Best strategy for high W2 income earner?

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Best strategy for high W2 income earner?

Andrew Zhang
Member since 2023 · 1 post · 1 vote

Hi, first time posting here. A little story about me is, I am unmarried, and late 20s. I was fortunate to make about $750k this year and next year the expected salary is $900k. I have a 1.2M house with 25%-ish equity, and no other assets. My yearly spending rate is low like 30K ish, besides the mortgage. I like my W2 job but I don't see myself keeping this high salary forever, so I am thinking of ways to create income streams. I've been reading posts here and was looking at low priced markets for cash flows, but even if I buy 10 of these and paid fully, it's nowhere near the income I am making. I also thought about buying more pricy homes in California and bet on the appreciation - but this doesn't seem like the most efficient way to use my liquidity. Maybe I should go into multi-unit homes? but I absolutely have no idea how to get started on this. My ultimate goal is to make 30k/month income apart from W2, but without working hard like STR owners.

Long story short, if you were making a high 6-digits a year, what asset would you buy to create incomes? 

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Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
2y

A prenuptial agreement.

Even though you are not married currently,

It would be wise to start to look around for someone locally in your county who can advise you about such things.

Then when you are in the market for this paper product you will be ready to go out the gate with it. 

Good Luck!

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  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    2y
    Quote from @Nicholas L.:

    @Brock Mogensen I think I just heard you on a podcast... Millennial Mike?  Or that guy from Rochester?  Congrats on your success so far, your story was awesome.

    @Andrew Zhang

    You got lots of good advice. I'll throw one thing out. Do NOT buy 10 random houses in a supposedly "cash flowing" midwest market. There are numerous examples of HCOL investors like yourself who bought 1 or 2 or 3 and got crushed because they weren't ready for the CapEx on the old, creaky midwest housing stock; didn't have the right team; didn't do an inspection; etc. IF you want to own real estate directly, great, buy 1 property and do your due diligence.


     Yessir!  Appreciate it and glad you enjoyed it

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    I would look to slowly invest your money into different buckets of asset classes.

    My mix is 
    50% Real Estate
    25% Bonds / Notes
    25% Stock Market

    You can pick whatever any ratio that you feel comfortable with.
    I think you should look to invest slowly into the market instead of putting all your money into investments now as you will be able to learn from your mistakes(if any).
    I think after a couple of years, if you do like your job, transition from Full-time to part-time.
    A lot of people think it has to be all or nothing. There is a middle.

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  • John M.
    Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
    2y

    Nice income!  I would focus on mortgage notes.  good returns of 9-14%, low risk, and definitely passive. Just diversify your holdings. 

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    2y

    It seems like you're venturing into buying single-family homes, I've been there in my early twenties, back when I was juggling an engineering job. I used to invest in turnkey rentals from Seattle, choosing locations like Alabama, Indianapolis, and Georgia.

    However, I realized they were more trouble than they're worth. This is particularly true for higher income earners and accredited investors. I shifted my focus towards syndications, opting to be a limited partner (LP).

    If you're curious about this shift, you can do a quick Google search for more insights. Or, feel free to contact me directly. 

    0Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @Andrew Zhang welcome to the forums, congrats on the first post and all the success! It depends on how much time you have as to which direction I would advise. I work with hundreds of investors like yourself that choose to invest in single family homes, passively, in the southern/middle part of the country. Most don't have the time, which is why they do it passively but of course there are active options as well.

     There are companies out there that buy homes, completely renovated them then manage for the investor as well on the back end so it is a one stop shop type deal where the interests have to be mutually aligned. 

    Feel free to reach out if you have any questions. Best of luck investing! Let us know which direction you decide on 

    0Reply
  • Terra Padgett
    Investor · Houston, TX · Member since 2022 · 126 posts · 122 votes
    2y

    I'd suggest you look into investing in real estate with an Investment Club. There are stock clubs, but I'm referring to Real Estate Investment Clubs. These clubs are usually made up of a group of individuals that want to grow their capital passively. They meet to discuss various educational topics, network, & review deals to potentially invest in. They pool their capital together to invest as one single entity in projects. They could be equity or debt positions; new builds, value-adds, funds, rentals, promissory notes, etc. I lead one called Power Pool Fund. You'll learn a ton and really start creating passive income streams to complement any active income things you like to do. 

    0Reply
  • Jason Allen
    Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
    2y
    Quote from @Andrew Zhang:

    Hi, first time posting here. A little story about me is, I am unmarried, and late 20s. I was fortunate to make about $750k this year and next year the expected salary is $900k. I have a 1.2M house with 25%-ish equity, and no other assets. My yearly spending rate is low like 30K ish, besides the mortgage. I like my W2 job but I don't see myself keeping this high salary forever, so I am thinking of ways to create income streams. I've been reading posts here and was looking at low priced markets for cash flows, but even if I buy 10 of these and paid fully, it's nowhere near the income I am making. I also thought about buying more pricy homes in California and bet on the appreciation - but this doesn't seem like the most efficient way to use my liquidity. Maybe I should go into multi-unit homes? but I absolutely have no idea how to get started on this. My ultimate goal is to make 30k/month income apart from W2, but without working hard like STR owners.

    Long story short, if you were making a high 6-digits a year, what asset would you buy to create incomes? 


    I'd invest in multi-family units that cash flow off the bat. Ideally in a market that is appreciating rapidly. Here in Columbus, Ohio, we're experiencing a rapid growth in the economic base due to companies such as Intel, google, and Wells Fargo investing here. It would also depend on what class of area you want to invest in. Typically, in an A class areas you see less of a return on your cash, but this also comes with much less of a headache regarding tenants. Class A typically comes with consistent and reliable appreciation, too. In C or D class areas, you'll typically see a much higher return on your cash. We often find deals for our out of state investors that meet or exceed the 1% rule in these areas. With the right team, your goals will be easily achievable in due time. 

    0Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Andrew, I'm going to give you some advice that will likely not be very popular on a real estate forum.

    Focus on your W2.

    You are killing it and you will likely burn out in 3-5 years tops. Most folks doing $1MM+/year do.

    Beyond that, you do not need to make the same amount of money from your investments as you make from your W2. In an ideal world your investments would cover your expenses. It seems those are pretty low.

    I'm assuming your W2 is pretty demanding. Real estate can also be demanding. I would hate to see your high-earning W2 suffer due to real estate whether that's time or mental distraction.

    I would focus on staying in the game with the high income W2 as long as possible, keep those expenses low, throw your added money into index funds, and see about doing real estate when you start pulling back from the W2.

    4Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    2y
    Quote from @Andrew Zhang:

    Hi, first time posting here. A little story about me is, I am unmarried, and late 20s. I was fortunate to make about $750k this year and next year the expected salary is $900k. I have a 1.2M house with 25%-ish equity, and no other assets. My yearly spending rate is low like 30K ish, besides the mortgage. I like my W2 job but I don't see myself keeping this high salary forever, so I am thinking of ways to create income streams. I've been reading posts here and was looking at low priced markets for cash flows, but even if I buy 10 of these and paid fully, it's nowhere near the income I am making. I also thought about buying more pricy homes in California and bet on the appreciation - but this doesn't seem like the most efficient way to use my liquidity. Maybe I should go into multi-unit homes? but I absolutely have no idea how to get started on this. My ultimate goal is to make 30k/month income apart from W2, but without working hard like STR owners.

    Long story short, if you were making a high 6-digits a year, what asset would you buy to create incomes? 


     Hi Andrew, I have seven figures invested in both my directly owned real estate portfolio and my passive real estate portfolio (i.e. syndications/crowdfunding). In my opinion both types have their pros and cons and neither is 100% superior to the other (and that's why I like both).


    One of the advantages of directly owned real estate is that you can put sweat equity into it and increase your return. However, if you have enough assets, then things like free time become much more valuable than continuing to work extra hours.

    From your description that might be your situation. If it is, then you may be looking for passive investments. The advantage here is that after you choose the investment, you're done and don't have to do anything else. And, if you choose well, you can select a sponsor that has many years more experience than you can ever hope to have (and avoid rookie mistakes that you might make).

    The disadvantage is that you have to feel comfortable with doing that vetting (and which is something not everyone feels comfortable doing).
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  • Michael Margarella
    Investor · New York City · Member since 2020 · 164 posts · 75 votes
    2y

    Hi Andrew, investing in a syndication or fund could be a good fit given your situation.

    Even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions. And during inflationary times rental rates increase. Pick solid operators and solid asset classes.

    We syndicate self-storage projects. These syndication can provide an 8%+ cash-on-cash return - providing you monthly cash flow - and a 15-20% IRR over the length of the project. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases. Feel free to reach out

    0Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    2y

    @Andrew Zhang congratulations on your success! I would start out first by getting educated and really thinking about what you want your life to look like in the future. Does owning 10, 20, 30 houses fit? Does owning apartment buildings fit? If you are going to do either of those, you're buying a business and need to be prepared to spend a handful of hours each week on the business. This is true even if they are turnkey or 3rd party property managed. If you have an extra 5-10 hours/week and want to spend it this way, then learn more about this path.

    If you want a more passive role now, while you're a high income earner, then look for passive routes like investing in a syndication, investing in a debt fund, investing in a NNN lease (still a bit active), etc. These routes provide a lot of the same benefits as the active investing, but take much less time. The biggest negative (and positive) is that you lose control of the operations/decision making.

    Of course, you can do a bit of both. 

    0Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    2y
    Quote from @Andrew Zhang:

    Hi, first time posting here. A little story about me is, I am unmarried, and late 20s. I was fortunate to make about $750k this year and next year the expected salary is $900k. I have a 1.2M house with 25%-ish equity, and no other assets. My yearly spending rate is low like 30K ish, besides the mortgage. I like my W2 job but I don't see myself keeping this high salary forever, so I am thinking of ways to create income streams. I've been reading posts here and was looking at low priced markets for cash flows, but even if I buy 10 of these and paid fully, it's nowhere near the income I am making. I also thought about buying more pricy homes in California and bet on the appreciation - but this doesn't seem like the most efficient way to use my liquidity. Maybe I should go into multi-unit homes? but I absolutely have no idea how to get started on this. My ultimate goal is to make 30k/month income apart from W2, but without working hard like STR owners.

    Long story short, if you were making a high 6-digits a year, what asset would you buy to create incomes? 


    Hey mate,

    Congratulations on your super high income.

    I'm biased so take what I say with a grain of salt lol

    Buy 3,4,5 turnkey SFH and get your feet wet with real estate investing.

    From there you can either purchase more and scale your portfolio further or start looking at a different asset class like multifamily, etc...

    Something in this order:
    1) SFH
    2) Multifamily
    3) Commercial
    4) Hotel
    5) Casino

    It's nice to dream and think big but that's my opinion how to start small and progress to different/bigger asset classes if you have such a desire.

    Or, you can keep busting your A$$ for the next 4-5 years and save every penny.

    Park the savings in 30 treasury bonds and go to sleep in the Bahamas 😁

    Just my opinion and wishing you all the best with your endeavors 
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