How Many Rental Properties Do You Have
My real estate consulting clients often ask me this question and/or assume that we have a lot of rental properties.
I think this question is tied to two issues. The first issue is imposter syndrome. The second issue is retirement.
Imposter Syndrome is fairly self-explanatory, but it's more or less the belief that you don't fit in somewhere. Specifically, it speaks to the belief that you are an imposter and that you do not belong.
I believe women and minorities may be more inclined to have this concern because the images we've been fed of investors up until about 5 years ago were primarily of white men. And often older white men. That isn't to say you never saw representation of female or minority investors, but our general exposure to investors has been older, white men who we then go onto make a lot of assumptions about: they are wealthy. They are disciplined. They live in a big house. They have a serious job. They are serious people. It's easier to believe a real investor is the old guy that lives next to your parents and mows his lawn diligently every week than it is to believe that the person in the mirror is an investor. So, I think a lot of people ask me that question to help provide a baseline for when they can start to comfortably think of themselves as an investor. It's easier to tie your investing status to specific credentials than it is to accept that you are an investor.
Aside from the images we take in, let's also discuss the kind of content we consume for investing. A lot of the content you see around investors feature people that own 100+ investments and it is their full time job. This is a bit of a disconnect with the people that are searching that content. To put this into perspective, it's akin to someone that would like to secure a job as a grocery store clerk watching videos about what it's like to be the CEO of Kroger. It's quite the leap. And, unfortunately, I think some of this content and images prevents people from even starting real estate investing because they understandably have difficulty seeing themselves as a person with 100+ properties when they don't own a property yet, or only own a handful of properties.
The other reason people care about this question is they want to know how much money they need to comfortably retire off of investment properties. Is there a common rule of thumb or a goal they should set as they anticipate living off rental property income.
How to Think About the Question "How Many Rental Properties Do I Need?"
How many rental properties do I need to retire is the wrong question to ask. And the reason it is the wrong question to ask is because this is geographically specific. The reason the number of rental properties you need is geographically specific is because properties cost a different amount in different locations. Similarly, your lifestyle preferences will also dictate how many properties you need.
More important than how many properties you need though is how much money you need to make. And this answer will be specific to you. If you have a property that is totally paid off, you need less money. If you have an inexpensive lifestyle, you need less money.
How Many Properties Do We Have?
This is how many properties we have had since we started investing:
Denver | Condo | 1 Bed, 1 Bath (2014)
Denver | Condo | Studio (2016)
Denver | Condo | 3 bed, 2 bath (2016)
Colorado Springs | Duplex | 2/2 and a 2/1
(2017) (Sold 2020)
Colorado Springs | Single Family Home | 4/2 (2019)
Colorado Springs | Single Family Home | 3/3 (2020)
Puerto Vallarta, Mexico | Condo | 2/2 (2023)
We are technically small investors, plan on staying small investors and support small investors. This means we exclusively work with investors that have between 1-10 properties.
Small Investors: 10 Properties or Less | 48% of all investors
Medium Investors: 11-1000 properties | 9% of all investors
Mega Investors: 1000+ properties | 32% of all investors
While we currently have 4 properties, we do intend on purchasing additional properties. An issue we have had is our Mexico investment. We wanted this property because we like Mexico. We like our proximity to Mexico. We kind of like the Mexican healthcare system and we are totally freaked out by 2024. Regardless of how the election goes, we know 50% of the country may be unhappy and looking for international options at that point. We consider ourselves part of this investing class and want to secure our long-term future. For this reason, we purchased a property in Mexico.
Most investors leverage loans to and tap into their existing equity to buy future properties. The reason this is attractive is because you can buy more when you borrow. What does this mean?
Hypothetically, let's say we wanted to buy an investment in Denver and had $1 million dollars. Assuming we were confident we could cover our mortgages with rent, we could buy one property for $1 million in cash or we could buy 5 properties (20% down) with cash and have someone else pay the rest of the mortgage. This is why people often avoid purchasing properties outright.
However, for our Mexico investment, we, more or less, had to purchase the property in cash. This has tied up a lot of cash. So, we will buy again, but we have to finalize Mexico to do that.
Do we regret selling our other properties?
Yes. We tell our clients to never sell if they can hold on, and we should have taken our own advice.