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Peter and Thérèse Campbell say being a landlord requires thick skin and patience.Kate Dockeray/The Globe and Mail

The income from rental properties is called passive. To retirees Peter and Thérèse Campbell, it’s anything but.

The Orillia, Ont., couple has financed their retirement in part from homes and apartments dotted around the region north of Toronto that they bought and rented out for the past 18 years. There’s decent money to be made from such an enterprise, they say, but only over time and with much effort.

“A landlord needs to be deep pocketed, thick skinned, hard working and alert to the health of the rental income stream – and threats to that stream,” Mrs. Campbell, 71, says.

It’s also good to have a high risk-tolerance and anger threshold, Mr. Campbell, 72, adds.

“Learn to enjoy humble pie and keep your rent-paying tenants happy, within reason. When they’re not paying rent, then the work really begins.”

When they began thinking about retirement in their fifties, Mr. Campbell says they realized that, while he’d get a pension from his government job, his wife’s position with a non-profit agency had no such plan. They considered real estate a “reliable investment” to create an income stream and bought their first rental property in 2003. They eventually came to own as many as 10 places at one time, including individual homes, duplexes and a triplex.

“We were horrendously in debt,” recalls Mr. Campbell, with substantial mortgages on all the places, which they fixed up and maintained themselves to save on costs and made every effort to keep rented so the money continued flowing in.

It’s a typical equation for people looking to finance their retirement from income properties, says Jason Pereira, a financial planner and partner at Woodgate Financial Inc. in Toronto. He says investing in property “is a natural part of the conversation in every financial plan.” He especially hears from older people who are comfortable with real estate as something that will generate income, “and the principal never gets touched.”

The reality is that even with today’s super-low borrowing rates, properties in a place such as Toronto or Vancouver can have “anemic” cash flow, says Mr. Pereira, given carrying costs.

There’s also upkeep, which should equal 1 per cent of the property’s value per year.

“We run through the numbers, and I’d say more than 50 per cent of the time the yield ends up being either abysmal or negative,” he says.

Buying outside of hot markets is an option, but rents may be slow to rise wherever you are, and you can’t count on property continuing to increase in value, he warns.

Retirees should ensure rental properties represent just part of their portfolios, Mr. Pereira says, because “a one-sector bet can be very unhealthy.”

Those looking to improve their yield by tinkering rather than paying for labour should consider “what their time is worth,” he adds. “A part-time job could actually pay more.”

Going big made all the difference for Thomas Beyer, who bought his first rental condo for $80,000 in Calgary in 1997 and quit his career as a software engineer 20 years ago to live off real estate full time. He formed a company in Canmore, Alta., called Prestigious Properties, and sold limited partnership units to investors.

Today at 61, Mr. Beyer is semi-retired and lives on B.C.’s Sunshine Coast while continuing to manage two large apartment buildings and three mobile-home parks in Western Canada. He’s written a book called 80 Lessons Learned: On the Road from $80,000 to $80,000,000 and says a big part of his success is finding the right market, shifting management duties to third parties and holding on for the long term.

He likens owning income properties to a three-course meal: The appetizer is the money you earn at first, which “should be slightly above zero,” while the main course is paying down the mortgage and then “the dessert is your equity upside” over time.

This isn’t a good investment for people afraid of debt or for perfectionists who constantly want to improve and upgrade places, “because sometimes good enough is good enough, especially in rental properties,” he explains.

The benefit of size is “you can delegate more and hire professionals,” Mr. Beyer says, such as a property manager. This shaves about 10 per cent off your rent intake, but it frees you up to own more places and provides distance from tenants.

“People smoke weed, people get evicted, people die, people have fights, they punch holes in the wall, they rip the doors out and they don’t pay the rent,” he says. “There’s always something going on, and it’s usually negative.”

The Campbells agree that rental properties can bring drama and demands, which prove even more bothersome as they age.

“You can never fully relax as long as any tenant can call you at any time, day or night, and tell you to come over immediately to unblock a toilet,” Mrs. Campbell says.

They’ve also had memorable experiences and made friends among their renters, such as a couple they hired to take over some maintenance duties and handle calls from tenants when they travelled.

A decade into owning the properties they began to “create a small pension commensurate with our high level of involvement,” Mr. Campbell says.

They’ve now sold all but one of the places, which they did one at a time to avoid a capital gain hit in any one year.

They recommend anyone considering buying rental property start well before retirement and ask lots of questions, for example about the tenants who live there and municipal regulations. Get a spreadsheet of fixed expenses and rental income and have a thorough property inspection done.

Focus on the “cash flow you’re creating” rather than assuming the property will rise in value, Mrs. Campbell adds. “If you’re losing sleep from worry, maybe this is not for you.”

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