The "Lazy Investor" How three rentals can change your future

The Lazy Investor: How Owning Just 3 Rental Properties Can Change Your Financial Future

When it comes to real estate investing, it's easy to feel overwhelmed by flashy social media posts from internet gurus who boast about owning hundreds of properties and managing vast portfolios. But here’s a secret: you don’t need to compete with them to achieve financial freedom. In fact, a simpler approach can often be more effective.

Imagine this: You have a stable W2 job, you own your home, and you invest in just three well-chosen, cash-flowing rental properties. That’s right—three properties can be enough to change your financial future and build long-term wealth without making real estate your full-time job. Let’s explore why this strategy works and how you can benefit from being a "lazy investor."

Why Only 3 Rental Properties?

1. Easier to Manage:

Managing three rental properties allows you to keep things simple. With only a few tenants to manage, you’ll spend far less time dealing with maintenance issues, tenant turnover, and other challenges compared to those managing dozens or even hundreds of units.
You can also decide if you want to self-manage or hire a property management company without feeling the financial pinch. With only three properties, the management fee won’t eat too much into your cash flow, allowing you to focus on other areas of your life.

2. Focus on Quality, Not Quantity:

It’s better to have three high-quality properties that generate consistent cash flow than dozens that are barely breaking even. With a smaller portfolio, you can afford to invest more time into researching and selecting properties that will give you the best returns.
A few well-chosen properties in growing markets can provide steady appreciation and rental income over time. For example, investing in areas with good job growth, low vacancy rates, and a strong rental demand can mean your properties will stay occupied and profitable.

3. Mitigating Risk:

Real estate comes with risks, such as vacancies, unexpected repairs, and market downturns. With a small, focused portfolio, you can more easily manage these risks. You have fewer moving parts to worry about, making it easier to maintain a strong cash reserve for emergencies.
This strategy allows you to diversify in a more manageable way—perhaps one property in your local market, one in a neighboring city, and another in a different state with favorable landlord laws. This way, you’re not overexposed to the risks of any single location.
How Three Rental Properties Can Transform Your Financial Future

1. Supplemental Income Stream:

Each rental property you own can become a reliable stream of passive income. Let’s say each of your three properties generates $500 in monthly cash flow after all expenses. That’s an extra $1,500 a month—or $18,000 a year—coming in without having to put in significant time.
This extra income can help cover bills, boost your retirement savings, or allow you to pay down your mortgage faster. Over time, it can even replace a portion of your W2 income, giving you greater financial security and flexibility.
2. Building Wealth Through Equity:

As your tenants pay down the mortgages on your properties, your equity grows. Over a decade or two, those properties could be paid off completely, allowing you to collect rental income with minimal debt service.
Plus, if you buy in markets with steady appreciation, the value of your properties will likely increase over time. A $200,000 property today could be worth significantly more in the future, adding to your net worth even without the hassle of constantly flipping properties or finding new deals.

3. Tax Advantages:

Owning rental properties can come with significant tax benefits. You can write off expenses like mortgage interest, property management fees, repairs, and depreciation. These deductions can help offset your rental income, reducing your overall tax burden.
Additionally, when you decide to sell one of your properties, you can use a 1031 exchange to defer paying capital gains taxes by reinvesting the proceeds into another property. This strategy allows you to grow your portfolio tax-efficiently, even if you’re keeping it small.
How to Be a Lazy Investor (and Still Succeed)

1. Find a Good Property Manager:

If the thought of managing tenants and handling repairs makes you cringe, hire a reputable property manager. A good manager typically charges around 8-12% of the monthly rent, but they can handle everything from tenant screening to maintenance requests. It’s a small price to pay for your peace of mind and allows you to stay “lazy” while still collecting checks. Selt managing is also an option with only three tenants. 

2. Buy Right From the Start:

Focus on buying properties that are already cash-flow positive. Look for properties in stable neighborhoods with a history of appreciating property values. Remember, the goal is to find properties that will generate income without needing major renovations or a complete overhaul.

3. Automate Your Finances:

Set up automatic payments for your mortgage, property management fees, and any other recurring expenses. Have your rent payments deposited directly into a separate account dedicated to your rental income and expenses. This way, you can keep track of your cash flow without having to manually manage every transaction.

4. Keep a Long-Term Perspective:

Real estate is a long game. Don’t worry about becoming a real estate tycoon overnight. Focus on maintaining your three properties, letting time and compounding do the work for you. Over the years, you’ll find that you’re building wealth while still enjoying your weekends.
Conclusion: Less is More in Real Estate
You don’t need a portfolio of hundreds of properties to secure your financial future. With a solid W2 job, a primary residence, and three well-chosen rental properties, you’re already doing better than most. This simple yet effective approach allows you to build wealth, create passive income, and achieve financial freedom without sacrificing all your time and energy.

So, if the idea of competing with internet gurus and their flashy portfolios sounds exhausting, take a breath and embrace the “lazy investor” strategy. By focusing on quality over quantity and keeping your investment approach streamlined, you can reach your financial goals without making real estate your full-time job. And in the end, isn’t that the dream?