How Many Rental Properties Do You Need to Retire?


Those of you who know me personally know that I’m a big fan of real estate investing. In fact, I think it's one of the best ways for physicians to achieve financial freedom.

The passive income provided by such investments can continue flowing for your entire life, and in fact, the best investments can actually be generational–extending well beyond your own lifetime. However, the biggest benefit of real estate investing is that it can start providing cash flow immediately, and you can begin replacing some of your income right away.

Is There A Foolproof Plan?

I’ll go ahead and say this at the outset: there is no perfect, magic formula for how many rental properties you need in order to retire, just like there’s no perfect, magic formula for how large your stock portfolio needs to be in order to retire.

Yes, there's the popular 4% rule, but in no way is that a guarantee either. There are just too many factors to consider. At the end of the day, all you can do is make a well-educated guess, use real current numbers, and look at both history and statistics.

In all of this, I'm making the assumption that you have absolutely no other source of income including retirement portfolios, Social Security, and rich children to support you.

Rich Uncles Student HousingSo How Many Rental Properties Do You Need?

Personally, I like to follow the acronym K.I.S.S. –Keep it Simple, Stupid. This helps me come up with a very simple, completely attainable goal.

As far as answering the question of the day – How many rental properties do you need to retire? – here’s how I go about it:

  1. Figure out how much you need in retirement to cover your monthly expenses and enjoy life a little.
  2. Figure out how much monthly cash flow you get from a typical rental unit/property.
Using those two numbers, figuring out how many rental properties you need to retire is fairly simple. To do it, you’ll just need a couple formulas:
  • Monthly amount needed for retirement ÷ Cash flow per rental property = Number of rental properties you need
  • Cash flow = Income – Expenses

For our purposes, income is mainly from rent paid for by your tenants. Expenses include the mortgage, interest, taxes, maintenance, vacancy, and a whole host of other things.

An Example at Work

With all that in mind, let’s use an example. Imagine there’s a man looking to find out how many rental properties he needs in order to retire. We’ll call him Ronald Drump. In order to Make Retirement Great Again, he needs $8,000 per month to safely retire and have everything covered.

He’s been buying up a few rental properties and notices that he averages $200 per month in cash flow per rental unit. How many properties, then, does he need to retire? ($200/unit is a very doable and conservative amount. I tend to see closer to $300/unit in my own portfolio.)

$8,000 ÷ $200 (per rental unit) = 40 units

There you have it: a nice, concrete number to shoot for. If you buy a 10-unit building that provides $200/unit in cash flow, that’s $2000 for the building. You only need three more similar buildings to reach your $8,000 goal. Passive income now covers all of your expenses.

Now, I know what some of you smart folks are thinking. You’re thinking that this is ridiculously simplistic–and you’re right. I didn’t mention anything about rent increases, leverage, tax benefits, increasing expenses, etc.

But I can assure you that if you follow the rough formula and do end up with something like 40 units under your belt, you’ll have done something right. You’ll be very close to (or more likely way past) where you need to be to retire, and like our hypothetical Mr. Drump, you’ll be well on your way to Making Retirement Great Again.

Easy? Agree or not? Have your own thoughts, let me me know…


  1. Thanks for another great real estate article.

    I’m thinking that managing 20 units seems like a lot of work. Do you consider real estate investing truly “passive” income? It’s certainly more passive than seeing patients every day, but it might still be difficult to truly do whatever you want, such as leave the country for a few months. I understand you can make it more passive by using a property manager, but does the cash flow still work out in your favor?

    • Thanks! Real estate isn’t completely passive, but it does fit the main criteria I use – income that is not proportional to the time you physically put into acquiring it. I feel like if you make smart decisions up front, it continues to pay off for the rest of your lifetime.

      I absolutely advocate for the use of a property manager and you should cook that into your numbers when you calculate returns. As the owner, you should only be handling the major decisions but the day to day things should be handled by someone else. Makes it quite a bit more passive. And yes, you can absolutely find properties that still cash flow after accounting for management. In one of my posts, I talk about a property I bought out of state. I’ve owned it for about 2 years, have never seen it in person, and the last time I got a call about it was a year and a half ago. The mortgage is paid through autopay and I receive a check as a direct deposit into my account every month. At this point, I can’t think of anything more passive. Not all of my real estate investments are like this, some require more work than others but I do feel like I’m getting paid in my sleep, especially when comparing it to my day job.

  2. As a non-real-estate investor who has many friends that do it and believes in the concept, I love this stuff!

    How many rentals do we need to retire? My problem is getting over the anxiety of just starting with the first one!

    • Well, the first step is always the hardest as it is with most things. I think people put too much pressure on the first one. Expect it to be a learning experience and that might make it easier to take the leap. Keep me updated.

  3. Agree. I like the 4% rule, but it only accounts for stocks/bonds. If you can get money out of your tax deferred accounts real state is the place to put it. 10% cap rate properties are not hard to find and even an 8% cap rate is twice the 4% rule so you need half the money to retire. Not sure the rule and cap rate can be compared apples to apples but it tells me something… At the very least real estate replaces bonds in my portfolio. Great post

  4. I am doing the same thing and have accumulated 20 homes in good neighborhoods with good schools so far . We also have a real estate broker license in Texas and together with my spouse have a Property management company while I also work a regular professional job. As a lot of our investor clients first bought their primary house with us and now are buying investment homes and wanted us to manage them. Thus the Prop Mgmt co.

    For side gigs we have done a lot of stuff like flipping homes, selling stuff on ebay and Amazon etc.


    • That’s a good number of side hustles. I also love the idea of buying homes in good neighborhoods and schools. The return may not be as great but I believe the investment grows better over time and you do experience less headaches overall.

  5. Great post. I agree with all that you have said. Finding the first one still seems to be the toughest. Do you recommend finding a good broker or agent to find the first unit? Thanks

  6. Every investor should look at what the income is once the properties are paid off. To retire with confidence it makes since to have 20 paid for as apposed to 40 that are leveraged. Once again KISS

  7. Are you at all concerned about liability of holding property in your name, such that you could be subject to personal lawsuit if there were an adverse incident at one of your properties? Holding property within an LLC is a common way to limit such personal liability exposure, but their governance is subject to state laws, which can vary by state. So what is the most efficient approach to limiting personal liability if one owns a portfolio of properties in multiple states?

Comments are closed.