How many deals does it take to get to 200k per year?

Goals, Business Plans & Entities
8yFollow

How many deals does it take to get to 200k per year?

Account Closed
Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes

I need some help here.  I am trying to set up a better vision for my investing.  As of now it's just been flipping a house here and there.  I have a pretty good J.O.B. so at this pint its been additional fun money for me.  That has been fine and all but I am ready to get a lot more serious with it and want to set a goal to make 200k per year.

I also would like this to preferably come from "safer" investments - if that even exists.  I want to avoid the classic way in which RE Investors go out - over leveraging.  Rather than over leverage and be surprised by a down turn I figure apartments may fare better.  So if I were to work backwards would it look like this...?

200k in Apartment income = $100 per door = 2,000 apartment units = work on flipping to build enough money start buying apartment units.  Maybe 60+ apartment units at a time.  i.e. Buy a 60 unit, then a 100 unit, 300 unit etc. until I get to 2,000.  I just feel there has to be a better way.  Would syndication or being part of a group i.e. Lifestyles, Brad Somrock etc. make it faster?  Maybe as a sponsor it would reduce the money needed and I could be rewarded more for putting the deals together?

Would it really take that many units to make 200k per year in apartment investing?

I'm sure there are others here that are actually achieving this - would you please help a guy out and chime in?

Best, 

-John

7Reply
396 views

Most Popular Reply

Nick B.
Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
8y

You're thinking in the right direction but your $100/door assumption is wrong. This number is used by some people as a cut-off point: "I won't do a deal if it does not cashflow at least $100/mo/door". 

First of all, cash flow per unit is irrelevant and so is the unit count. What's relevant is your cash-on-cash rate of return and your overall ROI which would consist primarily of capital gains.

If you want to have $200K/year income and your projected cash-on-cash is 8%, you need $2.5M in equity. That in turn would support $7.5M in debt giving you overall property value of $10M. In today's market this is 100-150 units depending on location and quality of asset.

54Reply
See this reply in the discussion

104 Replies

Jump to latestLatest
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y

    100$ a door ? That’s not much profit to be wasting time or money on . You want something very safe .. there is risk ,there is always risk .i would hope you could hit 200k long before you attained 2,000 doors . 

    8Reply
  • Account Closed
    OP
    Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes
    8y

    My understanding is that $100 per door was average for rentals after expenses etc.  I'm not too familiar with rentals yet - just want to put some feelers out before I go all gung-ho on it.  Is that incorrect?  Is it $200 not $100?

    Thx.

    1Reply
  • Jackson Pontsler
    Flipper/Rehabber · Salt Lake City, UT · Member since 2016 · 211 posts · 174 votes
    8y

    whole goal personally.

    150 per door after insurance, taxes, mortgage, and 10% repairs 10% property managers and %10 vacancy

    6Reply
  • Victor G.
    Rochester, NY · Member since 2016 · 23 posts · 10 votes
    8y

    Hi @Account Closed

    If I understand your question It would be around 160 doors you would need if your goal was $100 a door or you can do 55 doors for $300 cash flow this is all before taxes. 

    It all depends on your cash flow for each door 

    3Reply
  • Nick B.
    Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    8y

    You're thinking in the right direction but your $100/door assumption is wrong. This number is used by some people as a cut-off point: "I won't do a deal if it does not cashflow at least $100/mo/door". 

    First of all, cash flow per unit is irrelevant and so is the unit count. What's relevant is your cash-on-cash rate of return and your overall ROI which would consist primarily of capital gains.

    If you want to have $200K/year income and your projected cash-on-cash is 8%, you need $2.5M in equity. That in turn would support $7.5M in debt giving you overall property value of $10M. In today's market this is 100-150 units depending on location and quality of asset.

    54Reply
  • Account Closed
    OP
    Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes
    8y

    @Nick B. Thank you.  That is exactly what I was looking for.  So pretty much I would need to come up with $2.5M approximately correct?  So that is approximately 125 flips of of a 20k average profit.  So if I were to chunk it down - my goal may be to get to 63 flips or so.  This would get me to half the unit size.  It would allow me to maybe get a unit of half that size so $5M instead of $10M and then work on the second one after that.  Now to do 63 flips will be quite the undertaking - so maybe with adding wholesaling in, I can get there quicker. Ok - anyhow this gives   me a clearer picture.  Need to find a way to get to 63 deals of 20k Avg profit (flip or wholesale).

    3Reply
  • Nick B.
    Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    8y

    @Account Closed, you got it partially right. You do need $2.5M in equity but you don't need 125 flips to get there (did you account for taxes on those flips?). Instead of growing linearly, you grow exponentially. 

    E.g., you have $25K to start with. You buy a rent house with built-in equity. A year later you sell that house and 1031 exchange it into 2 houses ($50K in original equity and $50K in built-in or captured equity in the new houses). You may as well refinance $25K out and use it as a downpayment for the new house. The key is captured equity. It is the difference between your "all-in" cost and after repair value. Once you go above 5 units, your property value is driven by the property income and you can increase your equity by increasing the rents.

    Two years later, you sell 2 houses and buy a 4-plex ($100K of old equity plus $100K of new equity). 

    Year three, sell 4-plex ($200K old equity) and buy 8-plex with $200K of new equity. An so on.

    24Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    8y

    I wouldn't wake up in the morning for $100/door.  It's $500/door or not making an offer.

    14Reply
  • Account Closed
    OP
    Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes
    8y

    @Nick B. I think that is a great strategy.  Do you think that a hybrid strategy may speed things up?  i.e. I buy a rental house this year.  I keep flipping so that I can buy another rental.  I would then have two houses to grow exponentially.  Thoughts?  (And thank you for taking the the time to help a newbie out)

    Best, 

    -John

    1Reply
  • Nick B.
    Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    8y

    Sure. You may use any source of income to add to your capital stash :-) Just realize that flipping is a job (sefl-employment) and is taxed accordingly.

    6Reply
  • Account Closed
    OP
    Rental Property Investor · San Antonio, TX · Member since 2016 · 85 posts · 40 votes
    8y

    Excellent - Thank you @Nick B.!

    0Reply
  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    8y

    Great posts by @Nick B. 

    I use the same formula however I look for deals (as a value add operator) where I can get 12 to 15% return on equity annually.  Cash on Cash works well too but remember to consistently run return on equity on existing assets.

    For example I've sold all my small mfam deals where I had a large amount of equity yielding 5% (cash on cash was much higher percentage b/c I didn't put a lot of up front cash into the deals).  I take the proceeds from the sales and buy larger assets where I can syndicate the deals with my LP's thus getting my returns on that equity higher. I also avoid much of the taxes due to advantages of the larger assets.

    There's more to unpack here but the bottom line is keep educating yourself @Account Closedundefined

    10Reply
  • Kyle Schlosser
    Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
    8y
    @Joe Villeneuve Do share where it rains $500/door cashflow properties.
    15Reply
  • Mark Sullivan
    Viera, FL · Member since 2014 · 61 posts · 84 votes
    8y

    Also,  I think your initial math threw you off... $100 a door multiplied by 2000 doors would give you 200k a *month*.

    15Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    8y
    Originally posted by @Kyle Schlosser:
    @Joe Villeneuve Do share where it rains $500/door cashflow properties.

     SE Michigan...and I imagine a numb er of other markets across the country.  Many here have mentioned that number from other areas of the country.

    0Reply
  • Joseph Berhane
    Morrow, GA · Member since 2017 · 22 posts · 37 votes
    8y
    @Joe Villeneuve I run a close line 250 cap ex and 250 +/- to the pocket...
    1Reply
  • Joseph Berhane
    Morrow, GA · Member since 2017 · 22 posts · 37 votes
    8y
    @Kyle Schlosser I do two properties now... In Atlanta now... one is SFH and the other is a townhouse that i rent the 3 bedrooms out individually... considering I don't use Property Management...
    1Reply
  • Kyle Schlosser
    Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
    8y
    @Joe Villeneuve That’s strong cashflow...very nice! Two questions: Is that cashflow with or without use of property management? What is the cost per door to buy?
    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    8y
    Originally posted by @Kyle Schlosser:
    @Joe Villeneuve That’s strong cashflow...very nice! Two questions: Is that cashflow with or without use of property management? What is the cost per door to buy?

     With a PM

    Cost varies with specific market.  $75k-100k...and I'm not talking about Detroit.

    Where you fall within that range also depends on the strategy used to control.

    2Reply
  • Kyle Schlosser
    Specialist · Louisville, KY · Member since 2017 · 166 posts · 154 votes
    8y
    @Joe Villeneuve That’s fantastic. Thank you
    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    8y
    Originally posted by @Kyle Schlosser:
    @Joe Villeneuve That’s fantastic. Thank you

     If you have specific ??? just PM me

    2Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    You can get to 200k per year in any form of investing.  It's about scaling.  I just do what I am profitable and best at and repeat it.  Then I just do more of it .  There isn't really one method that is that much better than the next as they all work.  I know flippers, landlords and wholesalers all making 6 and 7 figures.  Any method works.

    7Reply
  • Account Closed
    Rental Property Investor · Beverly, MA · Member since 2018 · 41 posts · 16 votes
    8y

     Just to clarify, 2000 units at $100 a month would be $200k a month, $2.4 million a year.  

    If you only want $200k a year, you'd then only need ~167 units, making about $16,700 a month.  I think Victor said this earlier, but it may have been missed.  

    It's all about what you find for cashflow though, more than $100 a door and the number you'd need goes down.

    2Reply
  • Tyler Weaver
    Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes
    8y

    $100 a door was monthly. So you would need something like 166 units.. Though you can probably find closer to $200 a door. Funding this growth could be done through a mix of BRRRR and flipping. So while it will take millions of equity at the end, you will not need that much to get started and getting the snowball rolling down the hill.

    4Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    @John De La Garza Alright some people have already crunched the numbers but let me do the same. My end goal is to hit 200k in cash flow myself. Now that’s in today’s dollars so on say ten years this is around 240k. Inflation aside let’s do some math. I don’t do anything that’s not minimum 150 a door. This is with leverage so, to hit 200k in cash flow thats basically 111 doors. Now that’s a lot of debt, tenants and potential headaches. So what if I just bought unleveraged single family homes for say 55k. My average purchase price so far is 60k but I expect this do go down a bit over time. I believe I can cash flow 400-500 per unleveraged rental, so let’s just take the middle and say 450. That means I need 37 unleveraged rentals. 37 times 55k is 2.04M in equity. So I’d be earning around 10 percent on my equity, which is pretty good for me. My goal would be to hit this sometime between 35 and 40. If I save 100k for Ten years that’s 1M plus around 60k in cash flow for 7 years that’s another 1.42M now that’s not including the cash flow from the 4 years I’d already have before I can start saving 100k a year from my day job. That cash flow will another 50k or so for all 4 years. So now the total is essentiall 1.1M saved. Now after about 10 years I’ll have roughly 20 rentals and an average blended principle paydown of 10k per rental. This will be slightly high so let’s just say it’s 8k blended average per rental so 8k Times 20 is 160k. So I am at about 1.23M in equity. So on paper I appear short. But that amount of equity could easily get me (which some moderate leverage) I think the rest of the way there or close enough at 150ish grand. Keep in mind this is just real estate. My wife (hopefully I’m married by then lol) could easily make another day 70-90k on her own. So Let’s call it 80k gross from the wife, 150k at around age 35-37 (call it 36) for me. At this point I’d probably be full time, so that’s 230k total gross. I probably wouldn’t pay much tax on my share being a real estate professional. Taxes aside, if I go full time I would want to live where most my rentals are, which would probably be Memphis. Well Memphis has a much lower cost of living then where I live right now. So let’s look at the average income in Memphis. Google says that number is 38k. So I am 6 times the average AND most people agree “wealthy” starts at about 2 times the average. I think that’s a pretty big cushion to do just about whatever I wanted. Now all that aside, in reality I will be investing in notes by time I am to this point so my income will Be note Income and rental income. Hope this helps.
    14Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free