Carol’s Problem: 3 Rental Properties and Just $800/Month
Consider an investor I’ll call Carol.
Carol is 55. She spent nearly three decades building a successful corporate career, saving consistently, and making what most people would consider smart financial decisions.
Eight years ago, she started buying rental properties.
Today she owns three single-family rentals with approximately $450,000 in combined equity.
After property management, maintenance, insurance, vacancies, and debt service, the portfolio produces about $800 per month.
That’s $9,600 a year.
Or roughly a 2.1% annual cash return on her equity.
Carol isn’t a bad investor.
Her properties have appreciated. Her tenants have paid down debt. Her net worth has grown.
But now she’s asking a different question:
Can these rentals produce enough income for me to retire?
At the current rate, generating $100,000 a year would require approximately 31 similar properties.
That could mean nearly $4.7 million of equity spread across 31 roofs, 31 HVAC systems, 31 insurance policies, and 31 sets of tenants.
That isn’t passive income.
It’s a property-management company.
This is the realization many experienced rental owners eventually reach:
The investment that helped you build wealth may not be the investment that should fund your retirement.
That doesn’t mean you need to sell every property.
It means each property should have to earn its place in your portfolio.
How much equity is trapped in it?
How much net income does that equity actually produce?
How much of your time and attention does it consume?
And if you were handed that equity in cash today, would you buy the same property again?
That last question tends to make the answer much clearer.
Rental properties can be excellent wealth-building assets.
But appreciation and retirement income are not the same thing.
If you’re approaching retirement, stop counting doors and start measuring what your equity is actually doing for you.
If you own rentals, what percentage of your equity are they currently producing in annual net income?
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