Building a Buy and Hold Empire

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Building a Buy and Hold Empire

Daniel Pitner
Realtor · Peoria, AZ · Member since 2018 · 107 posts · 26 votes

My wife and I are 25 and are looking to retire in 10 years through long term rentals. We live in the Phoenix area and have 1 rental currently that cashflows $500/month.  What suggestions do you have to build enough cash flow to retire? Our "retirement number" is $4,000/month.  How would you buy enough properties to do this? 

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Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
7y

@Daniel Pitner

To me, $4k/month isn’t enough once you factor in health insurance, etc. and retirement at 35 just seems odd to me unless you have tons of money to travel and do great things. I see boredom in your future. Keep your W2 jobs, aim high, buy as many rentals as you can, bank as much money as you can, and retire early in your 50’s. As for me, if I’m home for 3 days in a row I go nuts.

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  • Benjamin DuPont
    Real Estate Agent · Orlando, FL · Member since 2017 · 12 posts · 8 votes
    7y

    @Daniel Pitner.

    4000 is very achievable. You can easily go above that as well.

    There are several posts on here about the "Golden number" which is where people get away from their w2. You probably wont fully retire in the sense of never working again, but perhaps just become full time investors.

    What you should think aboht is the compounding finances. If you get $4000 a month coming in (48k) yearly cashflow...then what will you be eligible for purchasing through lenders.

    I would say set that aimpoint higher⬆️⬆️. There is no reason you dont go for 10 units in 10 years or more. Once you get a few under your belt, you will be able to buy larger or more units every year. 10k a year cashflow by 35 can be 20k by age 40.

    Its your book, write the story how you want.

    Best of luck,

    -Ben

    4Reply
  • Daniel Pitner
    OP
    Realtor · Peoria, AZ · Member since 2018 · 107 posts · 26 votes
    7y

    @Benjamin DuPont Thank you! This is encouraging.  Currently we have a savings rate of around 4k/month which will be used for down payments on homes.  My biggest struggle right now is finding properties with positive cashflow in the Phoenix-area.  

    0Reply
  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    7y

    @Daniel Pitner

    You haven't really provided enough information to give sound advice. How much do you make? How much money can you save towards down payments? How much is the average purchase price of a home? Are you paying management and maintenance before or after your net cash flow? 

    My experience is that single-family homes don't really cash flow in the short term. You will usually have other unexpected costs like windows, roofs, furnaces, vacancies, etc. My recommendation is to purchase your rentals and hold them over the next 10 to 15 years. When you are ready, sell off half of your portfolio and use the proceeds from the sales to pay off the mortgages on the other half of your portfolio. Now your remaining properties will definitely cash flow and provide a good income from each. Whether or not this is enough to retire on, will depend on your current buying power and how many properties you can purchase.

    You could also look at other strategies to generate short term income to help towards your down payments.

    3Reply
  • Daniel Pitner
    OP
    Realtor · Peoria, AZ · Member since 2018 · 107 posts · 26 votes
    7y

    @Jim Pellerin Thank you! Currently we make 110k/year between the two of us and we save about 4k/month to be used towards a downpayment. The average purchase price in our area is about $260k, the average rent being around $1200. Our current rental property was actually our first home together that we got at a good price and the $600/month is generated from the property being listed as a STR.

    0Reply
  • Benjamin DuPont
    Real Estate Agent · Orlando, FL · Member since 2017 · 12 posts · 8 votes
    7y

    @Daniel Pitner

    That is a good start, see if you can lower your expenses and then follow the house hacking method. To answer your other question of how to do it, i would say you need to build equity into your places.

    I focus on places that need work and i put in the blood/sweat/tears. The goal is to be able to refiance after my first few deals and pull out money that i can then drop back into the next deal.

    Ive only been going for a few years but if you want to connect feel free to shoot me a message or add me on the IG. Best of luck with the journey!!

    1Reply
  • Josh Darley
    Rental Property Investor · Chandler, AZ · Member since 2019 · 39 posts · 21 votes
    7y

    Hi Daniel, 

    We too have had a hard time finding cash flowing properties in the Phoenix area. We have turned to SFH in the growing communities of Maricopa, Casa Grande, San Tan Valley, and Florence. We are acquiring newer to brand new homes for less than 200k which will cash flow $300-400 a month. The prices of homes continues to rise though and we are finding it tough to follow this trend. In hindsight we should have bought more homes when we relocated to Phoenix a couple years ago.


    Good luck on your endeavor and I am interested in the route you decide on.

    1Reply
  • Daniel Pitner
    OP
    Realtor · Peoria, AZ · Member since 2018 · 107 posts · 26 votes
    7y

    @Joshua D. I’ve been looking in The Casa Grande area as well as the Wickenburg area. You’re right— there are some better options out there! I honestly hadn’t even considered a new build out in San Tan. I also work in downtown Chandler and that area is gentrifying quickly— I’m interested in picking up some properties right in the down town area.

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Daniel Pitner I like the Casa Grande area. We have purchased around 8 properties there over the past 2 years along with 8 in Coolidge and about 30 others in the East Valley. The deals are there although they are getting harder to find. About 2 out of 3 of our properties are off market deals and the other third are off of the MLS or Zillow. We work with newer investors in helping them learn how to find off market properties and how to maximize returns by doing lease options. We work with people either individually or they can come to our meetup groups. Our next meetup is on October 16th in Mesa. Here is the link to the meetup group. It's free and super educational.

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

    Feel free to reach out and connect.

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    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jim Pellerin:

    @Daniel Pitner

    You haven't really provided enough information to give sound advice. How much do you make? How much money can you save towards down payments? How much is the average purchase price of a home? Are you paying management and maintenance before or after your net cash flow? 

    My experience is that single-family homes don't really cash flow in the short term. You will usually have other unexpected costs like windows, roofs, furnaces, vacancies, etc. My recommendation is to purchase your rentals and hold them over the next 10 to 15 years. When you are ready, sell off half of your portfolio and use the proceeds from the sales to pay off the mortgages on the other half of your portfolio. Now your remaining properties will definitely cash flow and provide a good income from each. Whether or not this is enough to retire on, will depend on your current buying power and how many properties you can purchase.

    You could also look at other strategies to generate short term income to help towards your down payments.

    In the US  some one using this strategy would face depreciation recapture.. so not sure that is the wisest route.. but I love the thought of paying off real estate.. free and clear is the way to go or minimize debt as your portfolio ages.. one thing folks need to keep in mind is 10 to 15 years down the line the houses are going to need Major cap ex at least most will.. you cant have a 15 year old rental that does not need just about a full rehab.. 

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  • Anthony GaydenPro Member
    Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
    7y

    @Daniel Pitner

    Life has a way of throwing a wrench in your plans as time passes. When I started investing I was single, living in Arizona, and able to save about $2500/month to invest.

    Fast forward 5 years and I’m married and have a daughter. I moved across the country. I’m almost 40 and my priorities have changed and I have had to change my investing strategy.

    Good luck on achieving that goal, but what you think is enough now might not be enough long term.

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  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Daniel Pitner

    To me, $4k/month isn’t enough once you factor in health insurance, etc. and retirement at 35 just seems odd to me unless you have tons of money to travel and do great things. I see boredom in your future. Keep your W2 jobs, aim high, buy as many rentals as you can, bank as much money as you can, and retire early in your 50’s. As for me, if I’m home for 3 days in a row I go nuts.

    5Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Anthony Gayden:

    @Daniel Pitner

    Life has a way of throwing a wrench in your plans as time passes. When I started investing I was single, living in Arizona, and able to save about $2500/month to invest.

    Fast forward 5 years and I’m married and have a daughter. I moved across the country. I’m almost 40 and my priorities have changed and I have had to change my investing strategy.

    Good luck on achieving that goal, but what you think is enough now might not be enough long term.

    TRuth !!!  my wife and I pay over 2k a month alone in health insurance..  the privilege of being financially free  IE self employed LOL.. 

    I personally cannot see how anyone can live on 4k a month unless every thing is paid for.. and they pretty much are home bodies.. and again if they have to handle their own insurances as they age.. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Matt M.:

    @Daniel Pitner

    To me, $4k/month isn’t enough once you factor in health insurance, etc. and retirement at 35 just seems odd to me unless you have tons of money to travel and do great things. I see boredom in your future. Keep your W2 jobs, aim high, buy as many rentals as you can, bank as much money as you can, and retire early in your 50’s. As for me, if I’m home for 3 days in a row I go nuts. 

    we are 63  retire no freakin way this real estate is too much fun..  my wife being a broker us doing building and such.. got to do something

    and like I said above  you become self employed IE what equates for the financial freedom comments on this site and you can expect your expenses to sky rocket over time.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Anthony Gayden:

    @Daniel Pitner

    Life has a way of throwing a wrench in your plans as time passes. When I started investing I was single, living in Arizona, and able to save about $2500/month to invest.

    Fast forward 5 years and I’m married and have a daughter. I moved across the country. I’m almost 40 and my priorities have changed and I have had to change my investing strategy.

    Good luck on achieving that goal, but what you think is enough now might not be enough long term.

    not to mention saving for Collage  etc.. I can see this living very cheaply if your single no debt type of thing. and basically a home body.

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  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    7y

    You two currently make over $9k/month but your retirement number is only $4k.

    Are you sure you can reduce your income by over 50% and retire with the lifestyle you want/have now?

    1Reply
  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    @Matt M.

    I agree with the boredom part completely.

    $4K could be enough to live on though depending upon their financial situation and location. Heck, I could live off $4K/mo. now if I really needed to.

    0Reply
  • Brent Paul
    Rental Property Investor · Shakopee, MN · Member since 2015 · 985 posts · 374 votes
    7y

    I don't see any reason you can't buy 1 house a year with your income.  And don't forget you can reinvest some of your cash flow towards a downpayment too.  Whether you want to pay them off early is really up to you.  You will cash flow more with a 30 year vs a 15.  In some cases it might make sense to do a 15 year.  You can always pay down early with a 30 year loan too.  You can absolutely do this.  Don't rule out you may get an opportunity for seller financing on a property which could mean less of a down payment.  

    Start networking with local investors in your area.  You will be amazed at how many investors are out there.  At a conference a few weeks ago I made a connection with a wholesaler that has already brought me deals since then.

    The one mistake people make when retiring early is how they are going to spend all their time.  My grandpa retired at 55.  He spent a lot of time with the grandkids, traveling, gardening, fishing and volunteering.  He's still kicking it at 96 having been retired for 41 years now.  My dad retired at 65 and the only reason he waited was because he wanted his house paid off as well as to acquire a few more things to keep going on his hobby of working on cars and woodworking.

    1Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Jay Hinrich

    Health ins alone is a killer. I am self employed, luckily have a W2 wifey that provides us with insurance, still costs us $500/month (she works for a major worldwide insurance company) with huge deductibles. I have two good friends that pay out of pocket for their families to the tune of $1400/month. These aren’t going to go down over the next ten years.

    OP- If you guys plan on having a family, or even health insurance for yourselves, I’d plan on way more than $4k/month if you want to eat more than rice and beans.

    1Reply
  • Eric Figueroa
    Lender · Newport Beach, CA · Member since 2015 · 15 posts · 4 votes
    7y

    @Daniel Pitner

    Hello Daniel,

    I recommend partnering with brokers in your area that offer Non Qm loans. These loans are better than hard money loans since they offer longer fixed rate terms. If you do not have any brokers you are currently working with I can try and set you up with some. NonQm loans can be easier to qualify for than your traditional conventional loans.

    0Reply
  • Sterling Chapman
    Rental Property Investor · Baton Rouge, LA · Member since 2018 · 65 posts · 76 votes
    7y

    @Daniel Pitner a year and half ago I had one single family house netting me $500 a month. Now I have 18 units netting me about $5k a month. I BRRRRed a couple duplexes, got someone to seller finance me a few more with just 10% down and got a partner to put up the down payment on a couple 4plexes. Totally doable! Good luck!

    3Reply
  • Ralph Poirier
    Rental Property Investor · Wrentham, MA · Member since 2019 · 137 posts · 104 votes
    7y

    @Daniel Pitner in the forum post after yours @travis Shelton posted about a networking meeting in your area. You should check this out.

    0Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Daniel Pitner Can I be honest, Daniel? 

    $4,000 is a great number for just TWO people, assuming you don't want to start a family. 

    When kids are thrown in the mix, things can get very interesting. Just wanted to highlight that blind spot. 

    3Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    7y

    Like @Jay Hinrichs & @Matt M. said, $4k/month is nothing when you add in health insurance cost. Especially once you have a kid. My partner pays over $2k/month. 

    If half your income goes to health insurance how do you expect to live/pay for anything else? Even with a fully paid off home, you have property taxes, car insurance, utilities; etc etc. Those expenses will only go up.

    Also be careful with what number you think you are clearing every month. Most people are horrible at actually calculating their net cash flow. Everyone forgets about the capex that is required to maintain your buildings. & 5% isn’t enough for most low priced rentals. You might think your clearing $500/month and then you have a furnace blow out and you just lost your income off that unit for over a year. 

    1Reply
  • Zack Howard
    Member since 2019 · 32 posts · 22 votes
    7y

    @Daniel Pitner buy the brrrr book.. Wala

    0Reply
  • Daniel Pitner
    OP
    Realtor · Peoria, AZ · Member since 2018 · 107 posts · 26 votes
    6y
    After reading through these answers again I feel like I should clarify: By retire I do not mean no longer actively work. I actually intend to work more hours, however my hope is to retire from any need to work at a W2 position and jump into full time investing. Thank you guys for your input! 
    0Reply
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