Projecting Costs into the future

[Will Conner]

Hi, 

First time posting but have been on the site and learning for a while now. Just like so many people here I've made a promise to myself to finally get into real estate as a way of exiting my W2 job and provide a long term income producer for my family. I think I have a decent handle on the basics of individual property analysis (says the guy who hasn't pulled the trigger yet) but I have a general question. 

I can say that I am interested in either single family rentals or small multi family (2 or 3 units) 

I am looking to project what I can expect my personal costs will be over the next few years vs. what the cash flow will look like. I have an internal goal to replace my salary within the next 5-7 years and I want to poke holes in that thought and see what is really realistic (or maybe move that target up?!) 

Hopefully that question makes sense? Plenty of articles and sample analysis spreadsheets out there to look at an individual project, but I am looking to see what it looks like if I buy one this year, two next year, refi one to buy another, etc etc. 

[Nathan Gesner]

Quote from @Will Conner:

Welcome to the BiggerPockets forums!

There are many paths to building wealth. Here's a good blog that explains one method, from a guy that did it: https://www.biggerpockets.com/...

I really started in 2016 with a hoarder house for $57,000 in a town where the median price was around $235,000. Six years later I had 33 rentals, 135 storage units, a net worth over $2 million, and net cashflow over $150,000. 

It's completely possible.

Keep learning. Start doing. Learn from your mistakes and figure out the details as you go along.

[Suzanne Player]

It seems easier in parts of the country where the cost of living is lower.  If you will be living in the New York City area, 5-7 years is probably not realistic if your situation is standard.  By "standard" I mean, middle income, typical expenses & savings account, nothing unusual (like a large inheritence or family real estate business).  Are you 28 year old making $50k/yr?  Or chief of surgery at a NYC hospital making $500k-1 mil/year?  Do you already have a large mortgage b/c you're married with 3 kids in the school system that you don't want to move?  If so, then house hacking won't be your thing.  Everyone's plan is unique, keep playing around with the numbers, and if you're in the NYC area our meetup group is talking about a topic that will probably be of interest to you, check out our event at:

https://www.biggerpockets.com/...

[Will Conner]

@Suzanne Player

Thanks for the reply, you make a lot of good points. To be clear I’m somewhere between your two examples :) 38 with kids in school, live on LI so yes, no house hack and moving isn’t an option.

I work in Manhattan as an architect and work amongst developers/real estate pros and “the money” daily.

With all that said, I’m not originally from NY (grew up in central PA). That area seems (as a rookie) a great place to look in terms of starting costs. Rather than here on LI or within the 5 boroughs.

I don’t think my question was all that clear admittedly but what I’m trying to do is figure out if I can set a goal to purchase a property at 100-150k all in, and pull rent of approx. 1% of sale price (for easy math). Do that year one. Can I project that out to year two, then look at refi and do it again, and again… and again…. building on that model. Where do I think I’ll be in 5-7 years.

Im not asking anyone to answer that question! Just wondering if there’s a seminar, article, spreadsheet that would help me create this model for myself mainly to feed my curiosity but also to share with my wife so we can understand where this can realistically take us. Realistically being the key word! And potentially help to guide our decision making.

Anyway, I appreciate you jumping in. If I wasn’t away, I would absolutely come to your seminar this weekend.

I’ve worked in Manhasset and have some connections in and around. If you’re local to LI/NYC also I wonder if we’ve run in the same circles.

[Will Conner]

@Nathan Gesner

Thanks for the response and link. I’m going to check it out!

[Suzanne Player]

@Will Conner Doing that many projections sounds like a herculean task, and it would be based on an enormous number of variables both with the economy & with each property you add.  I think it will fall into place as you go along.  Have you tried the rental property calculators on this site?  You can play around with the variables.  

If you know central PA, it sounds like a great place to start looking.  You already have an advantage and the prices I would expect to be good.