How Many Rental Properties to Retire in 2024

The examples provided in this article are for illustrative purposes only, and your actual returns may vary. Please evaluate your own circumstances carefully before making any financial decisions.

Real estate is one of the best wealth-building vehicles and a crucial component of your retirement portfolio. Are you looking to retire with real estate? In this guide, you’ll learn how many rental properties you need to retire, how much income your properties should bring in, and what to look for in retirement rentals!

Summary

• Rental properties are some of the best investments, as they allow you to build equity, generate cash flow for retirement, and reduce your taxable income.
• You could retire on $50,000 per year with 10 rental properties or $75,000 per year with 15 rental properties.
• When buying retirement rentals, look for low-maintenance properties in great locations that will deliver consistent cash flow.

Calculate your rental property retirement with our free Retirement Calculator!

First Things First: How Much Income Do You Need to Retire?

To calculate how many rental properties you’ll need to retire, you first need to determine how much income will support your retirement lifestyle, expenses, and goals. This varies from person to person!

Will you have a mortgage when you retire? Will you be in a high-cost-of-living area? Do you want to live comfortably, or are you content with a more frugal lifestyle? Make sure you account for not only expenses but also taxes and inflation.

Retirement Income Formula

Not sure how much rental income you’ll need in retirement? Tally your monthly expenses and use this formula to calculate your minimum yearly income:

Average Monthly Spending x 12 = Minimum Yearly Income Requirement 

So, if you spend $5,000 per month, you’ll need at least $60,000 per year in rental property cash flow to retire. You’ll also need to account for taxes and budget extra money to cover repairs, maintenance, and life’s emergencies.

Using Real Estate for Retirement

So, now you know how much income you’ll need in retirement, but how does real estate create that income? You can use rental properties to fund your retirement in several ways.

1. Cash Flow

Cash flow is the net profit (or loss) your rental property generates after all expenses are accounted for. You can live off this income in retirement!

2. Equity

Equity is the money you build up in your property over time through debt paydown and appreciation. You can sell appreciated properties to keep your nest egg growing.

3. Tax Benefits

Many people invest in real estate for the tax advantages alone. Retirees can reduce their taxable net income through depreciation, maintenance and repair write-offs, and other tax deductions.

Browse high-cash flow turnkey real estate investments in top markets!

How Many Rentals Do You Need to Retire?

Now that you know how much income you’ll need in retirement, you can work backward and determine how many rental properties will provide that income. There is no hard rule for how many rentals to retire, but you can apply the formula below to your own financial situation.

Rental Investment Retirement Formula

Plug your annual income requirement into the calculation below to determine the amount of money you’ll need to invest and the kind of return you’ll need to get on your investment.

Income = Money x Cash-on-Cash Return

Example: $50,000/Year = $500,000 x 10% Cash-on-Cash Return

Income

Income is the money you’ll retire on. If your expenses amount to $50,000 per year, that’s the amount of income you’ll need your rental properties to bring in.

Money

You’ll need to invest a certain amount of money in rental properties to generate enough income for retirement. The amount you invest isn’t always relative to your return, so buy properties that will generate the most income for retirement.

Cash-on-Cash Return

Cash-on-cash return is the yearly return of every dollar you invest. A 10% cash-on-cash return on a $100,000 investment is $10,000 per year.

Retiring on $50,000/Year (10 Rentals)

If you want to retire on $50,000 per year, flip the calculation above:

Money = Income ($50,000) / Cash-on-Cash Return

Let’s say you’re looking at turnkey rentals, which regularly achieve 10% cash-on-cash returns.

Now, plug this into the inverted formula above: M = $50,000 / .10 = $500,000!

This means you may only need to invest $500,000 to get $50,000 per year in retirement income.

If you buy turnkey rentals averaging around $250,000 each, putting 20% down ($50,000) for each property, you only need ($500,000 / $50,000) 10 rental properties to retire!

Buy one a year, and it would take you just ten years to retire (not accounting for rent appreciation). Do these calculations faster with our free retirement calculator!

Retiring on $75,000/Year (15 Rentals)

Let’s say you want to retire on $75,000 per year instead, in which case you’ll want to use this formula:

Money = Income ($75,000) / Cash-on-Cash Return

Now, fill in the formula for turnkey rentals that achieve 10% cash-on-cash returns: M = $75,000 / .10 = $750,000!

This means you only need to invest $750,000 to get $75,000 per year in retirement income.

If you buy turnkey rentals averaging around $250,000 each, putting 20% down ($50,000) for each property, you only need ($750,000 / $50,000) 15 rental properties to retire!

Buy one a year, and it would take you just fifteen years to retire.

Looking for high cash-on-cash return rentals?

What to Look for in Retirement Rentals

Not every rental property is a good asset for your retirement portfolio. Here are some of the things you’ll want to look for when buying a rental property.

1. Consistent Cash Flow

To meet your retirement income requirements, you’ll need rental properties that can deliver consistent cash flow from month to month. You can calculate the cash flow on any property with our rental property calculator!

2. Great Location

Investing in markets with high population and job growth bodes well for long-term appreciation, and buying property in a landlord-friendly state will make it easier to manage your rental. But don’t stop there! Niche down to cities, neighborhoods, and even streets to find a low-crime, high-appreciation area for investing.

3. Great Condition

The last thing you want in retirement is exorbitant costs that eat into your cash flow. Buying properties that are in better condition will keep maintenance and repair expenses low. Turnkey rentals are either newly renovated or build-to-rent homes, so you keep more cash flow!

4. Multiple Cash Flow Strategies

When analyzing a rental property, you should ensure it will cash flow with multiple investing strategies. For example, if short-term rental regulations change in your market, you should know whether your property can make money as a long-term rental as well.

5. Local Property Management

You want to retire, not manage rentals! Make sure there are quality property management companies near you (or your property), or buy a turnkey rental with Rent to Retirement and get leased and managed properties from day one!

Retire Faster with Rental Properties

Ready to start building your cash-flowing rental portfolio for retirement? Buy properties that will not only appreciate over time but also deliver a cash-on-cash return that meets your minimum income requirements. You can use our retirement calculator to run the numbers in minutes!

How Many Rental Properties to Retire FAQs

How Many Rental Properties Should I Own to Retire?

The number of rental properties you need for retirement will depend on the properties you buy, your financial goals, and your retirement lifestyle. Using the above rental investment retirement example, you would need 10 rentals to make $50,000 per year or 15 rentals to make $75,000 per year.

How Many Rental Properties to Make $100,000 a Year?

Based on the rental investment retirement example we used earlier, you would need 20 properties, each bringing in a $5,000 annual cash-on-cash return to make $100,000 per year in retirement.

What Is the 2% Rule for Rental Properties?

The 2% rule states that a property must be able to bring in 2% of the purchase price in monthly rent for it to be a good deal. Keep in mind that this is an outdated rule and not a good indicator of a quality property. Instead, use our rental property calculator to run your numbers!