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How many rental properties do you need to retire rich?

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Hi Everyone,

I hope you are doing well.

Before I dive into today’s blog post, I would like to thank fellow Canadian Real Estate Investor and Blogger Chris Davies.  I was chatting with Chris this week, and he gave me some great tips as to how I can improve my blog.  One of the blogs that he recommended to me that I am going to be leveraging in order to improve my blog is SEOmoz.  The SEOmoz blog has nothing to do with real estate investing, however, everything to do with Search Engine Optimization — which is something that I am going to be learning more about and integrating with First Rental Property.  Thanks again Chris!

Now for today’s blog post…

Today’s post was inspired by fellow Canadian Real Estate Investors and Bloggers Julie Broad and Dave Peniuk of Rev N You.

In Julie and Dave’s recent Rev N You Newsletter, they talked about figuring out your ‘why’ when you are buying rental property.

Over the past couple of years, they have met a number of real estate investors who have purchased 30 or more properties in a very short period of time.

Despite these large portfolios that these investors have accumulated in a very short period of time, they are not satisfied.  They are not satisfied because they never took the time to figure out WHY they were investing in the first place.

When I read this in Julie and Dave’s Newsletter, I knew exactly what they were talking about, because I see this happening as well with real estate investors that I know, or hear about.

It has been my observation that some real estate investors become obsessed with buying as many properties that they can.  Some investors ‘explode’ onto the real estate investing scene and buy a lot of properties REALLY fast.  Before the dust has settled, some find that they are in a situation in which they despise….very unhappy, and holding a large portfolio of rental properties.

For instance, they now have a lot of additional stress with the management of these properties and with dealing with all of their tenants.

Why it pays to be self aware

Most Real Estate Investors just like most of the general population are not overly self aware.  Due to this lack of self awareness, people do things without really thinking why they are doing it.

Fortunately, I have always had a high degree of self awareness.  This has helped to guide me through my real estate investing career.  If and when I begin to question what I am doing, I have to stop and ask myself the reason why I am investing in real estate.

As a new real estate investor, being self aware is crucially important.  Generally speaking, the more self aware you are, the less stress you will cause yourself down the road.

Here is an example of what I mean

Some new real estate estate investors think investing is all about money, and all about how many properties you can buy and how fast.

Fortunately, I came to realize early in my real estate investing career that it is not all about that.

This past year, I  had to turn down an individual who wanted to joint venture with me.  He was a guy with access to a large amount of capital and with experience in real estate.

When he first asked to joint venture with me, I struggled slightly with the decision making process, as all I saw were ‘dollar signs’, as I did not want to turn down this guy’s money.

Being the extremely self aware individual that I am, it did not take me long to figure out that I had to listen to my gut and not joint venture with this guy.

He was someone that did not have the same core values as myself.  He viewed life and business much differently than I did.  His time horizon for investing did not match up with mine.  Due to all these factors, my decision to turn him down was very easy.

Having only been investing in real estate for a little over 5 years now, I know well enough never to venture with someone who does not share the same core values that I do.  This in my mind is a recipe for disaster.

Unfortunately, there are so many investors who do not realize this and jump into partnerships with anyone, just because that other person has money to invest.  They get blinded by the dollar signs, and more often than not, are left cleaning up a mess and/or are completely miserable.

What I have learned by observing others…

I have been fortunate to learn a lot by watching what other investors do.

What I have learned is that in this point in my real estate investing career, I would only joint venture with family members (people that I am related to) or with people who have core values that match up closely with mine. (this could be close friends, friends or acquaintances — however, there has to be an alignment of core values)

Due to this decision on my part, it may take me longer to build my real estate portfolio, however, I will be much happier and will not be adding any unnecessary stress to my life by partnering with people just because they have money to invest.

So how many rental properties do you need to retire rich?

There is no right or wrong answer to this question.

This all comes down to your own personal goals.

As you can see from my example, I am choosing to grow my portfolio more organically…

It is perfectly okay to grow your portfolio in this manner.

If you are a new real estate investor, you may only need one rental property to meet your real estate investing goals.

Let’s say for example, you chose to purchase 3 properties.   Depending on your individual circumstance, there is no reason why you cannot do this on you own.  For some it may take a number of years to acquire 3 properties by yourself.  Whereas with others, it may only take a few months in order to achieve this.

At the end of the day it is important to remember:

  • There is no ‘secret’ number of properties required to retire rich.
  • It is completely fine to grow your portfolio organically (by yourself)
  • If you do joint venture with someone, make sure that you are not doing it just for the money, and that your partner and yourself are well suited for one another.

Best Regards,

Neil Uttamsingh

PS: To keep up to date with my blog, enter your email address on the LEFT hand side of the blog.  To receive The First Rental Property Newsletter, enter your e-mail address on the RIGHT hand side of the blog.  In The First Rental Property Newsletter, experienced real estate investors will be sharing how they purchased their first rental property.  They will also share with you some ‘tips’ and ‘tricks’ as to how to buy rental properties.

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12 comments

1 Julie Broad { 10.11.10 at 8:46 pm }

Hey Neil – thanks for the great shout out in your post! I am so happy that our newsletter today resonated with you. It’s wonderful to hear you’ve been so self aware.

I wish we could say the same. We’ve been all over the map in the 9+ years we’ve been investing. As a result we’ve partnered with the wrong person, we’ve hired the wrong property managers, we’ve placed the wrong tenants and we’ve learned some pretty rocking lessons as a result. But it got us to the place we’re in now – and we’re very happy with that. Tough lessons and all.

And you’re right – there is no one answer for how many houses you need to retire. The answer is different for everyone. :)

Great post … and thanks again.

2 Shae { 10.12.10 at 3:56 pm }

Great post Neil! “Rich” means something different to everyone, so you’re absolutely correct….and growing slowly yet strategically has been (and still is) a solid way to build wealth in real estate investing.

3 Gabi { 10.12.10 at 11:49 pm }

This is a great article, Neil! Considering I bought my first property following your advice, I think I’ll stick with you when making future purchasing plans!
Keep the good stuff coming!
:)

4 Paul { 10.18.10 at 8:22 am }

“Rich” is a pretty relative term. To me it means income is much greater then outgo.

I strongly believe that if a real estate investor can accumualte 3-5 nice rental properties that the tenants can pay off through rental income, he or she can retire quite comfortably.

Too many people try to get rich quick by buying many properties quickly, then are overwhelmed later.

5 neil { 11.24.10 at 10:10 pm }

Hi Paul,

Thank you for your comment.

You are bang on with your comment.

I too have seen people crash and burn when they try to buy too many properties, too fast. It often is a recipe for disaster if you do not have systems in place in order to support your business.

3 to 5 rental properties free and clear is an amazing accomplishment and should never be over looked.

It is not about how many rental properties an individual owns. It never should be. It should always be about what that individual is trying to accomplish. It should be about what their goals are.

Taking actions to move us closer to our goals is the way to go.

Regards,
Neil Uttamsingh

6 neil { 11.24.10 at 10:18 pm }

Hi Gabi,

Thanks for the comment.

You definitely bought in the right location. Given the fact that that location is undergoing a transition, I think that you will be pleased with the long term performance of the property.

Regards,
Neil.

7 neil { 11.24.10 at 10:19 pm }

Hi Shae,

Thanks for your comment.

You are right!

As the saying goes…

“Slow and steady wins the race!”

Regards,
Neil Uttamsingh

8 Bob { 12.11.10 at 11:00 am }

I would argue that the sole goal of acquiring rental real estate is for monetary gain. I see fit to leverage as many properties as one could, then one at a time with a large pool of monthly rent checks pay them off. The comment about the “right” property manager is necessity here. Research!

9 neil { 12.12.10 at 9:28 pm }

Hi Bob,
Thanks for your comment.
You mention a strategy that many experienced real estate investors use.
Often times, investors will sell rental properties that have appreciated the most, and use these funds to pay down other rental properties within their portfolio. Perhaps these other rental properties did not appreciate as much. This move allows the investor to increase their monthly cash flow on their existing properties, due to now a decreased mortgage payment.
Thanks again for your comment Bob.
Best Regards,
Neil.

10 London Properties { 03.14.12 at 8:10 am }

Over the past couple of years, they have met a number of real estate investors who have purchased 30 or more properties in a very short period of time.

11 Trackbacks { 10.02.14 at 2:20 am }

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