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How Many Rental Properties to Make $100k Article

How Many Rental Properties Do You Need To Make $100k Annually

If you’re wondering how many rental properties you need to make $100k per year, you probably already know that real estate can be a very lucrative investment. Globally, individuals are harnessing the power of investment properties to build generational wealth.

According to ZipRecruiter, the average full-time real estate investor makes about $124,000 annually. This rate will likely vary based on your location, type of investment, and the amount of capital you put in.

However, real estate is nothing like a get-rich-quick scheme. Just like with every other venture, making money with real estate takes hard work and commitment. But once you get the hang of it, you can work your way towards the steady stream of income you are looking for.

In this article, we will explore just how many rental properties an investor needs to make $100k per year. You will also see tips and strategies for earning six figure rental income.

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Why owning rental properties is the best way to build wealth

Real estate has a proven track record of being the most reliable avenue for generating wealth in the long run. It steadily outperforms other investment vehicles like stocks and crypto in terms of monthly cash flow, diversification, and a considerably less volatile market.

Owning investment properties in an ideal market will allow you to enjoy a steady stream of income from cash flow and home appreciation. You can also take advantage of the several tax deductions available to investors, including the general operating, managing, and capital costs of a property.

For many people, the desire to own investment properties is related to three goals: retirement, replacing income, or supplementing income. Your success with real estate generally depends on your level of experience and how dedicated you are. Real estate investing done well can give you enough money to retire comfortably, pay for your kids’ college tuition and serve as an emergency fund.

How many rental properties do I need to retire?

Before we get into how many rental properties are needed to make $100k per year, let’s discuss how much money is actually needed for retirement.

The truth is, while a comfortable retirement requires a consistent flow of passive income, knowing how many rental properties you need to generate that income isn’t an exact science. Before coming up with an answer for how many properties you need, think about the following:

1. What are your current monthly expenses?

Calculate how much you need to save for retirement based on your current expenses. How much do you spend every month? How much do you pay on your utility bills? Be sure to consider your travel expenses, meal costs, groceries, phone bills, children’s school fees, insurance premiums, clothing, and club memberships. It’s wise to factor in all of that when deciding how much you’ll need for retirement.

When you know how much you currently spend, you can decide how much to save for your future needs, as long as you adjust for inflation.

A spreadsheet is likely to be sufficient for these purposes. But if you want extra bells and whistles, there are mobile and desktop apps that help you calculate your monthly spending.

2. What are your desired monthly expenses during retirement?

Do you want to have more money to travel or to pay for rising health insurance premiums? Perhaps you want to be able to pay for your grandkids’ college education?

Expenses for traveling and vacations will be higher if you plan to take more vacations. Also, you might be interested in a few home upgrades or setting up an emergency fund. Take into account your potential monthly expenses after retirement.

3. How much income do you currently have coming in?

What are your current sources of income? How many sources of active and passive income do you currently have and how much do they bring every month? These sources could include social security pensions, gifts, or even income from a small business

4. Do you own any stocks or other investments that are paying you?

Have you bought any growth or value stocks recently? Do you have money in a high-yield savings account? Do you have money in a mutual, index, or exchange-traded fund? Have you invested in a real estate investment trust? Your current investments are things to consider to determine how much you want to earn in retirement.

5. How many rental properties should you own AND how much money do you need to make from rental properties to hit your monthly targets?

Let’s say you’ve determined you need an additional $5,000 per month to hit $100k per year in passive income from rental properties, or to retire comfortably based on your goals. Using an example from the Atlanta real estate market below, you would need to buy about five rental properties all cash for about $860,000 to generate this monthly income.

How Many Rental Properties To Make $100k Article - Atlanta Real Estate Market Pro Forma Example

Everyone has different retirement goals but you can use a simple formula to determine how much you need to invest in real estate to earn your desired monthly income: I = M ⨉ C, where I = your income in retirement, M = money invested in real estate and C = cash-on-cash return

Let’s say you’re trying to determine how much you can earn by investing $500,000 into a real estate portfolio with a 5% cash-on-cash return:

  • I = M ⨉ C
  • I = $500,000 ⨉ 5% = 500,000 ⨉ 0.05
  • I = $25,000

That yields $25,000 in earned rental income every year. To earn more, you will have to invest more money into your portfolio or increase your cash-on-cash return.

You can use the same formula to determine how much to invest in rental property. As an example, if you are trying to find out how much to invest into your portfolio to earn $80,000 every year with a cash-on-cash return of 8%:

  • I = M ⨉ C
  • M = I / C
  • M = $80,000 / 8% = $8000000 / 8
  • M = $1,000,000

This means that you need to invest $1,000,000 to earn $80,000 annually on a portfolio with an 8% cash-on-cash return.

Exactly how many rental properties to make $100k as an investor?

After calculating your desired monthly expenses and retirement income, you’ll need to find out the exact amount of your income that you want to get from real estate. For many investors, the magic number when it comes to retirement and replacing or supplementing income is about $8,000 per month or $100,000 per year.

The number of rental properties you need to make $100k per year will vary based on several factors, such as the property type, property location, the initial cost of the home, and whether you’re using leverage or not.

Here’s an example of a single-family home from Central Florida:

How Many Rental Properties To Make $100k Article - Central Florida Real Estate Market Pro Forma Example

If you bought several properties with cash flow potential similar to the pro forma above, you’d need to own about eight properties and spend about $1.7 million to buy them. That’s a lot of money. So how do you get there?

How do I buy all these properties to reach $100k or more?

1. Start early

If you want to make $100,000 per year from real estate by the time you retire, you need to start early. Like many investments, time is your ally when it comes to real estate. Most people retire when they are 65. If you buy a brand new home at age 30 and rent it out, your tenants will pay off the loan for you. You’ll own it free and be clear by age 60. If you wait to buy the house until age 50, then you’ll have to pay much of the loan down yourself to own it by age 60. The earlier you start, the easier it is.

If you need to buy more houses to achieve your target, it makes more sense to purchase a small amount every year until you reach your target number. If your desired rental income is $100K and you need thirty houses to arrive at that figure, you could buy one house every year for thirty years. As long as rents are increasing as much as or more than inflation, your cash flow in 30 years will still be worth the equivalent of $100K in today’s dollars.

As the adage says “Don’t wait to buy real estate, buy real estate and wait!” By starting early, you increase your chances of retiring comfortably and building lifelong wealth.

2. Take care of your finances

Tracking your spending and following a budget is crucial to building lasting wealth. You don’t need to make major lifestyle changes right off the bat but giving up a few non-essentials can help you save money and channel it to more useful ventures.

You should also make sure your bills are paid exactly on time and your credit score is in tiptop shape. Consider your current insurance coverage and make sure it is capable of covering any sudden event or emergency.

3. Know how to hunt for profitable properties

As a real estate investor, it is crucial to know how to find profitable properties to buy. Too many investors underestimate how one rotten egg can ruin their entire portfolio. The best type of property is an affordable one, located in a favorable housing market, relatively scarce, and occupied by desirable tenants.

The 1% rule is a helpful rule of thumb to use in most cases. It states that the monthly rental income on a property should be equal to or greater than 1% of its purchase price. This means that a property bought for $500,000 should rent for $5,000 or more. This rule isn’t to be applied in every situation but it is a helpful way to decide if an investment is worthwhile or not.

4. Use a Buy and Hold strategy

Also known as position trading, the buy and hold strategy, as the name implies, involves buying assets and maintaining them for a long period, regardless of the market situation. A buy and hold strategy also confers tax benefits by allowing investors to defer capital gains taxes.
Buying and holding real estate holds numerous benefits for investors. Apart from tax benefits, you get a steady stream of rental income, inflation hedging, and appreciation.

Starting early with a buy and hold strategy, you buy one house (or more) per year for up to eight years and let time and the tenants pay those off for you. A 30-year-old home (e.g., a house built in 1992) is still in pretty decent shape.

A buy and hold strategy can be used alongside short-term strategies like fixing or flipping properties, or as part of the BRRRR method.

5. Leverage the 1031 exchange

If you are not familiar with 1031 exchanges, they are a kind of exchange that allows investors to defer capital gains taxes by swapping one kind of investment property for another. A 1031 exchange involves selling a property and using the proceeds to buy a property or properties of like-kind. A 1031 exchange is governed by the following rules:

  • The properties must be of a similar type (like-kind) and serve a similar purpose.
  • You can identify up to three properties as likely replacements
  • The replacement properties must be identified within 30 days and the 1031 exchange must be completed within 180 days.
  • A 1031 exchange can be completed only if your replacement property has an equal or greater value than your old property.

There’s no legal limit on how many 1031 exchanges you can do but you must hold the property for a minimum of two years, in most cases.

For example, you could buy four houses in an appreciation market for $250K each, and wait 10 years. With a modest 7% annual appreciation, the house value will double in 10 years. At year 10 – before they get older and start needing more maintenance and upkeep – you sell those four and 1031 into eight (or more) resale houses in whatever the next up-and-coming market at that time is.

With larger down payments, you could get 15-year mortgages or just pay down the principal early with extra payments and wind up with a portfolio of eight houses owned free-and-clear in 25 years. Or you could 1031 into duplexes and four-plexes, where the cash flow per invested dollar is higher than for a single-family home.

6. Use the BRRRR strategy

The BRRRR investing strategy is used by both novice and experienced real estate investors. BRRRR stands for Buy, Remodel, Rent, Refinance, Repeat and that is basically what this strategy entails.

BRRRR involves finding homes in the pre-foreclosure stage (also known as distressed properties), flipping them before renting them out, refinancing the property, and moving on to make another investment.


You need to buy a distressed property that requires certain repairs or additions to bring it up to code. These types of properties are usually cheaper to purchase but are considerably difficult to mortgage. You might need to get a home equity line of credit, a hard money loan (also called a rehab loan), a private loan, or use seller financing.

It is vital to note the after-repair value (ARV) when buying a distressed property. This is the estimated market value of the property after it has undergone repairs and is now ready for sale. You can estimate the after repair value of a property by looking at comparable properties, that is, houses that are similar in square footage and overall features to the property you want to buy.

As a general rule, avoid investing more than 70% of the ARV on a distressed property. That is, you should avoid paying more than $280,000 on a property with an ARV of $400,000


You’ll need to make adjustments to make your home safe and convenient to live in. First, you should bring the house up to code, if it isn’t already. Then, you can focus on updates that add to the home’s value. Yet it is vital to work within a realistic budget and schedule.


Since lenders prefer to refinance properties that are already rented out, you should already have renters before you try refinancing. Make sure to screen your tenants carefully before renting to them. The rent should be fair to your renters while also giving you enough income to pay for the mortgage and operating expenses. The property should be ready for an appraisal when your lender decides, so make sure the property is in its finest shape whenever that is.


Refinancing allows you to convert your home equity to cash. When refinancing, you should choose a lender that offers cash-out loans so you can use the cash to buy another pre-foreclosed home. You’ll need to borrow on the appraised value of the home instead of the initial amount of the loan to use the BRRRR strategy. Your mortgage lender should be willing to finance the loan as soon as the property is brought up to code and rented out.

Cash-out loan requirements vary from lender to lender. Typically, this includes a minimum credit score of about 620, as well as a maximum debt-to-income ratio of 50% or less and a percentage of equity in the home.


Finally, you do it all over again. If you’ve followed the steps carefully, you will have a positive cash flow property in your portfolio with next to nothing down. You can use the cash from the refinance to buy another fixer-upper, flip it and start the process again.

Document every step of the process if you’re planning to repeat it so you can learn from any mistakes you make. You should not attempt to implement the BRRRR strategy without doing enough due diligence.

7. Use the debt snowball method to pay off debt

The Debt Snowball Plan is a debt reduction strategy advocated by many financial experts including Dave Ramsey. The Debt Snowball Plan allows you to pay off your debt more quickly by clearing them in the order of smallest to largest. It is commonly used with revolving credit such as credit cards but it can also be applied to mortgage loans.

Essentially, the Debt Snowball Plan works like this:

  • List your debts in ascending order from smallest to largest.
  • Pay the minimum amount on each debt except the smallest
  • Pay the most you can on the smallest debt until you’ve paid it off.
  • Then, repeat until you repay every debt.

With real estate, you can use the snowball method to determine which mortgage loan to pay off first. You can then use your rental income and your personal savings to make your mortgage payment until it is cleared off. Repeat until you pay off all the mortgage loans.

8. Hire a property management company

As mentioned above, if you want to make $100k per year with rental properties, you’ll likely need to own at least eight properties free and clear. This can be a lot to manage for one person, especially if these properties aren’t all located close to home. It’s important to remember that there is a limit to the number of properties you can manage on your own without burning out quickly. For some people, it is around five homes. Others can manage as many as ten houses. Whatever your limits are, you will probably need to hire a property management company at some point, if you’re looking to maximize your income from real estate.

Final Thoughts

When it comes to building wealth, the importance of finding homes that are well-priced and offer profitable cash-on-cash returns cannot be overstated. But more importantly, you need to have a working strategy that determines how you build your real estate portfolio. Hopefully, this article has given you an idea of how many rental properties you need to make $100k per year and also given you some insight into how to plan your way to financial freedom by investing in real estate.

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