How To Live Off Rental Income

https://www.youtube.com/watch?v=Xkeu-wJhxiI There are two main ways you can build a property portfolio so you can live off rental income. Book in a Free Property Strategy Session 0:00 - Introduction0:21 - The two main ways to live off rental income0:41 - Strategy #1: Owning properties outright2:12 - How many properties do you need to own to live off rental income?4:49 - Strategy #2: Positive Cash Flow Property5:40 - How many positive cash flow properties do you need to live off rental income?9:37 - The cool thing about investing in positive cash flow properties14:13 - How to get $15,000 in passive income from 1 property Recommended Videos: How to get $15,000 in passive income from 1 property The 3 Stages of Property Investing Transcription: Ryan 0:00in this video i want to look at the different ways that you can live off rental income and how to live off rental income so how exactly does this work and how can you become financially free not need a job in order to survive anymore and just survive off the rental income that you get from your properties now there's two major ways to do this when we're talking about living off rental income the first way is if the mortgage is completely paid off and the second way is what you would call positive cash flow so we're gonna have two scenarios here we've got positive cash flow and we've got owned outright we're gonna start by looking at the only outright one because that is the most simple one to look at so only outright works really simply is that you take some money let's say you've saved up a deposit of about 20% and use that money combined with the remaining 80% that you borrow from the bank in order to go ahead and purchase a property okay so this is a little property there that we've purchased what you then do is focus on okay using rental income from the property as well as rental income from your job and your life in order to pay off the debt on this property here until you get to the point where that is now zero and you now own 100% of the property and so when your mortgage is zero you obviously don't need to pay your mortgage anymore and so now what happens with this is the money now goes to you that is such a terrible person but the money goes to you and you can go ahead and live off that rental income you got to have expenses of somewhere around 20 to 30% of the rental income but so you get the total rental income minus your expenses of 20 to 30% and that's what you can live off so i think i've got like a mortgage calculator from years ago okay i couldn't find the calculator so i just quickly made a spreadsheet here where we've got our income goal the rent coming in from our properties per week this is then annualized times by 50 so allowing two weeks of vacancy per year regarding our expenses are roughly 20% and how many properties you would need to achieve your income goal so obviously if your income goal was smaller let's say you only need to live off $50,000 and let's say you did the two property strategy where you purchase a property and built a granny flat so your income is 400 from the house equals 400 from the house plus 300 from the granny flat then you're looking at $700 per week how many properties would you need to reach 50,001.79 if we put that up to 100,000 then you need three and a half of those properties with granny flats in order to reach your income goal of $100,000 so that's one way to live off rental income is to own your property outright so basically if we go and we'll fix up this image we purchase the property we pay down the debt we own it outright and then we have a bunch of different properties that all generate income okay that we own outright completely outright now you can pay these off using your own money him pay them off using the positive cash flow from these properties if we look at the two property strategy you got $520,000 so 400,000 for the house 120,000 for the granny flat $700 in total rent plus a low interest rate of 3.3% you're looking at yearly cash flow around $15,000 per year using this rough example so you could actually use that $15,000 let's go 15k you could use that to pay down the debt of the property or if you're negatively good you would then need to use your own money but basically once you've paid all of these off let's draw a picture of you or maybe you like to wear dresses like i do or maybe you and your partner that makes more sense doesn't it once these are paid off then the money goes into your bank account after the expenses are taken out and you live off your expenses so super simple strategy to live off rental income there are you want to focus on markets that are gonna have long term demand and long term rental growth and obviously you want to achieve as much rental income per property as possible which is why building a granny flat on a property can be such a good idea the second thing is positive cash flow and this works a little bit differently so let's say we still take our 20% deposit and then we got an 80% mortgage and we combine those in order to purchase a house okay in the previous example our focus was on paying down this debt and getting rid of this debt but in a positive cash flow situation you don't actually have to pay down the debt in order to live off the rental income so let's have a look at how that works using our two property strategy where you build a property and then you build a granny flat on that property so we're gonna jump over here to property tools conde you two tool i created myself which you can sign up for if you want to use it and so i'll just reset this so you can see we've got the house which is $400,000 renting for $400 per week interest rates are super low at the moment at 3.3% so as you can see we're in a positive cash flow situation of $3,651 per year so let's say our income goal we'll move this down here income goal of 100,000 again annual positive cash flow ps pcf was what was it 3600 let's go back 3651 and then over here properties required equals 100,000 divided by this number now this positive cash flow has already taken into account expenses server scroll down here we've got property manager fees we've got the interest on the property vacancy repairs and maintenance insurance council rates you get the idea all of the expenses are paid for by the rental income and this is what's left over and so how many properties do you need we actually need 27.4 properties with this sort of cash flow in order to live off the rental income at that income goal so as you can see 27 properties very different to 3.57 properties now these are the same properties the same weekly rent oh no they're not because we haven't built the granny flat on them so let's go ahead and do that so we're going to add $120,000 to this in order to build the granny flat instead of having a 20% deposit we're going to put a 10% deposit on the house 30% on the granny flat which will make 15% overall this will be 520,000 rental income jumps to 700 and we can say that our estimated cash flow here is $13,510 so now let's go ahead and let's just copy this and instead we'll do our $13,500 now we would only need 7.41 properties in order to be financially free so buying a property building a granny flat do that seven to eight times in order to get this rental income now remember if we're looking at this you've got down here your interest costs so you're still actually paying interest on this property you haven't actually paid it off but you're still after paying your interest in everything getting that positive cash flow and instead of putting that onto the mortgage to pay off the property you're actually going ahead and living off that so that's why you need more properties than if you completely paid them off now obviously this would look different if interest rates were to go up so if interest rates would go up 5% then the income from that goes down to 6000 and so then in our situation 6000 you'd actually need 17 properties instead of seven or eight properties or if you've got a situation where it goes up to 7% well now you're actually in a negative cash flow situation and if you put that at 2800 or whatever it was yeah 2800 you actually can't get a result you can't buy negative 35 properties the more properties you buy the worse off you'll be until you actually own these for a couple of years and let's say rent goes up by 10% okay now you're in a positive cash flow situation by $400 per year not a lot you need 250 properties so as you see depending on what cash flow you get dramatically affects how many properties you need to own now one of the cool things about this though is that if we look at our situation here 703.3% this 13,500 what we could do right is we could go ahead and purchase these 7.41 properties and actually live off the $100,000 that that generates for us so we can actually do that and we've got let's call it eight properties that we own now over time those properties are gonna go up in value so let's let's make it 10 just because otherwise i can't really do the math so 10 properties $5.2 million total investment but $7,000 total income we can see we've got a yearly cash flow before tax of that right did i do something wrong here the reason that's wrong is because of our expenses down here like repairs and maintenance need to be $10,000 insurance should be 10,000 and council rates 20,000 bank fees 3000 you probably have some water rights and land tax and stuff in there as well okay there we go 135 that looks better so basically we've got this situation right where we own all these properties and we can live off the rental income let's call it 135,000 let's say that was our goal and we own 10 and we need that to live off we're spending all of that because we're living a boozy lifestyle and we're loving it but let's say each year we get 2.5% growth in rental income so we've got $7,000 7000 times by 2.5% okay one or 2.