How Much Money Can You Make from Rental Properties?


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84 thoughts on “How Much Money Can You Make from Rental Properties?”

  1. Good luck on the Muira! One of my favorites too. I like how you say you have no idea how you will accomplish this, but you also have no idea what opportunities will come. Great attitude…that’s how to keep pressing forward to realize ambitious goals!

      • I am a 25 y/o subscriber of yours. Bought my first home at 21 y/o on a short sale 40k below value and used my first time homeowners 8k tax credit to renovate property. It’s been a great investment as I have rented it out for $500 extra cash flow per month (And I live in the master bedroom as I rented out the other three rooms through college). I have been raised a Dave Ramsey type of investor but I don’t agree 100% with everything he teaches. This RE investment idea is definitely good in theory, how far along are you as of today? And I would love to see your spreadsheet with all of the assumptions you made to come up with these numbers. Love this post, great work as we are all reading to hopefully learn something and expand our thinking!

        • Hi Randy,
          Thank you for the comment! Good work on your rental. I have 10 rentals now with an 11th under contract. You can find the details under the rental property category on the blog. I think Dave Ramsey has some great ideas for those looking to save money, but he is ultra conservative about debt. Debt can be a great thing is used carefully and to create more money. My spreadsheets are actually hand written out year by year. I keep redoing them, which is an awesome exercise to get an idea of the numbers and progress I will be making.

  2. Are there any Aussie readers reading this? Is this possible to do in the current Aussie market or is this only possible for US readers given the cheap real estate on offer there at the mo?

    • I just saw this article about the Aussie market. https://www.biggerpockets.com/renewsblog/2013/04/14/housing-bubble-australia/
      I have no personal knowledge about what it’s like over there, but there are markets that don’t work for my model in the US as well. Many investors in New York, San Fransico or other high value areas end up investing in other areas of the country because prices are just too high in their local market to cash flow. You may try a simple google search for “best places to buy rental properties in Australia”.

    • Hi. I’m an Aussie living in Atlanta. I think you’ll find it more difficult to achieve in Australia given the higher cost of houses and interest rates. I have a house in Brisbane which I’m currently selling so I can buy some rentals in Atlanta where I’ll get a better return. I wouldn’t be able to buy as cheap in Brisbane.

      • Hi Rachel, sorry for the delayed reply, I have been moving all weekend. I have heard from a couple Aussies, that prices are too high there to make the numbers work for investing. Good work taking the steps to invest in a better market. That can be a very scary thing to do, but sometimes it is the only choice.

    • There’s still plenty of good pockets of affordable real estate in Australia. A lot of new investors get caught up with the ‘prestige’ of having an investment property and overlook golden investment suburbs in areas they wouldn’t live in themselves. An example would be Woodridge Qld.

      In Woodridge, it is strategically located between two major CBDs (Brisbane & Gold Coast), on a train line and the M1 Freeway, close to tafes and universities and has a consistent rental vacancy rate below 3% for over 10 years. You can still buy a 3 bedroom home there for less than 250k and rent that for $300 a week.

      There are a lot of positive cashflow opportunities there, It attracts a large ethnic diversity of cultures and you can get good long term tenancies and properties are never vacant for long.

      If you were wanting to dip your toe in property development, these areas are also great for finding a good large block that can be subdivided. If you look on Gumtree, often you can find houses for free that people want removed from their land so they can build. If you divide one of those properties, move a house onto the split block, give them both a spit and polish, and list one of them for sale, it will pay off the capital of the first property which you can then revalue and leverage to buy more. It costs about 25k to move a house, and about 20k for the subdivision with surveyors and whatnot.

      Think outside the square.

  3. Thank you.

    My current thinking is buy a $300,000 unit (the cheapest in a good area in Melbourne) Live in it and pay off in 6 years. Then go to a smaller city nearby and buy two more at $200,000 each. And “Snowball Method” these in 6 years. Just thinking out loud. Trying to do the best with what I have. Should leave me with a $40,000, adjusted for inflation, income and a place to live in ten years. Which I’d be very happy with. No Muira for me. I also think although it’s important to maximise your earnings and keep learning and pushing but I think it is also important to stick with what it is you can understand easily in order to not bite off more than you can chew. This is the balance I struggle to keep. I think keep it simple works best for me. Anyway. Great blog. Very inspiring. Keep it up.

  4. Your blogs are great! I’ve been reading them non-stop!

    Any direct lenders you recommend? I’m in California and looking to invest in central coast areas and north of California.

    Thanks

  5. Hello Mark,

    Thank you for your article. I did not see any math for tax liabilities. How are you using all of your excess cash flow dollar for dollar, without any adjustments for taxes?

    Best Regards,

    Colette

    • Most of the cash flow is income is countered by the tax savings by depreciating the properties. There is some other taxes that I pay on them, because the cash flow is higher that that depreciation, but I have not taken the time to calculate it out.

  6. Mark this is a brilliant explanation. I too, want to do some more in real estate. My family in particular has been burned on renting properties and so I’ve held back for until I learned more. How do you get and keep good renters? Do you, at any point, set up a company or companies to handle all the properties, paperwork and accounting involved?

    • Thank you for the comment and sorry for the delay responding. I am in Florida on vacation right now. I am in the process of starting a property management company right now. They will handle all the paperwork and accounting. It is really not too difficult with a few properties.

  7. You want to earn more so you can give more to charity but it your earning more that ultimately leads to why they need charity in the first place. Speculation in the housing market increases land prices which increases rent. Rent being higher, the poor now ask for your generosity to help them meet their needs.

    I’m more ok with renting to students or people who are only renting because they’re in the market for a house, but having long-term tenants is the reason that rent is high. That’s why people who rent are also people who receive charity. The landlord is putting them there. He’s not doing it intentionally and he’s not doing it alone; there are other factors, but he is certainly one of them.

    I’m just saying.

    • Hi Darris, I have heard this argument many times, but there are many fundamental flaws with it.

      1. Speculation in the housing market rarely raises house prices. It is a matter of supply and demand that raises house prices. The people that pay the highest amounts for houses are owner occupants. Investors look to get good deals and buy below market value, not pay at the top of the market.
      2. Land prices do not drive rent. Supply and demand drives rent. If house prices increase that does not mean rent prices will increase as well because landlords all get together and raise prices. Prices increase because there is a shortage of rentals and too many people looking to rent. There are many areas of the country with very high houses prices, but relatively low rent and vice verse.
      3. This is a free country and people can buy houses if they are able. The landlord is not forcing anyone to rent their houses. Not everyone wants to buy due to not wanting to settle in one place or bad credit or many other reasons. In my area it is cheaper to buy than to rent, but people still rent. It is not the landlord forcing people to rent houses but their own circumstances or choices.
      4. If there were not landlords where would people live who cannot buy homes? Landlords buy homes and rent them because there is demand for rentals. They cannot create the demand the renters do that.

  8. Mark,

    I reside in Colorado as well. I just purchased my first home and I am now looking to move forward with purchasing my first rental property. My credit is decent (Decent enough for me to purchase a home) and i don’t have any liquid cash to put down 20% on a property. What investors would you recommend me contact, pertaining to investment property. And how could i use my asset(My home) to help spring board me into investing into more rental properties? Thank you in advance. I am in Denver Specifically.

    • If you just purchased your current home you may not have much equity. It would be hard to use it for much unless you put a lot of money down. Finding investors for private money is one of the hardest things to to. I would check with friends and family first.

  9. Mark your articles are both educational, inspiring. and great reading material. They have motivated me to get the financial and physical freedom that I’ve been waiting on. I’ve been flipping and wholesaling for years but the market has changed and now I’m starting to implement your strategies as I’m about to purchase 2 properties this month to hold. Keep up the good work man….you’re the best!

  10. Hi Mark,
    Could you explain your numbers in more detail. For example where do you get your ” mortgage reduction amount ” in year two.. And what are your starting numbers? Cash flow of 18, 000 annually is what 500/month for 3 rentals? and the purchase price of the first one paid off is ?? I am using this model for mine but just not sure what your numbers reflect.

    Thanks and have really been enj0ying your blog.
    Liz

  11. Great article, but none of them touch on my situation .. which is POOR CREDIT .. and in the middle of a chapter 13 bankrupcty..
    that all being said.. in less than a year.. I should be getting about half a million dollars cash pay off what is left on the chapter 13.. ( about $30k) .. Lost home in bankrupcy etc..

    So my point with BAD CREDIT and about $500k in my pocket. with Zero Debt. NO credit cards etc. no car payments. everything paid off on the chap13.. (except house which was let go )..

    during all that. something happened and now were looking at a windfall .. my question .. I don’t need a loan to pay cash for a home.

    Should I purchase 1 or 2 homes? rent them out pay cash? or would I better off taking say $375k or so and purchasing a fourplex or whatever I can afford.? throw $25k – $50k into repairs if need be. and rent those out till the credit repairs itself? and then I will own the 4plex outright . have decent credit. in 2 – 3 years. and take a loan out on the building to purchase another property? say a home for $175k or so and rent that out?

    what’s the best thing to do with a bunch of cash. and bad credit!!

    • Frank, that is a tough situation. Having that kind of cash is a great though. With bad credit I would talk to a lender asap to see what steps to take to make your credit improve the fastest. Having credit cards that are paid every month may improve your score.

      Deciding on what to buy depends a lot on your market, what price to rental ratios are and many other factors.

  12. What if for 5 years you took all your profits and put back into buying more rentals to boost your plan and shorten your time line?

  13. Hey Mark, I am very interested in buying my first rental property. I’ve done some research and it looks like I can attain similar margins in my area as you can in yours. I am curious as to how long it took you to go from one property to two? I feel as though getting off the ground will be the most difficult step with an endeavor like this.

    • It depends. I have multiple corporations and I am self employed as well. The rentals are single member LLCs are can be put on my personal tax return.

  14. so you can afford a Lambo on 60k a year profit….. really that doesnt seem like a good amount for 16 properties, what do you have tied up in the 16 properties?, if you average, your making about 312 bucks a mo on each property, I think I can do much better on mini storage where I can pull about 1200 a month ( 100x30ft building) at about 30k )not including property) each building

    • Hi Tim, Good catch! i updated the number of properties I own, but I did not update the income I am making on them. It is around $100,000 a year now with my 16 rentals.

      I finance them with 20 percent down and then have refinanced many as well. My cash on cash returns are over 15 percent when I buy and most are over 20 percent. That doesn’t include any appreciation, tax advantages, debt pay down or buying below market.

      Storage units can be nice, but your making 12 percent cash on cash assuming no other expenses and assuming you are paying cash, they won’t really appreciate unless rents go up, probably tough to buy below market and like you said you aren’t including the cost of land.

      No I cannot afford a Lambo on 60k a year if that was all I had. I simply stated I feel comfortable buying the Lambo because of that 60k a year coming in in addition to my flipping, real estate team and other sources of income.

  15. Can I use current house as equity or.. I would love to rent turn key duplexes here in colorado. Also could I use the possible rent as income?

    • You would have to get a line of credit or refi to use that equity. You can use rent as income if it covers all the expenses.

  16. Why are people so greedy? Ever heard of the studies that show haponess does not increase after more than 70-75k/year?

    • Those studies were conducted about 40 years ago and very flawed. More recent and better done studies show the level of happiness goes up the more money you make. I can say from personal experience my happiness level has increased greatly as I have made more money

  17. Hi Mark,
    Love reading your blog. We are looking to start our rental portfolio and live in Las Vegas. Should we look at other States to invest or is it hard to own rentals out of State? I am asking because $100000 or lower properties here that we have found are not single family homes and they only rent out for around $750-820. I am wanting to have 10 properties by the time our kids start college so I only have 6 years to do it.
    Thank you
    Cass

    • Those are not good numbers in my opinion. It can be hard to invest out of state depending on how involved you want to be.

  18. Hi mark how are you doing I am just trying to get my foot in the door dont’ have very much money right now what is the best way for a rookie to get started I was looking at single family homes or condos to start out looking forward to hearing from you.

      • Hi mark. I’m a young (19m) nursing student. I was in a very bad car accident resulting in a lost football career but also a potential large revenue I’m very interested in putting into real estate. My goal is to be a young retiree that can do whatever I want bc I used this opportunity as widely as I could have! I was very interested if you could possibly text me or email me. And if you would teach me some basics or better yet take me on as an apprentice of sorts! Any help would be greatly appreciated and I thank any time you devote to me!

  19. Hi Mark . you really inspired me .I’m a college student. I’m 24 years old. I managed to save 41,000 my mom and I own a town house near our house. When it comes to investing in property what advice do you have for me if I currently only have 41,000? Should I work and save up until I have 100,000 ? In order for me to buy another town houses ?

  20. Hi Mark, how do you decide between fixing and flipping a house or fixing and renting the house?

  21. Hey Mark,

    I am about to take over my mom’s business. She has 20 properties and I am a little excited and scared to take over this business. Do you have a certain person plumber, electrian, and Etc… I have not handy at all and afraid I will taken advantage of your certain jobs because I don’t know how much this may cost. Any pointers.

  22. Hi Mark,

    My name is Jeremy. I am looking into becoming a Landlord and buying rental properties. I was wondering where I could go to find rental Data or somewhere to show rental statistics for my area. Also if you could provide any guidance or tips and tricks I am a open book . Thank you for taking the time to put this article and video together for everyone.

    Sincerely
    Jeremy

  23. Hi Mark
    I live in Los Angeles, the land of no cashflow! I have a few rentals in the Cincinnati area and want to add more in a couple different markets in the midwest and the south.
    My main holdup with my situation is that I will most likely have to buy using turnkey companies given that Im not familiar with those markets enough or have the necessary contacts to work them and find the below market deals. Also not being close I assume it would be difficult, if I was able to buy low, to manage the repairs from long distance to get the properties rent ready. Im not opposed to turnkey companies but I will not be getting the $500-600 cash flows like you are achieving by being able to take advantage of working in your home market. It seems the most I could expect in cash flow through turnkeys is about 150-250 a door.
    Those cash flow amounts arent nearly as attractive and i keep going back and forth about whether or not at those numbers is it worth taking on a bunch of properties across the country and also dedicating my capital to it. Would love to hear your thoughts on this subject.
    Thanks for all the great content you provide!!

    • That is tough, Personally I think buying below market is one of the biggest advantages of real estate and that is really tough with turn keys. Any way you can pick a market, find a great agent and property manager? Then work on buying good deals?

  24. Hi Mark,

    I am thinking about using my VA loan of 750,000 0% down next year after I graduate from nursing school to start renting out properties. Do you have any advice on the best way to start this process? I will most likely move into the first house for a year and go from there. I’ve had friends in the military do this and they make a considerable amount renting properties but I just don’t even know where to begin. Thanks.

    -Haley Nix

      • My buddy and I are graduating CRNA school in May and want to begin like you did. We are going to start with an area around the university and target graduate students who are in medical school and then branch out. He is from Western, NY and I am from Central N.Y. so we were going to branch out within our respective cities once we start making a profit. We will have one LLC. Can you suggest a good place to start, whether its research or what not. We understand the risk, but are very hard workers and want to be successful. Thanks!

  25. Hi Mark,

    Never invested in the USA, where should I buy my first rental property and get a min cash flow of $500 per mouth.? Any advise would be very appreciated

    Regards,

    Joe Gentile

  26. Hey Mark!

    Just found your site and am excited to explore but wanted to make you aware that in the paragraph “How much does it cost to buy a rental property?” the hyperlink “cost of a rental property here” doesn’t work.

    Just wanted to let you know!

  27. Hi Mark,
    great article. What about using short term rental instead of long term?
    I am making my adventure in short term rental as i found that can be more profitable for certain properties. Obviously you have to spend more time managing it.

    • They take more management as you said. They can make money but it all depends on the market and time you have or extra cost of management.

  28. Hello Mark,

    Great article!
    I was trying to follow your numbers on the chart. I understand that there is additional cash flow from the mortgages being paid off however I can not follow your calculations on where that amount came from based on your model. I have been spending hours trying to back into the number and I cant. Can you let me know how you calculated the first Extra Cash Flow amount from mortgage paid off?

    Thank you very much sir.

    • Once a mortgage is paid off, there is no longer a mortgage payment being made to the bank. That increases your cash flow by whatever amount the mortgage was.

      • Ok, so I understand the concept and was able to pick up on that. However I was trying to back into where you got the $4,572 amount from. I assumed you split the difference on your estimated mortgage so you were accounting for a $550 mortgage payment. By my math you were bringing in $1500 per month and using the entire amount to pay off the mortgage on the initial home. With an $800,000 loan you would have had the first home paid off entirely in between the 5th and 6th month of the third year. Can you help me understand exactly where the $4,572 number came from?

        Also, would you be interested in being retained on a private consulting job? My partner and I have worked hard to build a successful international rental business. We have now gained the assets to take the model to the next level and instead of “re-renting” properties, we are ready to start owning. I am sure your experience and involvement would be valuable to the start of this new venture. Would you be interested in hearing the opportunity and getting involved? It is in the New York City market so I imagine it could be a very exciting project for you if you have the interest.

        Please let me know your thoughts and if you are interested in speaking offline to hear more. Thank you very much.

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