I Own 150 Rentals. Here's How Much I Make. (Real Numbers)

TLDR

A 16-property portfolio brought in 250,000 in rent and cash-flowed about 7,000 after everything. That is not the business model. The business model is the equity that grows every year while the tenant pays the mortgage down. The real number is what this looks like in 30 years.

Table of Contents

• The Full P&L on a 16-Unit Portfolio
• Why the Cash Flow Number Looks Terrible
• The Self-Management Shift
• Why You Still Buy at Break-Even
• The Equity Game
• Cash-Out Refinance: Grocery Money

The Full P&L on a 16-Unit Portfolio

I picked one matured portfolio for this walkthrough. 16 single family homes, mostly B-class and C-class. Past their first year of operation, so the higher initial maintenance has settled out. Clean case study.

Full year numbers:

That is roughly 76 percent of gross rent flowing through as operating income, with about 15 percent of gross rent going to taxes and insurance.

When I underwrite a deal, I always assume about 60 percent of rent is what I will actually pocket after operating expenses, taxes, and insurance, before any mortgage payment. That is the conservative baseline I have built up over years of real numbers like these.

Why the Cash Flow Number Looks Terrible

Yes, 7,000 dollars in cash flow on 16 houses is nothing. Then you still have business overhead. QuickBooks subscriptions. Bookkeeping help. CPA fees. Office expenses. Take all that out and you are making 5,000 bucks.

You are probably wondering why the hell I would bother.

Here is why. The cash flow today is a small part of what this portfolio actually does. The whole math changes when you zoom out to what happens over the life of a 30-year mortgage.

The Self-Management Shift

Before we get to the 30-year view, one adjustment. If I self-managed instead of using a property management company, the numbers shift fast.

• Gross rent goes up about 5 percent because I can pick better tenants. A management company has to follow equal housing rules and operates on first-come, first-served within policy. I can choose whom I work with, which means longer tenancies and less vacancy.
• Management fees disappear. About 10 percent of rent.
• Maintenance drops because better tenants treat the place better, and I might DIY small stuff.
• Eviction costs drop.

New numbers if self-managed:

• Gross rent: about 263,000
• Operating expenses: about 26,000 instead of 60,000
• Operating income: about 237,000
• Debt service: about 184,000
• Cash flow: about 54,000

On just 16 properties. Multiply by 10 to get a rough read on the full 150-unit portfolio.

Pro Tip

If you are in the active phase of your career and your time is better spent flipping or acquiring, property management earns its fee. If you are in the settle-down phase and want to maximize cash flow, self-managing is where the real money is on a matured portfolio.

Why You Still Buy at Break-Even

Here is the core thesis. If I can underwrite a property conservatively and it shows zero cash flow or slightly positive today, I will buy it. Never negative. Negative is stealing from everything else in your business.

The reason is simple. Rents go up 3 to 5 percent per year on average over the last 30 years. My principal and interest on a 30-year fixed mortgage does not move at all. Taxes and insurance climb a little. Maintenance climbs a little. But the biggest slice of my expenses is frozen for 30 years.

So the gap between rent and cost widens every year. Year 1 might be 5,000 dollars on the whole portfolio. Year 30, my mortgage goes to zero and the rent has roughly doubled. That same portfolio is throwing off serious money.

A break-even deal today is a big money deal in 20 years. A negative deal is never worth it.

The Equity Game

But cash flow is not even the biggest piece. You don’t buy single family homes for the income. You buy them for the equity. You just make sure the income makes sense.

Here is what one property actually looked like for me.

I bought it with a hard money lender, rehabbed it, put a renter in, refinanced to a 30-year fixed that paid off the hard money. I ended up with zero cash in the deal, a 210,000 dollar mortgage, and 90,000 dollars of equity on day one. And the tenant pays the mortgage down every month.

Now stretch that out. Real estate has appreciated around 4.2 percent per year on average over the last 30 years. Project that on the 300,000 dollar house.

Meanwhile the mortgage goes to zero. So that house at 4.2 percent appreciation becomes a roughly 1 million dollar asset with no mortgage, with a tenant still paying rent that has also roughly tripled from today.

Key Concept

The real wealth in real estate is two things stacked: the value going up, and the mortgage going down. The gap between them is your net worth growth, and it gets bigger every single year you hold the property.

Scaled Up

That 16-property portfolio today is worth about 3.8 million with mortgages of around 1.8 million. So I have roughly 53 percent equity, about 2 million dollars of net worth on just that portfolio.

Project it out at 3 percent appreciation: about 10 million. At 4.2 percent: about 13 million. No mortgage at the end.

That is the actual product.

Cash-Out Refinance: Grocery Money

You do not have to wait 30 years to eat. The gap between value and mortgage is tappable every few years through a cash-out refinance.

Say a 300,000 dollar property grows to 350,000 over a few years, and the mortgage paid down to 185,000.

• Equity: 65,000
• New refinance at 80 percent LTV: 280,000
• Payoff old mortgage: 185,000
• Cash in hand: 95,000

The bank wires you 95,000 dollars. To the IRS, that 95,000 is not income. It is debt, and debt is not taxable. So you get 95,000 dollars in your pocket without paying a dime in tax on it.

Does your payment go up? A little. But rents went up too, so the new rent covers the new payment. You never take a loan that is not covered by rent.

Pro Tip

Cash-out refinances are the grocery money of a rental portfolio. Debt is not taxable income. The same property keeps generating cash flow, keeps appreciating, and keeps paying its mortgage down while you spend the equity you pulled out.

Banks usually cap cash-out at 70 to 75 percent in most current programs, so adjust the numbers, but the principle holds. You are harvesting equity without selling the asset.

How You Get to 150

I started with onesies and twosies. Then I started buying portfolios of 10 at a time. Eventually the skills I built attracted people with capital who wanted to partner, and people who knew how to raise capital who wanted to partner. That is how the 150 happened.

Knowledge times experience equals skills. Skills are your tickets to the game. Once you have them, money comes looking for you.

FAQ

Is self-managing really worth it for a small portfolio?

On one or two properties, yes. You save 10 percent in management fees, you get better tenants because you can choose them, and you learn the operations side of the business. Once you cross about 10 properties, the bandwidth cost starts to compete with your other income, and a property manager makes sense again.

What’s a realistic cash-flow target for year one on a new rental?

At today’s rates, break-even or slightly positive on a conservative underwrite. Do not chase a specific dollar number. Chase a conservative underwrite that includes taxes, insurance, vacancy, maintenance, property management, and capex. If it still breaks even after all of that, it is a buy.

Can anyone actually refinance with hard money into a 30-year mortgage like that?

Yes, the process is common. You buy and rehab with hard money, then refinance into a conventional or DSCR 30-year mortgage once the property is rented. Lenders underwrite the property’s performance and the appraised value. Terms vary, so talk to a local lender about current programs.

What appreciation rate should I use when I project a property forward?

3 percent is conservative. 4.2 percent is the long-term historical average for real estate. Use 3 percent when you are deciding whether a deal works, and 4.2 percent when you are projecting what your portfolio will be in 30 years. Be conservative on the buy side, realistic on the plan side.

Just starting out. Should I flip first or buy rentals first?

I buy at breakeven cash flow now, but the real wealth is in the hold. If you need income to live on while you build, flip to generate cash. Keep the ones that should be kept, sell the ones that should not. The moment you can afford to hold, start holding.