Living Vicariously Through Others’ Positive Cash-flow

by |

I absolutely love success stories.  Especially those stories which demonstrate that it is possible to be successful as a real estate investor, yes even in today’s market, and live the American DREAM!

Let me share one such story with you… a story I hope you are currently aspiring to.

The story goes something like this…

The year is 2005 and a young woman was tired of the rat race and decided that she wanted more control and freedom in her life.  She decided that real estate investing, buying and holding, yes… being a landlord, was how she wanted to get started.

Now for those of you who were active in the market in 2005 you know it was much easier to find money then it was to find truly quality rental properties.  Yet this did not stop this young investor from jumping in.

Starting from scratch and with the guidance of a local mentor she slowly and steady built her portfolio.  While the properties available to her weren’t throwing off large amounts of positive cash-flow, nor did they have large amounts of equity… she was in the game and moving forward.  One property at a time.

I won’t bore you with the dynamics of the market since she got stared in 2005… we all know as time has progressed through to today, finding high quality cash-flowing properties has become extremely easy.  And… with each passing year this intrepid real estate investor added more properties to her rental portfolios.  Each new property added to her portfolio, contributed greater and greater cash-flow to her bottom line due to ever declining property acquisition costs.  A situation that is unlikely to change anytime soon.

I should also mention that this young investor quickly learned that there were riches-in-niches as she made the decision to purchase her rentals in transitional neighborhoods and catered almost entirely to Government Assisted tenants.  And… she discovered that quality rentals attracted quality tenants… even Section 8 tenants.  Her renovations routinely include ceramic tile floors, granite counter tops and stainless appliances.

Oh… and one other thing.  She realized very early on that to be successful as a landlord she needed cash.  Cash for purchases, renovations, reserves… and lots of it.  So… she set out to master the borrowing game and created relationships with private lenders, hard money lenders and even banks.

With each new property she became more experienced, confident and able to successfully manage and grow her real estate empire.  And, as of January 2011 she now owns 32 rental units.

In ending her story she shared the details of three recent purchases.  They looked something like this.

Purchase and renovation costs on each property less then $41,000.00.

Rents averaging between $1,100.00 and $1,400.00 per property per month.

Normal expenses for taxes, management, maintenance, vacancies and of course debt service.

Net positive cash-flow for all three properties combined: just under $2,300.00 per month.

And if that isn’t enough to convince you of her success… consider that her average net positive cash-flow for her entire portfolio is around $300.00 per property per month.

That is what I call SUCCESS!

So… how did she do it?  What did she do to grow her portfolio when others met only with challenges?

Well… here are few insights that I hope will guide you toward success.

1.  She got started!  You read that correctly… she decided that she didn’t like where her life was and she was determined to change her situation.  She chose real estate investing as the vehicle to help change her life, she started moving one step at a time and has never looked back.  How about you!

2.  She knew that getting into real estate investing without proper guidance and support would only lengthen her learning curve and possibly cause her to make costly mistakes.  She found someone who was an experienced landlord and engaged his services to help her build her empire.

3.  She niched into her market… Government assisted housing.  This was an incredibly wise decision as it focused her on specific neighborhoods and allowed her to quickly develop criteria, processes and procedures unique to her market and tenants.   She only had to get good at a couple of things and then execute ruthlessly.

4.  She quickly learned that without access to cash her business would not be able to grow.  So… what did she do?  She created relationships with lenders.  Private, hard and even banks.  And, even as recently as last quarter she has been able to secure 30 year, fixed-rate amortized blanket loans from a small local bank.

5.  She developed a strong team of reliable contractors, tenant acquisition agents, and other vendors.  Her business is close to being on automatic.

6.  She decided early on that no one could manage her portfolio as well as she could.  So… she set out to teach herself to be a successful landlord and now manages her portfolio herself.  

All-in-all a classic success story.  One that should be an inspiration for everyone of us as we move forward in today’s market.

In closing I will leave you with this one thought…

As the housing market continues to struggle to reach a true bottom in terms of property acquisition costs, opportunities for real estate investors to purchase properties that throw off considerable cash-flow abound.  If you aren’t focusing at least a portion of your business on rental property acquisitions perhaps now would be a great time to get started. And who knows, in five years or less you could have achieved similar success the young investor discussed above.

Best of luck!

Photo: Anna Chan

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.


    • Mathew… The short answer is urban areas. But not in every case. The city in which this investor has prospered is Baltimore Maryland. Baltimore is an “urban” city just like Philly, Detroit, most of the cities in Ohio, Atlanta, etc. If you look closely at the any neighborhoods within cities like the above you will find fairly clear divisionss between good areas, transitional areas and then the war zones. Every city has them… It’s our job as investors to figure out where they are and execute accordingly.

      While this example provides a great view of what is possible in older urban areas, there are many areas throughout the country where the acquistion costs for rentals are so inexpensive and the rents are firming up strongly that getting into rentals is a no brainer.

      Is the type of cashflow being generated in this story possible everywhere… no. But almost anywhere it is possible to attain $300.00 per unit of net positive cashflow.

      You just have to be patient and willing to move when the opportunity is presented.

      Best of luck!

    • Jason,

      Stories like this are what keeps us all going. I believe strongly that as you continue to execute your business plan that in a few short years you will be in the same situation the investor in this story.

      Looking forward to Wednesday’s discussion.


  1. Very inspiring! I purchased my first rental last year and am getting postive cashflow. My goals is to buy two rentals a year. But in today’s market, banks require 20-25% down and then don’t want to lend to you after you have a certain number of properties. How does one buy multiple properties per year in today’s strict lending environment without having to put down 20+% per property?

    • Sam,

      Congratulations for jumping in and getting started.

      As for financing your deals… I could and should write a book on financing deals… but here is the short version.

      Most successful investors purchase their inventory with either private funds or hard money. In many cases, assuming they are getting their deals at a low price, they can finance 100% of the acquistion, rehab and holding costs. Meaning that they don’t have any of their money in the deal.

      Once the property is rented, these investors then go out into the banking world (small local banks) and put longer term financing in place. In some cases investors will go brokers who will try to place the loans through Fannie or Freddie guidelines and that is where you will run into an underwriting nightmare and of course you will be limited to the total number of loans that you can have… that number is anywhere from 4 to 10 loans depending on the bank.

      The key is to avoid the banks as long as possible.

      I hope this helped?

      I you have any further questions most of this stuff is discussed on the Bigger Pockets forum or send me a colleague request and a PM and we can continue from there.

      Best of luck!


  2. Hi Peter,

    I do not understand how financing addtional properties are possible without coming up with your own funds when hard money or private lenders only lend up to 60% of ARV. According to calculations below is the goal only to look at properties selling at 60% or less of ARV?


    $300 Market value after repairs
    55% Property Price % of ARV
    $165 Property Selling Price

    $165 Hard money loan up to 60% of ARV
    $60 Repair and holding cost
    $225 Total Cost

    $225 bank loan @ 75% of Market Value
    $60 Cash back after hard money pay-off

    • Bob,

      Based on the numbers you provided this deal better be generating a ton of gross rental income to carry a $225K mortgage plus insurance, taxes, maintenance, management and vacancy and still be throwing off several hundred dollars a month in net-positive cash-flow.

      But that is not what your a question asked…

      At this level of the game, where acquision and renovation costs are so high, it would be a rare individual who could do several of these deals in the same general time frame. Forcing a business plan that was more serial in nature.

      As a general rule I never recommend paying more then 60% of conservative ARVs for any property… and for rentals the purchase prices are usually in the 30% range.

      While I know that this is not possible in every market, I also know that when you can find markets like this the rewards can be substantial.

      The other point to consider is that the high cost of properties in the example you provided suggests that the ROI may not be great when compared to the return on the same dollar amount invested in a different market.

      As an example… in Baltimore Maryland an investor can purchase and renovate 5+ properties and experience net positive cash-flow of $300 to $400 per property per month for the same amount invested in your example. The total monthly net for a $225K investment in Baltimore would be… $1500 to $2000 per month… with the investor often times taking some cash out at closing.

      I know that many markets don’t support the kinds of properties that Baltimore or other similar locations might and that is why I recommend that investors be willing to look outside their market for better returns.

      Jeff Brown’s most recent blog article touched on this very topic. Both the article and the comments make for some great reading.

      I hope this answers you concern?


  3. Just wanted to thank you for writing this. I know the woman you are writing about, she is a great friend, business associate, and mentor to me!
    She is very driven, and successful and pushes me to be my best and succeeds too!

    My most recent purchase I have less than 22K in, rehab and all, and should get $950 a month…

    • Scott,

      You are learning from a very seasoned person… and you are wise to recognize this and follow closely what she requires.

      The easiest path to success is following the path charted by those more successful then us.

      Best of luck!


      • Pete,
        Thank you….I hope to inspire others to take the risk and do it right, so that investing in real estate can change their lives. It certainly worked for me, and I am forever grateful for the person that inspired and mentored me. Keep the positive stream of information going!!!

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here