Can You Actually Live Off Rental Income?

by Phil Cord

It is safe to say that renting property is one of the easiest ways to become financially independent. For starters, a potential landlord needs to do proper research and check the state of the local housing market, as well as figure out what is a probate bond. Later on, one needs to find trustworthy tenants and take care of the basic maintenance work if need be.

However, it is easier said than done. First, one needs to ensure that one is earning enough money to be able to quit one’s job. Second, one has to keep on reinvesting one’s earnings and growing one’s assets.

In this article, a potential landlord will find a bunch of useful information related to living off rental income, including calculating how much money one needs to quit one’s job, how many properties one needs to become financially independent, and how to go about minimizing expenses.

How Much Money Does a Landlord Need?

Before one thinks about quitting one’s job, one needs to know how much money one needs to have saved. The amount might differ depending on one’s financial goals. For instance, if one is planning to retire at a certain age or go on a long vacation, one will need more money than if one just wanted to live a comfortable life without having to worry about work.

In order to determine how much money one needs to live a comfortable life, one has to add up the amount of money one needs on average to get through the year, including rent, costs of repairs and maintenance, cost of annual insurance premiums, annual property taxes, and cost of utilities.

Next, one needs to find out one’s potential annual income from rental properties. For instance, if one plans to buy three properties for investment purposes and each property will have an annual rent of $10,000, the mortgage payments need to be subtracted from that $30,000.

Lastly, one’s monthly expenses need to be multiplied by 12 and subtracted from one’s potential monthly income from rental properties. This will give one a general idea of how much money one will need to live comfortably without having to work!

If one discovers that one’s income is not as high as one had hoped, one might consider taking out a personal loan to cover expenses. A helpful site for that is SocietyOne personal loan calculator.

How Can a Landlord Minimize Expenses?

Most people tell potential landlords that they should buy properties in cash. But landlords who are just starting out might not be able to come up with a big enough down payment to do that. In that case, the landlord’s expenses can be minimized by using a loan to finance one’s properties.

To do this, the landlord needs to choose a loan with a low interest rate and favorable terms. For instance, one can take a look at a VA loan. The VA loan has a very low interest rate of around 3.5% for qualified veterans and around 5% for non-veterans.

When the landlord’s loan is about to be fully paid off, that landlord can sell a property to pay off the loan. This way, one will be able to live off rental income without having to worry about any other expenses!

How Can a Landlord Keep Growing Assets?

In order to actually live off one’s rental income, one needs to keep on reinvesting one’s earnings and growing one’s assets. This way, one can maintain a certain level of income while still minimizing one’s expenses. How should one go about doing it, though? The following tips may help:

  • Reinvesting one’s earnings. The easiest way to grow one’s assets is to reinvest one’s earnings. It means having to continue investing in properties if one wants to maintain one’s income.
  • Growing one’s net worth. In addition to that, one had better keep on growing one’s net worth. In this case, it means finding ways to invest in profitable ventures other than real estate, such as stocks, bonds and mutual funds.

As long as one is willing to put in the work, it is definitely possible to live off rental income. In fact, many people have already done so. The key to success lies in picking the right location for one’s investment properties and caring for these properties!

If one wants to quit one’s job and become financially independent with rental income, one needs to be sure that one is earning enough money from renting properties. If that is not the case, it would be best to look for another investment vehicle that will allow that person to earn more.

Moreover, one should also make sure that one is calculating expenses carefully. Consequently, one will know how much money one needs to accumulate before being able to quit one’s job.

Lastly, it would be best, if possible, to buy properties in cash so that one does not need to worry about paying mortgage interest. With that being said, if one is looking for profitable investment opportunities, the real estate market is an excellent option!

Phil Cord is a freelance content writer. He loves exploring new solutions and their impact on business. Currently, he works with a group of specialists fascinated by the broadly understood subject of work. Their areas of interest include topics related to the future of work, offices, technology in the workplace, HR specialists’ competencies, health, communication and a wise combination of professional and private life.

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