Truly Passive Real Estate Investing

The house pictured above is in Montgomery, Alabama. I have never seen this house in real life. I have never been to Montgomery, although I am sure it is lovely.

The odds are good that you, too, have never been to Montgomery and have also never seen this house.

Even if you have been to Montgomery, the odds are very much against you happening to have seen this house.

Heck, even if you live in Montgomery, you still very unlikely to have seen this house.

None of this is surprising.

What is surprising is that my pal Rich, the owner of this house and the author of today’s guest post, has also never seen this house. Rich has mastered making real estate investing truly passive.

Time was, I fooled around with real estate myself. For the most part, I did pretty well. Although my first purchase was a self inflicted wound. Only now, decades later, can I see the humor in it.

But whether I was hemorrhaging cash or minting it, it always took time and effort. Less an investment than an investment/job hybrid. Too much like work for my taste.

This experience has made me very skeptical of most real estate investing books, articles and podcasts. They always seem just too easy, risk free and sure. Not my experience, or that of the real estate investors I’ve known.

Still, for those who take the time to learn and understand the craft, there is no question that there is money to be made. Maybe even passively.

I met Rich when he attended Chautauqua several years ago.  We became friends. 

Back in September of 2018, I heard him on the ChooseFI podcast, and that reminded me I had been meaning to ask him to write this guest post. How, exactly, I wanted him to tell us, has he made real estate totally passive?

Passive enough he owns houses he has never seen, let alone set foot in.

Passive enough that he runs his empire from anywhere in the world he happens to be stationed.

Bear in mind, we are not talking about one or two or half a dozen houses managed by imposing on local friends and family. We are talking about 20, 14 of which were bought sight unseen.

Yeah, I wanted to know more too.

Oh, and by the way Rich, please share your actual numbers.

“Sure,” he said. “Why not?”

Throughout this post I’ll scatter more pictures of some of Rich’s houses. Here’s the tale of how he acquired, owns and manages them…

Truly Passive Real Estate Investing

Rich’s First House

There is something I love about the FI community and investing in index funds. 

How easy it is.

It doesn’t get any more passive than index funds.  All you do is set it, and forget it. Go VTSAX!

That’s what is so tuff about real estate.

Who wants to take a phone call and fix a busted water pipe in a middle of the night?

Or a deal with a difficult tenant?

Who wants to worry about supervising a complicated project when you buy a property that needs a lot of work?  

Plus some people lose a lot of money in real estate!

That’s not passive investing!

I think the reason JL asked me to write a guest post is because of my experience dealing with problems like these.  

It’s been quite a bit different than his.  He’s done real estate, and it wasn’t always fun.

I’ve been in the military the past 18 years, moving every one to three years, and I’ve spent a majority of that time overseas.

In that time, I’ve built up a substantial real estate portfolio that is completely paid off (only the FIRE crowd would think that’s cool) and professionally managed.  

The interesting thing about all of this is how I’ve set up my systems.

For me, real estate investing takes no work.  

I mean like NONE.

Even when I buy properties from overseas that need significant remodeling I’ve set up systems to have all the rehab performed and managed for me by people I trust.


I’m just calling it an empire because it makes me sound cool.  It’s not really an empire…


I currently own 20 single family homes as long term rentals, all in Montgomery, Alabama.

They are all paid off, which I know I mentioned earlier, but I’m mentioning it again because it’s unusual in the real estate investment world.  

Real estate investors think I’m insane for not using leverage to get-rich-quick.

On this blog, and in the FIRE community, I think debt-free real estate makes a lot of sense.  I can’t be foreclosed on, and I can’t go bankrupt.  I have very little risk.

Suffice it to say, I have amazing peace of mind as I approach a military retirement in the summer of 2020.


Rich’s Second House

I arrived in Montgomery, Alabama in 2013 for a 10-month assignment to attend a military school.  During that time I purchased six houses with cash.  I then moved to Germany for three years, and then Korea for two years.  While in Germany and Korea, I purchased 14 more houses in cash, all sight unseen.  I haven’t been back to Montgomery once since I left.  

I purchased these houses for prices ranging from $30k-$65k, and the average house now is worth about $75k.

While there is some work involved with finding and purchasing the houses, I was able to do this all on the internet, mostly at  

Once the houses are bought, with my systems in place, there is virtually no more work to be done.  These houses provide pure passive income.

Now, let’s get into the nuts and bolts.


The key to successful passive real estate investing, whether you live next door to the property or in China, is to have a trustworthy, efficient management company.  This is easier said than done. 

The most important issue is trust.  You need to know the company you are dealing with is trustworthy.

Thoroughly vet the management company and make sure they are going to be a good fit for a real estate investor.  This is best done before you purchase the home, but it can be done at any point in the process.

I’m going to give you my idea of what this vetting should look like.  

You are going to ask the property management company for references.  The best reference to get from a management company is from other investors.  If they have a track record of working with investors, and they are satisfied customers, this is a good sign.  If they’ve never worked with investors and/or don’t give you any references, that’s a potential issue.

Another reference to ask for is current tenants.  Speaking to people who live in their homes as tenants or “customers” can be very telling.  How good are they with answering service calls, taking payments, dealing with disputes, etc.

Talk to all of the references they provide you, but these people have likely been coached to say nice things.  You need to also develop new references through these people who haven’t been coached, and don’t know they will be called.  These are called developed references.  This is how you get the real story.  

You ask the people the management company gave you as references if they know anyone else you can talk to who has worked with this property management company in the past.  This way you are developing the reference yourself instead of getting it directly from the property management company.  

Also do a bunch of online research to include social media and better business bureau, to see what else you can dig up.


Also, I like to approach the company as a renter.  Use their website posing as a renter and see how it operates.  Call the company and see the process for setting up the showing of a property.  

Send an email and see how promptly they respond to your inquiry.  I encourage you or a friend to actually go to the showing and see how they do.  This is all very important and telling in how effective they’ll be.


This advice applies not only to management companies, but to all aspects of real estate, and business for that manner.  It’s often neglected and key to success.  Once you hire a management company, it’s likely you’ll notice things they are doing or not doing that you don’t like.  

You need to clearly tell them what you expect and give them a chance to fix it.  I had lots of tweaks like this with my management company over the first several months, and a smaller amount as time went by, but it’s always a constant effort to improve and keep things well oiled.

In cases where they are falling short, and not able to fix their behavior, make it clear you are planning on ending the relationship.  When the time comes, switch to a different company.  Don’t waste time with a bad management company.  This same advice applies to everyone else on my “dream team”.  


Here’s where I’ve done something different than most real estate investors.  

One of the key things that’s allowed me to be truly passive in my long distance real estate investing is the deal I’ve struck with my management company.  

Usually when I find properties to buy, they are distressed and need a lot of work before they will be ready to move into.  Most management companies expect to receive a rental property in move-in ready condition.

I worked out a deal where my management company is deeply involved in the entire purchase process.  While overseas, I buy properties that are in need of a lot of work.  The management company finds the contractors and supervises the rehab on these large projects for me.

The key to making money is real estate is buying houses cheap enough to make a good return on investment (ROI), and being able to buy distressed properties while I’m overseas is key to my success. 

I’ve found that when I tried to arrange for this type of rehab on my own, even when I lived in Montgomery, I was being charged higher prices than the management company was getting when they arranged it.

Even though they are charging me a 10% fee on top of their cost, I’m still saving money.  They have contacts I don’t.  I’m tapping into their expertise, and I don’t lift a finger!

When I find a property I want to make an offer on, even once my real estate agent has sent us pictures and approved it, I get my management company’s approval before I make an offer.

They are the ones who know what neighborhoods are best, which have problems, and which floor plans are popular (and not popular) with tenants.  I rely on this to avoid buying lemons, and it’s been golden for me.

Here’s more info on finding a great management company. 


Another key member of my team is a real estate agent who knows how to work with investors.

Real estate agents are in the business of making money from getting a commission on the sale of properties.  Most agents have not worked closely with investors, and they don’t understand the unique needs we have.

Furthermore, the incentives of real estate agents and investors are not aligned.  Real estate agents want to make a sale quickly and spend the least amount of time as possible with each client.  Investors need their real estate agents to make multiple low-ball offers on properties over a long period of time before anything gets accepted.

The typical real estate agent will feel like an investor is a waste of their time.  Too needy and greedy.

I had to find an investor-friendly real estate agent who understood my unique needs.  I need someone who will:

  • Make multiple low-ball offers without complaining 
  • Not question or second-guess low-ball offers
  • Gladly visit multiple properties and take extra pictures and video
  • Understand the types of properties I’m looking for as an investor
  • Answer phone calls and emails promptly
  • Bring me deals

My wife uses to view properties.  It pretty much has all the info available on the multiple listing service (MLS).  This is the information that used to only be available to real estate agents before the days of Zillow and Trulia.  We use this info to make multiple low-ball offers, through our real estate agent, on pretty much any property that meets our criteria.  We then sit back and wait for bites.

Our real estate agent checks the properties for us.  In many cases, if there aren’t enough pictures on a listing, he’ll take additional pictures.  

If one of our offers gets accepted (this is rare), or at least gets a counteroffer that is close (more common), then we start the next step in the process.  We have the management company go over to the house with the realtor and give us their take of the property.  They will likely take pictures as well, and send us a detailed email explaining if we should proceed with the negotiation and purchase or not.

If we are advised to proceed, we continue negotiating a cash purchase.  We offer to close in 10 days, which sellers love.  This often gets us a better discount.

Once our offer is accepted, we immediately schedule an inspection of the house.  I also use the same inspector, someone I know and trust.  We will get a detailed report with lots of pictures.  At the same time, I ask my fire insurance company to go look at the house.   He will also perform a detailed inspection and give a report of what I will need to fix before he will insure the property.

Keep in mind, at this point, I’ve had 4 different people I know and trust carefully look at this property for me.

  • Real estate agent
  • Management Company
  • Inspector
  • Insurance Company

Yes, I haven’t seen it myself, but I’ve got professionals doing that for me, and I have lots of photos!

Using the property inspection report, I negotiate with the seller to get the price down lower.

My management company sends me a document to electronically sign so they can put the utilities in their name and manage the property for me.

I call my bank using Skype and wire transfer the money to my attorney in Montgomery for the closing.

The property closes and my attorney sends me one or two documents to sign electronically. 

When you pay cash for a property, there’s often only one document to sign.  It’s so easy!


Rich’s Third House

In order to have an idea how my investments in Montgomery compare to say VTSAX or other investments, I want to explain the 1% and 50% rules to you, and then tell you roughly what I paid for my properties and how much I’m getting in rent.

The 1% rule in real estate means you should be able to rent a property out for at least 1% of the acquisition price.

Acquisition price is the purchase price plus the price of getting it move-in ready.  

Example.  Purchase price $90,000.  Fix-up price $10,000.  Acquisition price $100,000.

According to the 1% rule, you should be able to rent this property out for at least $1000 a month for it to be a good candidate for purchase as a rental property.  This is just a guideline, more complicated math should be done before you actually purchase.

The 50% rule in real estate tells you that approximately 50% of what you collect in rent will go to expenses.  This is much higher than most people realize.  Here in our example, we bought a house for $100,000, the rent is $1000, and 50% of that, or $500 a month, will go to expenses. 

Without nerding out too much, I’ll tell you that a house that satisfies the 1% rule with 50% of rent going to expenses makes an ROI of approximately 6%.

The first house I ever bought in Montgomery in 2013 was for $30,000.  I spent $15,000 fixing it up. It rents for $850.

The second house I bought for $45,000 move-in ready.  It rents for $900.  

My third house was a short sale that I purchased for $37,000.  $6,000 in repairs.  It rents out for $900.  

In all of these examples I have not just satisfied the 1% rule, but it’s closer to 2%.  My ROI is probably above 10% on these houses, even after management fees.

I own 20 houses debt free, but 16 are in an LLC, and 4 are in Roth IRAs.  

To make the math simple, I’ll be conservative and say my average house is renting for $850 a month, and 50% of that is going to expenses.  

Since I don’t want to touch my IRAs for a while, I’ll leave that out of the calculation.

Applying the 50% rule means $425 a month in expenses and $425 a month income X 16 in LLC = $6800 a month or $81,600 a year profit.

In reality, that is about what I actually make, although it fluctuates widely by month.  This month I made only $3000 because a tenant that was evicted did a lot of damage to a property, but there are months my income is over $10,000.

It’s been about a year since we’ve purchased a house.  When you take purchasing houses out of the equation, my real estate portfolio is virtually zero work.  It’s all done by my management company.  It’s taken time to get to the point where they know when to call me and not call me, but we’ve got it down to a science now.

When I first started using this company and I was still in the local area, they were asking me questions about every little detail on each property.  

I realized quickly they had great judgement, wanted to save me money, and had my best interest at heart.  Eventually we got to the point where now they make most of the decisions for me, unless it is something very expensive.

If I answer one email a month about my 20 houses, I’m surprised.  All I do is wait for a big, fat check to come at the end of the month, and wrestle with taxes in March or April each year.   

I’ll be honest, without mortgages, the tax bill on my rental income can be pretty ugly.

I guess that’s not a bad problem to have!

If you want to understand more about how I do real estate, read my blog page entitled The Complete Guide to Real Estate Investing.

I’d love to answer any real estate related questions you have in the comments section below.

But if you ask me who my management company is, I’ll have to stab you in the face!

Rich on Money


New Podcast

Doug Nordman of The Military Guide, Jane and myself had a blast being interviewed for this episode of the What’s Up Next podcast:

How to Raise Financially Responsible Children

Some fun outtakes at the end, too.


Old Post

Seems I’m seeing a lot of press on Social Security these days, most of it scary. I wrote this post back in 2013. My views remain the same.

Social Security: How secure and when to take it


Here’s an absolutely awesome holiday idea:


Think you have free will? Think again.


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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. Janice says

    A quick note, having relocated to the South 14 years ago…Be prepared to go back in time 50 years plus!!! You will be a “Yankee” and a “damn Yankee” if you stay. Ugh!

    • Winston says

      If you are arrogant and insulting about a people, call them all backwards, and make no attempt to fit in, then don’t be shocked if you get some sort of label.

    • Barbara says

      I moved to the south and do see a marked difference in doing business in a small city of about 100K people. Being raised in a fortune 500 company in NY, then spending 11 years working in DC can make a person more than a little impatient when moving south. After four years, I am “settling in” and recognizing some of the benefits of my new life. I still will not do business with someone who cannot show up for an appointment, communicate, or give a courtesy call; but perseverance has found me a great electrician, plumbing company and welder, among other professionals who have come to realize that a woman can lead a project intelligently while also being open to professional suggestions.

  2. Wealth Well Done says

    Cool and inspiring post. I own one rental now and manage it myself because I am relatively young, live next door, and don’t mind the work. But this gives me the blueprint on how to 1) scale my real estate holdings as I save more $ 2) Slowly drift away from the management duties myself as the fees to have someone else manage it mean less and less to me. As I grow personally and professionally, I am sure I will start using this blueprint to help me become more location and responsibility independent. Thanks for the glimpse into my future!

    • Rich Carey says

      Drifting away from management as you get older is nice. I managed myself for sometime. The key is buying the house for a good enough deal so you still make money even with paying a management company. You build the expense in. It’s not easy to do, but possible.

      • Wealth Well Done says

        Thanks for the advice. Financially my rental is working great now. My payment on it is $980. Rent is $1600. Monthly cash flow is $620, which gives me alot of options for my future. Right now I’m just saving it all to build up my war chest of cash. Once 10% monthly management fee doesn’t mean much to me, I’ll start building my team of professionals to manage that part of my portfolio for me.

  3. Vancouver Brit says

    I have to say, reading through that article makes it sound like a lot of work and far from passive! Coordinating with the management company and the realtor seems like a ton of work in itself. I assume this is only during the initial purchase of a property, but still.

    I also have to say, Rich sounds like difficult client. I definitely would not want to be his realtor earning commission on his perpetual low ball offers for multiple properties at a time. He must put a lot of effort in to maintain good relationships!

    Also, as always, in Canada the 1% rule is basically impossible to achieve. It’s always middle America that you read these stories about. $1,000 rent for a $100,000 property? Not a chance in Canada. You would be lucky to reach even 0.5% here.

    • Rich Carey says

      Buying the properties is work, but not much. I feel like I coordinate the work from afar, but I don’t really do the work. That’s the people on my team like real estate agent, property manager, inspectors, etc.

      Once it’s bought, that’s when it truly becomes passive for me. I’m spending more time writing this comment to you than I do many months taking care of my rental properties.

      Certain parts of Canada’s market have just taken off. You don’t invest in areas like that. The 1% rule is tough to impossible there.

      My real estate agent has made 20 commissions off of me. Realtors can make good money off of investors if they know how to cater to them and what they need.

    • jlcollinsnh says

      My guess is most realtors feel the same way and so avoid investors. That leaves a rather nice market for those who choose to serve it.

      Those realtors who do serve it likely have systems set up that make submitting and tracking multiple offers a smooth and easy process.

      They know they are working with a serious buyer with cash in hand. No worries of a deal falling apart when the buyer can’t get a loan or loses a job or just gets cold feet.

      They know such buyers represent not just one commission, but an ongoing flow of commissions.

    • Michel Ritchie says

      Hi Vancouver brit

      Same in Montreal, Canada.
      0.5% would be a very good investment.
      People in Canada bet too much in only the appreciation rate.
      Too many eggs in the same basket!!

  4. Mike says

    Rich, loved your article. I almost felt like I could jump in to “real estate.” Then, I begin to have the feeling of “work.” The wife is always trying to talk me into investing into real estate. I am praying she fails. I am in love with Indexes. Doesn’t feel like work. But I did learn if the wife wins I could actually do it by starting with finding a great Management Company. You see – when I try to fix things I make it worse.

    • Rich Carey says

      I’ll probably address this is some other comments, but index funds is waaaaayy easier than real estate investing. There is also more risk with real estate. I love real estate, that’s why I do it.

      Lots of my retirement money is still in good ol’ index funds.

      I’m not telling anyone to abandon index funds for real estate!

  5. Major Marine says

    As a fellow military officer who has attempted to navigate the waters of landlordship from across the country and overseas… are lucky the Montgomery market is what it is my friend. The BAH rates relative to the cost of housing must favor landlords significantly. Your 1% rule will not work in most military markets…..granted I see your strategy has been to buy homes on the lower end. For your method to work, you must also have very unsatisfactory on-base housing that military members do not want to live in. In the North Carolina market where I purchased, the base continued to build base housing in addition to the new housing market booming outside of the base. When an E-6 or E-7 with family could buy a 2300 sqft house for only $225,000 – the majority of the market sought to purchase homes. You are in a very unique situation with a military market to cater to. You have a steady flow of renters which you obviously understand how career timing and progression works. I would bet there is not enough housing on base to cater to young enlisted who are married, and I commend you for finding the market nitch. I a truly happy for you, however I don’t find your method able to be replicated anywhere but in a unique market such as where you’ve placed your guidon. I’ll stick with VTSAX and the TSP.

    • Rich Carey says

      Major Marine!

      Great comment. It allows me to clarify some important things. I have a wide circle of friends who are real estate investors, and it is possible to find good buys throughout much of the United States. There is no secret to me choosing Montgomery.

      I will say that what rarely works is investing in a high cost of living area. Low cost of living cities lend themselves easier to the 1% rule.

      To clarify about Montgomery, I’ve never had a military member rent one of my properties, so I’m not catering to them.

      When I moved to Montgomery, the house that I wanted to live in as a military member didn’t meet the 1% rule, so I rented it instead of buying it. The areas with good schools and newer homes and low crime are more expensive, and don’t make good investments (from the 1% rule perspective).

      Areas with high crime and horrible schools are also a bad investment. I strike a balance and invest in good working class neighborhoods.

      And yes, VTSAX and TSP is a much easier and stress-free way to invest than real estate.

  6. Sam says

    I did like this choosefi podcast too. It still seems like a lot of work up front for 6%. I guess the advantage for many is extra leverage. Personally I’d rather get the 6-10% from equities

    • Rich Carey says

      Yes, I agree.

      Most people use leverage for purchasing homes, and then talk about the potential benefits of leverage, appreciation and tax benefits, but I try not to get distracted by that.

      For me, 6% isn’t enough. I need to be projecting higher than 6% before I’ll buy the property. Call it the 1.5% rule.

  7. Matt says

    I’m also 100% passive in real estate. I buy small ($50k-$100k) limited partnership stakes in larger apartment deals. The general partner does all the work and collects a fee. I just get quarterly checks and occasional additional distributions from add-on loans and refinancings. The deals I do definitely use leverage but relatively low loan-to-cost of 65% on average. I know that Big ERN uses a similar strategy except invests into a private equity fund that buys larger limited partnership stakes in institutional real estate assets. This method provides geographic diversity and sophisticated management and oversight (when the right asset managers and fund managers are selected).

    • Drew says

      This also what I have done for the past few years, although in addition to large apartments I do self storage and mobile home parks. In the not too distant past I have owned 20 sfh rental properties and I won’t be doing that again. Personally, having 20 rentals in one city would be too much geographic risk to me. Another BRAC could be devestating.

      • Rich Carey says

        That’s partially true. If the one or both of the military bases there were to close, it would impact my rents. I imagine they would go down a certain amount. If I had mortgages on my houses, it would be devastating, could put me out of businesses. With the houses paid off, it would be annoying. I might sell and move to a different city.

  8. Ben says

    Similar to a previous poster I wonder what you pay to all the four parties who do all this work for you on every house that you ‘might’ put an offer on or ‘might’ purchase.

    What commission do you pay your propertymanager for checking out all these houses that mostly won’t get purchased? And what do you pay them for overseeing the whole rehab process? Thanks

    • Rich Carey says

      The real estate agent has made 20 commissions from me.

      The inspector makes $400 for every house he inspects.

      My insurance guy has 20 policies because of me.

      So they make some money.

      I pay my property manager 10% on top of the actual cost of rehab. Since they find better people than I do, it still comes out cheaper, plus they are supervising the process for me.

  9. Tammy says

    I go back and forth on buying property again now that I finally got out from under my mortgage and the constant high maintenance of owning a townhouse in the DC suburbs. The main thing that raised my eyebrow when reading your post was that you make it sound so easy just to buy those first few houses in cash. Not all of have that amount to drop that is not tied up in retirement type accounts just yet unfortunately. I can’t imagine buying my first four houses in cash back to back like you describe. I’m curious if you recommend this same method if you can’t own the homes outright right off the bat like you do.

    • Rich Carey says

      I don’t recommend paying in cash as a rule. I recommend conservatively investing in real estate. You save up at least a 20% downpayment, get a fixed rate for 30 years. If you want to use this method for many homes, you need to think about the risk of being unable to make the payments for some reason (loss of job/injury/market crash/who knows).

      You watch your cash flow for a year or so and the value of the house and make sure things look good and, if all is good, repeat the entire process.
      Make sure you always have enough equity in your houses that you could survive a real estate crash like 2008. Obviously, with my houses paid off, I don’t have that risk.

      I’m not a fan of taking equity out of houses to buy more houses. The equity is the safety cushion. Many investors will disagree with me on this. So be it.

  10. Davy Jones says

    So all I have to do is: have lots of cash so I can buy houses outright. And find a team that I can trust and that will do everything for me while I travel the world and fill my pockets with money. Why no one else thought of this?

    • Rich Carey says

      I LOVE this comment.

      Here’s what I would say to that. The reason I was in a position to buy these houses was after a career of saving, being frugal, and investing well. Essentially, because of the things that are taught on this website and Jim’s book. I invested in the S&P 500 index fund as my only investment my entire life, and it did fairly well. I also had side hustles to make extra money. In my case, I flipped homes.

      As far as your comment “while I travel the world and fill my pockets with money.”

      If by that you mean my overseas service in the U.S. military, then yes. Currently about 50 miles from North Korea. 🙂

      • Dr. Remoulak says

        Rich – not only did you graciously take time out of your schedule to provide some very helpful insight, but then respond the way you did to his comment. You’re a class act.

        I own 8 units (multi-families) and have always been a do-it-yourselfer. It’s getting old and your post has given me the nudge to take a serious look at finding the ‘right’ management company. Thanks!

        • Rich Carey says

          That’s great! I think there is valuable experience to be learned in doing it yourself. Also, when getting started out in life financially, it may be necessary. At a certain point, however, you just don’t need to do it anymore!

          • Mike says

            Hi Rich, Loved this post. Thanks for taking the time to write it!

            Two questions:

            1) If you were to start over again and had to find a new management company in a new city, then how would you start? I understood your vetting process for when you found a company that you believed was a good candidate. But, how would you go about finding some good candidates? Sure google will help you find a list of management companies, but is this the best way to find good ones to vet? (assuming you have no contacts in the industry).

            2) Essentially, you found a good way to way to buy undervalued houses. Hence your ability to rent them at about 2% their value. Can you talk more about how you identify these properties? Do you have a process for finding these? Note, I understood your process for vetting them once you found them, so I am not asking about that. I am asking about how sort the haystack to find the needle worth vetting.


      • Rutledge says

        Rich, your ability to flip the script is admirable.

        Great post as well.

        If I use short paragraphs like you, will I attain your zen?

        I hope so. 🙂

  11. Michael Papper says

    Does the estimated 6% profit per year (on a 1% house) also include any potential capital gain? I ask because many areas with 0.5% income should have significant capital gain.

    • Rich Carey says

      When you say capital gains, I’m wondering if you mean appreciation on a house. It does not include appreciation. You can benefit from appreciation as well if it happens. While overall homes tend to appreciate, I think appreciation happens less than people realize over long periods, even though there may be large jumps during certain years.

      • jlcollinsnh says

        “I think appreciation happens less than people realize over long periods, even though there may be large jumps during certain years.”

        This should be seared into any RE investor’s brain.

        And when the market is volatile enough for large jumps, it is open to large drops.

        • Rich Carey says

          It’s the most misunderstood concept in real estate.

          There is a thread on facebook where someone is saying of course it was easy for me to buy these houses because I made so much appreciation on my first townhouse in 2003.

          Actually, I bought that house for $280,000 in 2003 and sold it for $400,000 in 2016. It made about 3% per year. Not very good!

          Compare that to VTSAX! Real estate is not always a great investment.

          You can count on cash flow much moreso than appreciation, so that’s what I do.

  12. MsTJ says

    Thank you for this post. It has opened my eyes.

    I bought an 11 unit apartment complex with no idea what I was doing. Today, 13 years later, it is almost bringing in 1% and I’m not putting anything near 50% away monthly for expenses. It’s all going to the mortgage company. It’s something to reach for. I’m grateful I have been able to hang on so long, and things will get better in the future. Thanks to your article, I have something more to reach for.

    Wish you had posted this years ago, and I had found it.

    • Rich Carey says

      I’m glad you enjoyed the post.

      If I’m understanding correctly, this apartment complex isn’t making much money for you. Have you thought about selling? Can you?

    • jlcollinsnh says

      A good friend of mine in Cleveland, along with a partner, owned a similar building. It was what we back in those days used to call an “alligator”, because properties like that ate you alive. Wonder if they still use that term?

      Anyway, it hemorrhaged cash every month and was impossible to unload as the sales price couldn’t cover the mortgage. They were cops and didn’t have deep enough pockets to cover the short fall.

      Took them forever to get out from under.

      Stories like yours and theirs are not unique, but they are no less painful for that.

      How did you get drawn into yours, MsTJ?

      • MsTJ says

        “How did you get drawn into yours, MsTJ?”

        All I can say is stupidity or maybe impossibly naive. In 2004 I inherited a 7 unit rental about 2 hours away. Sold it and thought I had to do a 1031 exchange to not lose it all to taxes. That was wrong and I didn’t know. I bought the only place in my current town, that was on the market and I wanted to own. It was overpriced at the time, then 2008 happened and had to lower rents.

        I don’t know if these properties are still called “alligators” and it did almost eat me alive, I like the term. Fortunately, so far, I have had deep enough pockets and am holding on. Checked out selling this year and found out I could sell for what I paid.

        Today, I’m able to handle it and pull a little out each month (all to savings goals). I’m on a very tight budget, and live a good life, one I could be happy with for the remainder of my life. Today I put away about $2.5K per month, in good months. To meet Rich’s ideal of putting 50% of rental income aside, I would need to put $6K aside each month instead of my current $900.

        Afraid to sell though. I would lose all the tax credits I’ve built up (over $100K), plus closing costs. Would also have to pay taxes on what I have written off to depreciation. In other words, to the best of my understanding, I would lose a lot if I were to sell today. Believe I am stuck with it for quite a while, if not the rest of my life.

        The rental market is great here now and looks like it will only get better going forward, there are more prospective tenants than rental units and rents are rising quickly. Since finding the Financial Independence community (and YNAB), I have gotten my spending under control and it feels like I’m making progress.

        Your manifesto, Mr. Collins, has given me reason to hope. I liked your line about reaching for a star. That is what I want to believe I am doing. Holding onto this purchase almost broke me, and it hasn’t yet. I’m reaching for that star that would bring me more income than I could hope to spend, once the mortgage is paid off, in about 15 years. Between now and then, things will get better by bits and pieces, with increased rent and decreased maintenance costs as I take care of things. Also paying a little extra on the mortgage and hope to pay it off in less than 15 years. Have already prepaid enough to cut 2 years off the length of the mortgage.

        Would you hold on or sell? I read your story about how you lost money in real estate and learned that the depreciation I have taken would hurt me. I can hold on and believe that is my best option. The hemorrhaging of money has stopped and believe selling would just start it again. If you have any other thoughts I would love to hear them. `

        • jlcollinsnh says


          Thanks for sharing your story and glad my blog has been of some consolation.

          I am by no means an expert in RE and it has been decades since I’ve fooled around with it. So I hesitate to offer any advice.

          Better to listen to Rich. 🙂

        • Rich Carey says

          This is a tough one.

          I’m guessing someone would need a lot more specific info from you to give you an idea of it you could get away with selling or not.

          I’ve asked a friend of mine to weigh in on this.

          You need to find out what you can sell the property for, and then make sure you understand all the tax consequences of that, and see if it’s something you can afford to do. It might be worth hiring the right CPA who understands multifamily to go over with you.

        • HeadedWest says

          I definitely cannot give you real estate advice, but MMM wrote a big-picture post about these sorts of problems titled “If you wouldn’t buy it, you should probably sell it.” Might be worth a read if you are torn on what approach might serve you better in the long run.

  13. Steve says

    Hi Rich – thanks – this was super helpful to read. Congrats on building your portfolio. I think RE investing is an interesting way for people to generate income and we’re interested in sharing ideas with our community at (I’m the founder).

    What do you think about sites like Roof Stock that claim to enable what you have done at scale? (Although I agree with your assessment that the property managers really matter).

  14. Markola says

    Hats off to you, Rich, for figuring out one way to crack the real estate code profitably. There is a lot of ways to do it but every time that I get the bug to learn more about a real estate investing method (rentals, fixing and flipping, wholesaling, crowdsourced funds, vacation rentals, etc., etc) I decide I’m grateful for the simplicity of my job, high savings rate with employer match and purchases of index funds over several decades now. Your particular formula is truly impressive and interesting to read about, however, so good luck. As far as I’m concerned, it’s all yours :-).

    • Rich Carey says

      Fair enough. You do make good points. There is more risk and more work than straight up JL Collins index investing.

      It’s because I love the game and love owning something physical that can be seen.

      It’s in my blood.

      I also do the index fund thing too.

  15. dawn says

    Very interesting. I have a rental property here in the UK. owned outright. if i sold ,after paying agents fees and capital gains tax ,id be left with£125,000. I get £575 a month rental income.[£6900 pa] I pay management fee of 10% plus insurance and gas safe cert [required] totals £900 pa. That leaves £6000 pa , I put aside around £800 for repairs and maintenance so thats £5200 return on £125,00 which is 4 % return. Due to other income being tax sheltered , my tax bill is not a big issue for me. the numbers are not as good as yours but its passive and it would be the same return from a stock/bond portfolio, [which i also have, the property is an extra] .My reason for staying with the property and not selling is diversification. If/when the stock market crashes i can leave my equities alone. Im not forced to sell low or panic sell. whats your take on my plan.? Im a woman on my own so don’t have anyone to discuss this with and it would just go over most folks heads anyway.

    • Rich Carey says

      Your thought process seems sound to me. It’s conservative. Many would think you are wasting your equity and not leveraging it to control more property, but that’s not my style (clearly). You are making money and it’s diversification with the stock market. It’s the same thing I’m doing. Many readers of this blog (jlcollinsnh) may tell you to sell and put everything in index funds for the long haul. That’s simple, but then you lack the diversification of also having a property. Good luck!

  16. Sendug says

    Thanks for the info, Rich. Am on the fence about real estate myself and have browsed your blog a bit, along with Chad Carson’s. I’m currently living in Japan, so you might be a good model for me to follow. A few questions (if this is in your guide, please direct me there):

    -You started out in the town you’re buying, so that gave you 10 months to find the good neighborhoods that fit your criteria. Advice for finding neighborhoods from afar (and abroad)? Did you just ask the property manager/agent? Your own online research? If driving neighborhoods, that doesn’t really help me, or other non-locals.

    -Just watched your opinion of turnkeys (spoiler: he doesn’t like them). Would you consider doing 1 place turnkey just to get your feet wet and quiet jitters better than not doing real estate at all? Note: We move back stateside in a couple years (waiting on wife’s visa), so I’m currently wondering if I should push myself to do this now or just read up and hit the ground running once we move.

    -Ever thought of BRRRRing on 1-2 properties for the tax benefits on the loans to balance out other properties?

    Thanks again!

    • Rich Carey says

      Read my article on 5 secrets to finding the best property manager.

      You don’t need to be there yourself to find the best neighborhoods, you need a great management company that has experience in a wide area.

      Mine often tells me not to buy in certain neighborhoods, or even on certain streets, because they have some properties there, and have trouble renting them out. They have learned what areas are good and bad, and guide me in my buying decisions.

      Turnkey is a bad idea imho. You’ll could end up with an overpriced property in a bad neighborhood with bad tenants and a poor management company.

      BRRRR is not my thing. If I have equity in a house, I don’t pull it out immediately, I leave it there as a safety cushion to fluctuations in the market. I sleep better at night that way.

  17. Gino says


    I live outside of Chicago, in Cook County Illinois. There is no shortage of homes in blue collar neighborhoods within the price range you paid for your homes. However, the property taxes are high!

    It’s not uncommon to find homes listed for 55K with $4,500 yearly taxes. The taxes alone make a lot of these properties appear to be bad investments from that standpoint alone when half the rent is consumed by property taxes alone.

    When finding suitable properties, how do you factor in property taxes?

    Do you begin your search in areas with lower taxes, or do you search within a price range, and then factor in taxes to see if the property would cash flow.

    What is the minimum percentage a property needs to cash flow on a monthly basis before you consider buying it. And do you figure that percentage based on half the rent going towards expenses.

    I would love to try and replicate what you did. It seems like finding the right management company is the key.

    Is there a database of management companies that your aware of that investors can scout?

    Thanks Rich!

    • Rich Carey says

      Those property taxes are insane.

      I usually think of it this way. How many months profits from rent would it take to pay the property taxes?

      In Alabama, property taxes are between $400-$600 on each property. Less than a month’s rent. Low taxes are pretty important for cash flow. You really have to make up for it with an amazing purchase price and high rent if you have high taxes.

      The minimum cash flow you expect is a personal question. I’ll recommend minimum of 6%. If you are asking me, it’s 9%, but that’s been harder and harder to get in Alabama recently, and I either need to accept less, stop buying, or go elsewhere.

      The biggerpockets forums are a great place to ask around about management companies, but not everyone is willing to share that info. My advice is to do check these forums for your city and do your own internet searches and start calling the companies as well as go over their websites to start the vetting process.

  18. Alex says

    Rich, good post thanks for sharing. There was one thing you mentioned in passing but is significant and I hope you can comment on it: “…a tenant that was evicted did a lot of damage to a property…”
    Can you elaborate on this a bit? Is this something that happens regularly enough to be a concern or at least an annoyance? Who deals with and repairs the property with issues such this and do you find it to take any of your time to deal with? Renting always seems good on paper, but the non-quantifiables such as a difficult tenant sway me into the “I’d rather pass” category with regards to renting out properties.

    • Rich Carey says


      Sometimes tenants trash your property. It hasn’t happened to me a lot, but it has happened.

      I had a renter that was great for several years, I think maybe 4. When they left, the place was trashed. It was expensive to fix everything. You don’t really have the ability to get this money back from the tenant, it’s not financially worth the effort, and they probably don’t have the money, so you just absorb that cost.

      I would call it the cost of doing business. It used to bother me a lot, but in the end, it’s a business and I’m still making decent money.

      My management company handles all of this (remember, totally passive for me!), but I get annoyed when I see the bill.

  19. Dugan says


    I’m confused as to what the benefit of this approach is. If you had your money in VTSAX you would have seen ~96% growth (plus dividends) between January 1 2008 and now. Conversely if you put that same ammount of money into a house purchase where you were earning 6% per year and then reinvesting that in buying more houses which also earned 6% you’d end up with ~79% return (1.06^10).

    Is the assumption that the houses are always appreciating in value? Or is it about diversifying your source of income? Because the first point seems like a bit of a gamble. The second point– diversifying your source of income would make sense, except we’ve already seen why a house is generally a bad investment in other articles ( If the goal is diversity wouldn’t bonds or a global index fund would be a better bet?

    • Rich Carey says

      It seems funny to compare my real estate investment to a time period in the past and tell me I would have been better off in index funds.

      There are other equally long time periods in the past where I would have had very low returns in said index fund, but my returns from real estate are consistent. Never negative. I like that.

      I think I love index funds as much as the next guy here, but just because the stock market has been giving consistent returns in the past is not a 100% guarantee that is what will happen in the future (same is true of real estate), so I choose to diversify in real estate as well.

  20. NJ says

    Thanks for the great article– and a nice alternative to the whole leveraging-properties way of doing things. That never appealed to me, and I prefer owning properties outright. My wife and I (30s) own 2 3 bedroom properties in a college town (paid 115K and 130K a couple years back, now worth around 175K each), 1 paid off, 1 with a mortgage with a few more years @ 3%. They rent for $1200/ each.

    We plan to move at some point in the next few years, and I’ve started to do a little digging for a property management company. At the moment we have a hybrid approach to FIRE, having about 50% of our assets in real estate and 50% in Index Funds (Thanks Jim!).

    Due to a recent inflation of property values in our college town (maybe getting 200K each for our properties), we’re considering selling the properties and putting the proceeds in index funds (vanguard broad based ETFs), or even selling them when we move. I hesitate though since I’m not sure I want all my eggs in one basket (even if that basket contains 500-3000 companies.

    Would love your thoughts on this sort of hybrid approach to Financial Independence? Real estate + Index Funds.

    • Rich Carey says

      That’s exactly what I do. I think it’s great. Just make sure you are happy with the ROI, or cash flow on your existing properties. If they don’t cash flow good enough for them to be good uses of your money being tied up in a house, then you consider selling.

      Remember to understand what all your expenses are, most people underestimate this. 50% rule is a good start, but then you need to actually calculate is yourself, especially after you’ve owned for awhile. You’ll have actual numbers. It may be less than 50%.

  21. Erika says


    We overlapped years in Germany, and I travel to Montgomery frequently!
    Have you ever considered doing a 1031 exchange and placing the cash down on an apartment building? I went from a 4plex to 18 plex and now have 145 units in a complex, all on our military salary, still maxing two TSPs and IRAs.
    Also, have you calculated what your income would be if your money was in VTSAX? Like you, I just love real estate so I understand the draw to it.
    Finally, what are your plans post-retirement?

    • Rich Carey says

      Sorry Erica, a little slow! Waited a few weeks to respond to comments this time.

      I’ve done the paperwork to take out a portfolio loan on my properties should I find a suitable multi-family investment.

      Haven’t found it yet.

      I have not calculated what my income would be if it was in
      VTSAX. I don’t like playing the would of, should of game.

      Since that’s where my tsp is, I’m diversified and making money on both index funds and real estate, so I’m happy with what I’m doing.

      I’m retiring in Aug 2020. Moving back to Montgomery July 2019 and will see if I decide to make any big moves in real estate. Probably spend a lot more time on this blog, work out more, travel more.

  22. Aaron says

    The math doesn’t seem to add up. What am I missing? 20 houses at an average purchase/rehab cost of what? $100k? That means you have about $2 million dollars in assets that you purchased with cash… on a military salary that probably averages around $100k a year if you’re an 18 year officer. Less, if you were prior enlisted.

    If your lifetime military income has been $1.8 million, yet you somehow purchased $2 million in real estate, where did the money to purchase come from? Other investments? Inheritance?

  23. Trisha Ray says

    Rich –
    Your post comes with perfect timing.

    I’ve known Jim Collins since we were both about 20, and he was hitchhiking around Ireland. We hijacked him, took him to the hinterlands to dig turf with an Irish bogfarmer, sleep in a farmer’s haystack at a music festival, and – herd rhinos in Nepal later. Life hasn’t been the same since.

    I own 4 rental houses in Albuquerque, and – like you – I bought them cash and owe nothing on them. (How did I do that? I had a line of credit on my primary residence, and kept paying it down. Whenever it got low enough, I’d buy another property. That counts as “cash” – and the line of credit for my primary residence was much lower than anything I would have found for investment property.) Not complicated.

    It was something I understood – unlike – at that time – the stock market. And like you, everyone else thought I was nuts. Why not just put down 5%? But I could offer cash, closing in 5 days, if they wanted – I only had one “loan” to concern myself with – and I wound up paying pretty killer low prices.

    (I had twice as many houses at one time, never as many as you had – I’m impressed! – but – when I got divorced, we split the properties. I only have 4 left now.)

    I also have a good management company, and have been working with them for almost 30 years. Like you, I thought in simple terms: 1% – if I could rent it for 1% of what I bought the property for, that was enough by me. Additionally, I had to LOVE the place, or – I wouldn’t buy it. And: Unlike you, I got a pretty good “multi-property discount” – the original 10% went to 8% with the second house, and 6% with the third. So that’s what I pay now.

    Recently though, I have been working to get rid of everything I own. (I’m in Jim Collins’ age bracket-) I want to limit my obligations and responsibilities – and travel the world with a “credit card and a toothbrush”. At least, that’s the goal.

    I’ve been doing that more or less for the last 4 years.

    Now – here’s where I’m asking your advice: I’d like to sell the properties. They’re well run – and the management company doesn’t bother me much, unless there’s a question of a major repair. You mentioned having a realtor who looks out for investment properties. But what about – selling those properties? Any suggestions on how to get rid of properties that are already rented, already earning income – I don’t want to toss the tenants out and have to “stage” the properties! I’m not looking for more work – I’m working on selling my primary residence already.

    You see the properties as a great income producing deal. For me, since I followed Jim’s advice, I no longer have to “generate income” – and I’d just like to NOT own anything. Credit card. Toothbrush. I’m working on it.

    I’d appreciate any advice you might have!
    And thanks for the great post.

    • Rich Carey says


      You describing your travels sounds like an interesting life! Something I’d like to mimic.

      I’ve seen people sell groups of homes as a package investment, with or without tenants and property managers.

      There are lots of places to advertise. A traditional agent can list it in the MLS, but I’ve also seen it on loopnet and similar sites. You can also check the forums.

      The trick is, people viewing the property can be disruptive to tenants, you need a way to make sure the people that are looking are serious about buying and not just screwing around and giving impossibly low ball offers.

      • Trisha Ray says

        Rich –
        Thanks for the info. I’ve never heard of those sites, (loopnet, bigger pockets-) and I’ll look into them.

        Since the properties have always just been a sideline, I haven’t really given them the attention they deserve. And yes, the problem is exactly – not disturbing the tenants while the houses are up for sale.


    • jlcollinsnh says

      Hey Trish…

      Always great to have you here, and to be reminded of a couple of the adventures we’ve shared. 🙂

      I know you have now gotten a PM from Rich in addition to his reply.

      It also occurs to me that quite a few people reading this post have an interest in creating a RE portfolio like you and he have. What you have to offer is “a four-house starter kit” reliable management company sorted and included.

      If anyone reading this has a serious interest, comment here and I will make the PM connection.

      BTW, you’ll need to add your passport to your toothbrush and credit card. 😉

      • Shinwon says

        I own four multifamily properties in central Texas but the high property taxes and inability to open a HELOC on them is giving me some heartache. I’m curious to know more about the Albuquerque market and your numbers in particular. I may be open to doing a 1031 exchange for the “starter kit” if the math works out.

        • Patricia A Rempen says

          In ABQ, it’s also difficult to get a HELOC on the rental properties. I had one on my primary residence only. When I paid it down, I bought another property – a cash deal. I’d keep paying the line of credit down – again – and bought another property. And so on. But the LOC was only ever on the primary residence.

          So I don’t think the location help will help solve that problem.

          (And – looks like I might have a buyer for one of the houses – )

          Good luck –

          • Bourbon says

            I’m still in the building phase, picked up 3 properties locally and trying out a management company on one.
            Thankfully life is full and busy right now, which is a blessing but doesn’t leave me time to go hunting deals etc. If you are looking to sell them as a package and have a goot management solution in place, I’d be open to trying the out of state investor line as well.

  24. Chris says

    Another great article. Can you provide any insight on the Asset Protection portion? I think this would be a great next post by you. I almost just signed up for a Series LLC but because I already have an LLC, I didn’t.

    Is it necessary to place each property inside a trust, a $500 expense, inside the LLC vice keeping properties just inside the LLC? Is an umbrella insurance policy a worthwhile addition? So many ways to mitigate, just looking for some additional insight.

    • Rich Carey says

      I don’t think I have the asset protection thing mastered. 16 of my properties are in an LLC, 2 in my IRA, 2 in my wife’s IRA. I’ve heard of series LLCs, but mixed reviews of if they really protect as advertised. I think for the average investor, the benefits of an LLC are probably overstated. In your name vs. LLC is probably not much difference. People talk about how LLCs protects people from being able to go after your assets. Maybe.

      If you have a lot of properties, as I do, you pay a smart lawyer some money and figure out the best way to protect your interests. there is no clear cut answer to this question.

      It is on my list for future posts, but I better consult a few good lawyers!

  25. Freedom says

    In my humble view buying 2-3 small (total value 600-800K$) rentals in a decent area (thus avoiding bad tenants) putting down 20% and locking with 30y fix mortgages can be a good a way of differentiating your portfolio keeping the risks low

  26. Chris Giorgi says

    Not the only one…but definitely a good one. I’d love to learn more about going from a 4-plex to a much bigger apartment complex with a 1031…I may be in the position to do that in’19. Are you on BP or LinkedIn?

  27. John says

    Rich, I know that only the $50K houses in midwest will meet your 1% rule. However I am curious on the capex. I remember reading tons of articles on bigger pockets including some by Ben Lebovich as to why these $50K houses will be money pits in 5-7 years. How many years have you owned the properties and what are your thoughts on capex?

    • Rich Carey says

      I own a wide range of houses when it comes to age. 1950 to 1980. I’ve owned them for about 4 years. I tend to have a lot of things like plumbing, heather and a/c repairs, but nothing insanely expensive. I have yet to replace a roof or windows on the 20 properties I own. It’ll come, and maybe even a few at the same time. Capex is higher on these properties than newer properties, but the newer properties really make NO MONEY.

      I think houses up to $100k can meet the 1% rule, and it can go higher with multi family.

      That’s my thoughts.

  28. shawn devooght says

    hey rich, great article. Very unique system allowing you to buy so many houses sight unseen and managed sight unseen. Very impressive. When i started investing i wanted to invest, not manage. My problem was after many management co’s i could not find one that was competent. Maybe due more to my own expectations of management. So i created my own management co. which allows me to travel around, i have teleconfrance meetings at 9am daily. If my current(and last) acquisition goes through ill have little over 100 doors. I employ about 6 people and Im very lucky to have found some of them, allowing me to not be too involved.

    • Rich Carey says

      Hey Shawn, small world. That’s awesome. You have a little business, which is more than what I want, but you may make more money that way, and maybe you enjoy employing people and running a business.

      I do not.

      Take care and hope to meet up sometime again!

  29. Mark E says

    I have read the section of your book on how to access part of your funds and using them to pay the bills a few times now and totally still don’t get it. Do you have a simpler blog post on how you did/do this? It still seems like a foreign language to me after reading how it’s done MANY times.


    • jlcollinsnh says

      Sorry Mark…

      ..the book was my best effort.

      If that didn’t work for you, I am not the right source.

      Good luck!

  30. Rajkumar says

    It is an interesting post to read for me as I am planning to shift in Alabama in the next 5-6 days. Once, I heard about real estate investing in Alabama is a pretty good option. Therefore, I am searching about Alabama and real estate investing on the internet and luckily found your website.

    According to me, real estate investing gives you the freedom of living your life in a different way at the older age. Also, you don’t need to work anymore as you will get higher profits in this business. But you need to take calculative risk. Therefore, it is a worth reading post for those who are planning to start real estate investing.

    Your article gave me a better idea on how to start real estate investing or business in Alabama. But there are few doubts in my mind like which is a better option – rent a property or buying a property? Hiring a management company or managing the rental individually? Go for big investments or small investments at the early stage?
    These all are the questions which came into my mind and bother me all the time.

    Can you please give me proper suggestions on all the above questions I asked? Thanks in advance.

    • Rich on Money says

      As a general rule, you should rent the property that you live in, but buy good investment properties that cash flow well. They should at least meet the 1%, rule, hopefully better.

      You should be able to manage a few properties yourself, and this is a good education in real estate. At some point, however, you may want a management company so you can move away and have the income be truly passive.

      Small investments at an early stage. Gain your confidence and make small mistakes instead of big ones.

  31. Financial Orchid says

    Inspite of the low cap rates esp in coastal cities, I’m just super glad to have a roof or 2 in bear market corrections as of late…
    The portfolio can go to 0 for all I care, bleeding companies can get gobbled up by their competitors, consolidations can be ripe left and right.
    I still get to stay warm and dry.
    I’m glad I diversified from realty and used it as a hedge fr Mr Market on days like these.

    • Rich on Money says

      In the long run, the market will be fine. The day the day or even year to year matters little. The market will still most likely to very well on average over the long term. I’m still invested heavily in the market with retirement assets.

  32. Kevin says

    I’m not tracking your comment, “I’ll be honest, without mortgages, the tax bill on my rental income can be pretty ugly.”

    Your rental income taxes should mostly be offset by depreciation, maybe not all of it but most of it.

    • Rich on Money says

      I think with mortgages, your cash flow is $50 or $100 a month per property if you’re lucky. This can be offset with depreciation. When there is no mortgage, your cash flow may be more like $500 or more per month per property. The depreciation doesn’t help much. You pay a lot in taxes. That’s mostly taxable income.

      Again, not a horrible problem to have.

  33. Blisseth Sy says

    Hi Rich, Firstly, THANK YOU for taking time to share your wisdom and experience here!

    Might you pls advise on my situation?
    Location: SF bay area (richmond, CA)
    net worth: $500K; zero debt;
    Renting: $700/mo (shared house, great deal!) + util = $850/mo
    income: $145K/yr gross starting this year; last year it was $120K/yr; on average for working life, average = $65-80K/yr (went to grad school 3 yrs; didn’t net any savings for 2yrs while taking a sabbatical) But always living lean 🙂
    * I maximize saving/investing so that I keep $50K in cash and invest the rest, maxing out 401K and putting rest into 85-90% VTSAX, 10-15% BND (have not gotten into VNQ = REIT’s)
    * QUESTION/issue: will be losing great rental deal as landlord takes back his house mid-2019…..what to do about my housing needs?
    Option 1: I live in another rental (which will at best be $1200/mo given current rental market in my area)… and keep investing my savings in the market AND look to buy out of state my first property (which I will likely need to put 25% down, unless I find a property to buy in cash, which I can comfortably do if 5%/yr on ave)

    • Rich Carey says

      I think you are asking if you should stay in your current HCOL area even though you’ll have to pay high rent, or move to a lower cost of living area. I don’t think you necessarily use the numbers to answer that question. How important is it to you to remain there? How much do you like/love the area? Weather? friends? There’s more to life than just optimizing savings. I’d lean towards staying personally, but I’m from California, and love the weather!

  34. Cliff says

    I just read the article. I am happy for Rich. Being a military man and investor. The problem I have is with people that do something and then set up a blog to tell people about it. So I ask is the money being made in real estate or on the Blog. I would think busy investors would spend the time in real estate on not on the computer blogging. I have not seen a blog from Warren Buffet yet. To many bloggers try to really make the money off the internet with their site. Now that is real passive investing.

    • Rich Carey says

      I think your comment might apply to certain situations, but certainly not in my case. I haven’t made a penny from the blog. If you look around the blog, you’ll notice I don’t sell anything. I don’t have any ads. I don’t have a course. I don’t have a book. It’s simply something I do because I enjoy it.

      There is nothing wrong having a blog that makes an income, but your comment doesn’t make sense if you are using me as an example.

  35. planedoc says

    Rich, that was nicely presented. (I also appreciate the kind way you have answered questions….very much a class act.)

    Jim, thank you for continuing to bring us thoughtful articles.


  36. Mathias says

    What astonishes me is how anyone would be willing to cough up 750 a month for a house worth 50 or 75k? Surely it would be cheaper to get a loan and buy the house outright, especially coz you’re saying these are long-term rentals.

    • Rich Carey says

      That’s pretty much the whole concept of cash flowing real estate! My second house I paid $45,000 for and it’s renting for $900. It was move in ready. Those deals are gone now, but that was only 5 years ago.

  37. Matt says

    IMHO truly passive residential real estate investing can best be accomplished by direct investments into institutionally managed residential real estate. I invest directly as a limited partner into LLCs which possess multifamily complexes that are professionally owned and operated by what’s called a sponsor or a general partner. This is the same type of avenue private equity firms commonly use to invest into the residential RE asset class. PE is another truly passive avenue for RE exposure (BigERN has shared he invests this way). Other truly passive avenues are public and private REITs. These methods allow for better geographic diversification and professionally sourced leverage. And property management can benefit from economies of scales. Owning individual properties, even with a solid property manager, still involves a lot. Even if the manager is handling a new roof install, a major plumbing repair, a delinquent tenant, an expensive eviction, an insurance claim dispute, a property tax dispute, a neighbor dispute, an exterior drainage or flood damage problem, a termite inspection, a pest problem, black mold tenant litigation, insurance policy review and upkeep, an HOA problem, tenant CC&R violation, etc., the owner often has to be involved with decisions and approvals. And most RE has leverage so there’s loan management and refinancing. In more and more jurisdictions rent control is becoming a regulatory hazard for landlords too. And of course there’s the bookkeeping and tax management side. Then there’s just the stuff would have never ever dreamed of: Google “landlord nightmares” and “tenant horror stories” for plenty of other stuff that the best property manager in the world can’t protect your sleep from. Real estate is easy until it isn’t.

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