re using.

Let’s use an annual salary of $60,000 for our example, assuming that this is your net pay, meaning it’s after all taxes and deductions.

That’s $5,000 per month that needs to be replaced by rental properties to retire.

Let’s look at how many rental properties to retire and how to quit your job with real estate based on the strategy you use.

Please keep in mind that these examples are purely for educational and illustrative purposes. No one strategy is being recommended specifically nor are any numbers guaranteed.

Short-Term Rental Properties

If you don’t have a ton of capital to get started, but you do have some, this is likely the quickest way to retire from rental properties.

It is not unreasonable to be able to purchase one short-term rental and net an annual profit of $60,000.

If you’re buying a lower-cost property in a non-vacation destination, how many rental properties to retire using this strategy would likely be more, closer to 2-4.

However, if you’re purchasing a relatively expensive property in a vacation destination, this is certainly possible with just one short-term rental.

One of the biggest things to consider here is the variability. While it may only take one rental property to retire using this strategy, short-term rentals can be less predictable and stable than long-term rentals.

It is likely wise to build in a bit of a margin of safety if you utilize this strategy.

Small Long-Term Rental Properties

This approach likely takes the most when it comes to how many rental properties to retire. It’s going to vary depending on the market conditions of when you’re buying, but it can be estimated that your 1-4 unit rental properties will provide a net cash flow of $150-$300 per door per month.

This means if you’re mostly buying duplexes, two-unit properties, and are on the upper end of the net cash flow range, just over 8 duplexes is how many rental properties to retire.

If you’re buying triplexes, three-unit properties, and are also on the upper-end of the net cash flow range, above 5 ½ triplexes is how many rental properties to retire.

If you’re buying fourplexes under the same conditions, you would need just over 4 rental properties to retire.

Of course, if you implement a short-term rental strategy with any of these properties or units, you could shorten this time to retirement. You can also shorten it if you’re buying even better deals than the average, where your net cash flow is higher than the $150-$300 per door per month range.

With this approach, you’re building wealth one house at a time until you reach retirement.

Large Long-Term Rental Properties

The answer for this strategy for how many rental properties to retire is similar to the short-term rental strategy answer previously. This strategy can also be done with 1 property, if you buy a big enough deal.

However, this is likely going to take substantially more capital.

You would likely need to buy a 15-25 unit apartment building providing between $200-$300 in net monthly cash flow per door. Depending on your location, this is likely going to cost $1.5-$5+ million.

That size property is likely going to require between $375,000-$1,250,000 in cash just for the down payment.

House Hacking

House hacking will likely take the least total capital, but certainly isn’t easy. It will require a lot of sacrifice, hard work, and moving, but with this strategy, how many rental properties to retire is roughly 5, assuming the income levels mentioned at the beginning of this post.

The real benefit of house hacking comes from when you continue to house hack, time after time.

One of the biggest benefits of house hacking is that it can dramatically shorten the amount of time it takes for you to achieve financial freedom. This works because it changes your home from a liability to an asset.

One of the most common properties used is a house hack duplex, so this property type will be used to illustrate exactly how house hacking can shorten your time to financial freedom.

Once you have learned how the process and numbers work with a duplex, you can extrapolate that out over more units, such as a triplex or a fourplex, and also to fit your exact income and purchase price situations.

As an example, let’s assume you purchase a two-bedroom, one-bath duplex for approximately $350,000 with the intention of house hacking.

You will live in one unit and rent out the other side.

Market rents in this area are about $1,500 per month for two-bedroom, one-bath units.

Your all-in cost for your mortgage is approximately $2,000 per month, including principal, interest, taxes, insurance, and PMI.

While you live in one of the units, your portion of the mortgage is $500 per month, since you will be receiving $1,500 in rent.

Know how house hacking reduces your largest expense — your living costs? This allows you to live for $500 per month, in the same, or similar, house as someone who lives directly next door for $1,500 per month. Being able to do this saves you $1,000 per month that can be put towards saving, investing, or even splurging here and there.

You have lived in the property for more than twelve months and decided you enjoyed house hacking, especially living for so cheap, but you are ready to move on to another property.

Instead of selling the duplex you currently live in, you rent out your unit at the same market rent as the other unit, $1,500 per month, and now collect $3,000 per month in total monthly rental income.

Your mortgage is approximately $2,000 in total, so you now have a profit of $1,000 per month, (we’re not going to account for any CAPEX, maintenance, repairs, or vacancy in this example to keep the numbers clean and simple). You should certainly add these numbers into your calculation before officially retiring off of rental properties.

You can use a simple calculation to back into how many duplexes are needed to replace your current income.

If you earn $5,000 net per month, that can be replaced by just 5 duplexes that have a monthly profit of $1,000 per month. How many rental properties to retire would only be 5.

Like the small long-term rental properties, you’re building wealth one house at a time.

To perform this calculation for your income and profit, calculate your monthly net income and divide it by your rental property’s total monthly net profit (or net cash flow). The resulting number tells you how many of those properties you would need to replace your income.

There can be nuance to this calculation when you start to consider the benefits your employer may provide, such as a 401K and health insurance, as well taxes and property repairs, but the idea remains true.

A few, high-quality house hacks can significantly shorten the time it will take you to achieve financial freedom.

So, how many rental properties to retire? How to quit your job with real estate?

It depends.

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Analyzed by: Robert Leonard
I am the founder of Everything House Hacking and a real estate investor. I house hacked my way to financial freedom. My goal is to help you learn my tactics so you can house hack your way to freedom.

Learn more here.