Owning rental properties is a great way to fund retirement. A rental property will produce steadily, will have a predictable income, and has many tax advantages for retirement.
The question is “How many rental properties will I need in order to retire?” First, you must figure out the finances. There is no magic number. It all depends on how large your stock portfolio must be in order to retire.
Most people will use the 4% rule. Have you heard of this? This rule is a financial guide that states you can withdraw your savings each year by 4%, but it should last 30 years with over 95% certainty. But this is not a foolproof plan by any means. It is a financial suggestion to help you. At the end of the day all you can do is make an educated guess. By using real numbers you can make a pretty accurate guess. Make sure that the numbers are current and look at both history and statistics. You must also take into account your other source of income. Your other sources would include retirement portfolios, social security, and family support.
The short answer to this question is, figure out how much you need in retirement to cover monthly expenses, and figure out how much monthly cash flow you get from a typical rental unit.
Here is a formula to help:
Monthly amount needed for retirement ÷ Cash flow per rental property = Number of rental properties you need
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