Can I Invest Less Than 25% If I Have Rental Properties?

June 14, 2023

If you have rental properties, can that change how much you invest monthly? In this highlight, we discuss how you should approach factoring in your rental properties when it comes to investing 25%.


Next up, we have David. He says, “I’m 38, married, household income is 160k. Nice! I have 200k in IRAs and two rental properties. I plan on owning them through retirement. The setup question is, can I save less than the 20% of the gross income that you like we talk about and count on rental income in retirement?”

It sounds to me like David, and I don’t mean this – I’m going to say this tongue-in-cheek, sounds like your riddles have gone good, yeah, right? Sounds like, definitely, I bought these rentals at a good price, got a good mortgage on them. LaRae got some good tenants covering the note, cash flowing, which is great. Yeah, that’s awesome. It is so good when rentals work out. However, it doesn’t always work out that way. Doesn’t always work out that way.

The question is, can I save less because I have these rental properties? Yeah, you could theoretically, you could. But man, you’re putting a lot of eggs in a pretty unknown basket, right? You’re putting a lot of eggs on the assumption that one day, many years in the future, I’m gonna have good tenants. The area in which my rental property is still going to command good rent. It’s still going to be a place one wants to own. I am not going to move to some other part of the country or I’m not going to move away and still have to navigate it. There are some assumptions you’re making right there that are a little bit aggressive. Neither inherently good nor bad.

Here’s what I would encourage you to do, David. I want you to go to learn.moneyguy.com and I want you to do our “Know Your Number” course because what I really want you to have is a good, clear picture of, “What is my number? How much do I need to be able to live the life that I want to live, the way that I want to live it?” And once you have that, then I want you to backdoor into, “Okay, here’s how much I think my rentals can do.” And by the way, whenever you do rental property or any sort of business endeavor, you’ve got to do the three Ds plan. I can’t believe I’m doing the 3D thing with you. This is a Brian thing. I mean, it’s good though, it is true. It helps you think through all the scenarios. So what are the 3Ds? Go to the 3D plan. You’ve got to do the dream plan. Oh my gosh, this rental property, I’m gonna buy it on an oil field, it’s gonna blow up and I’m gonna turn into a Clampett. Like, that’s your dream. Then you’ve got your down-to-earth plan. Hey, realistically, I think this is what’s gonna happen. This is what I think I can bring in rent. That’s how long it’s going to take me to satisfy the debt. This is how much my tenant vacancy is going to be. This is the cost of maintenance. That’s your down-to-earth plan. And then there’s Brian’s fair. There’s the doo-doo plan. There’s the “Uh-oh, I’ve got a lot of vacancies, I’ve got to carry this debt by myself, the tenants trash the place, I’ve got big upkeep.” And I want you to figure out those three plans and figure out, once I have those three 3D plans, “I know my number. Now, how much savings are necessary for me to get to my number.

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