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How Much Cash Flow Do I Need From Rental Properties Before I Can Leave My 9-5?

A question I hear all the time in the real estate investing world is, “How much monthly cash flow do you want from your rental properties before you will quit your 9-5 job?”

The numbers I see and hear most often range between $4,000 – $6,000 per month ($6k/month happens to be roughly a $100k pre-tax salary in Ontario).

Remember, we are only talking about cash flow. The other two components of the “Return on Investment” calculation in real estate are mortgage paydown and appreciation. Mortgage pay down also happens each month, and appreciation has been very strong in recent years – although investors should not expect similar surges forever. Nevertheless, this article is about cash flow.

A very important part of being a real estate investor, or running any business for that matter, is having very clear goals.

Some investors want to own a certain number of doors. A duplex is 2 doors, triplex is 3 doors, etc.

Personally, I like a goal of cash flow per month because that allows me to reverse engineer how I can hit that goal.

For example, if I convert a single family into a duplex and the cash flow results in $700/month, and after refinance, that property cost me $50,000 (money left in the deal), I have some clarity about how many more duplexes I might need to own before I can reach my goal.

Goals will evolve.

When we purchased our first property, the goal was simply to have somebody pay off our mortgage.

We didn’t know how to correctly calculate cash flow for a rental until we purchased our third property. And that’s when we realized that the cash flow on our first two purchases was not strong. In fact, one of them required us to put extra money in each month as the rent was too low to cover all of our costs. We have since sold both of those rentals.

Whether you are on your first or fifth property, make sure you have clear goals. Your cash flow or number of doors or number of properties goal needs to align with the capital you have available, as well as your lifestyle. Owning a 5-unit building in a rough part of town that you self-manage will impact your life differently than a duplex in a good part of the city that you hand off to a property manager.

And just because some investors may be aiming for $5k or more in monthly passive income (it’s never really passive), doesn’t mean that this number should be your goal. I shared it just so you know that it’s possible, one door, one property at a time.

Put in the work, hustle, surround yourself with all-star investors and professionals, buy good assets, and you might just reach that goal sooner than you think!

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