become a landlord or more index funds?

[Senator]

My brother has 2 rental homes now, at a total investment of more than $400K.

I am sure people make money in this business, just like anything else. I don't know the rope, and am too lazy to learn it, so I just stay out.

I own five 4-plexes, two duplexes and a SFH. Plus my own home. When they are full, that's over $330K in annual revenue, and only ~$3400 per month in mortgages. Soon to be $2500. ~$1.8M in investment for property worth

I find it difficult to find a properties where the numbers work in my area. I would not be able to purchase a property in my area at the drop of a hat and make a decent return.

When you buy right, you can make money. All were purchased as distressed properties. Most needed a lot of work. One I purchased a mortgage from the bank and continued the foreclosure. One I purchased a contract for deed, and canceled it. I have done many creative things to buy property that most (99%) of realtors do not even understand how to do.

Buying property for 50-80% of value is a huge indicator as to making a bunch of money.

 

[NW-Bound]

I own five 4-plexes, two duplexes and a SFH. Plus my own home. When they are full, that's over $330K in annual revenue, and only ~$3400 per month in mortgages. Soon to be $2500. ~$1.8M in investment for property worth.

The gross revenue of $330K over $1.8M (current value, not your original cost) is 18%/yr, which is very good. What is your net return after all expenses?

 

[Senator]

The gross revenue of $330K over $1.8M (current value, not your original cost) is 18%/yr, which is very good. What is your net return after all expenses?

1.8M was my approximate purchase cost of which I still owe $470K. If I figure a 5% of rents for a vacancy rate, and 10% of rents for maintenance, and the rest of the expenses at actual, I can assume ~$165K annual. That is what I project in my spreadsheet. So figure the return on 1.3M. Or about 12%+.

With multifamily properties, one can generally assume a 45% expense ratio. Since I self-manage, I have a bit less in expenses. For 2016, my vacancy rate was 2/300 = 0.006%, only 2 months empty for all 25 units.

With depreciation and other (non-rental) business expenses like auto and office, I only pay taxes on ~$75K. So the $165K actually stretches quite a bit further. I am gaining appreciation too, so that increases my return.

Once I pay off the mortgage that I am focused on, and paying an extra $5K a month, I can add that $5K plus the $960 of P&I I am required to pay to my monthly income. That is an extra $70K+ annually.

I do a few more things to generate a bit of extra income on the side, it's a nice position to be in. That's why I had to quit work. I still have pension, SS and VA disability, 401K and Roth and after tax account.

I decided I was paying too many taxes, and decided I had enough to live on. If I die a multi-millionaire at some point in the distant future, some stripper that has likely not even been born yet is going to be very happy.

 

[FreeBear]

<snip>
but is it worth the headache of becoming a landlord all over again? I wasn't thrilled first time around, so I'd definitely put the properties under management...

For the record I'm 49 and another 2-3 years away from FI.

Perhaps the OP's words say it all... I don't think becoming a landlord is a good thing to slouch or stumble into due to the potential PITA factor and pain of exit.

My folks owned some stuff and I've done my share of w*rk on houses & apartments. As an introvert, I hate the people drama, actually all people drama in general. The manual stuff is sometimes interesting, but it becomes w*rk when I HAVE to do it. I FIRE'd to get away from this stuff.

Actually, I have a deep sense of admiration for my folks and any of you guys who are successful in RE or business. It's just not for me. Man's got to know is limitations...