How Many Units to Retirement?

Posted on December 6, 2013 by

Do you have a solid plan to have your real estate investing be your vehicle to retirement? Do you know how many units you need to own to quit that J.O.B (just over broke)?

Not having a solid plan of action is one of the biggest mistakes I see new investors making. Most people know that they want to be full time investors and they want the passive income from real estate to replace their working income but they never really form a solid plan to get to that goal. In this article I will help you do just that! Create that retirement plan!

The first step is to decide how much money you need to live on each month. Not how much money you need to be really rich but just how much money you need to cover your monthly expenses and be free from having to earn a paycheck. Most people I speak to say this is $10,000 a month.

The next step is to decide how many years you are willing to work toward your real estate investing. For me it was 5 years. I would say that you need to plan on at least 2 years and no more than 5.

Now the idea is to calculate the amount of passive income that we need to add to our lives each year to accomplish our net revenue goal at the end of the allotted time period we have set for our “retirement”. To do this divide the dollar amount by the number of years. Again in my case I divided $10,000 by 5 years, resulting in a needed gain of $2,000 in passive income a year for 5 years to reach my financial freedom. Not that much!

The next step is to turn the dollar amount in to a unit amount. Most multifamily properties will cash flow around $100 dollars a door per month. If we take our annual goals ($2k) and divide by the unit amount, we now know how many units we need to add to our portfolio each year to create the passive income goal. $10,000 / 5years = $2,000 a year. $2k / $100 = 20 units!

I only need to add approximately 20 units a year to my portfolio for 5 years to create $10,000 a month in passive revenue. Not that much! Your numbers may be different but I bet you are surprised at how few units you need to add each year to reach your income goals.

What I have found is that most real estate investors never really set a unit goal to reach a financial destination. They know that they need more money and more units but they don’t have a solid plan of action to create that portfolio. With this simple calculation you are on your way to actually obtaining those results.

If you close two 10 unit properties you are done for the year. If you could close a 50 unit property you would be half way there. Start building a marketing funnel that will get your deal flow going so that you are looking at enough property to be able to close on your unit goals each and every year. Happy Hunting!!

Bill HamBill Ham has been investing in real estate for 8 years and has created a portfolio of nearly 400 apartment units in Macon, GA. He created his entire real estate investing portfolio using creative and seller financing.


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