Passive income from rental properties

[Thomas Liberatore]

I’m a rookie investor, looking to gain off passive income for cash flow & appreciation.

I made a great investment when I bought my current home from my grandmother. I did some work to the upstairs and did about a 1/2 renovation & built a substantial amount of equity inside the house. Which got me and a future business partner talking.

I’ve invested inside his company as a PML & got 2 returns of 15 %

So one stream of my machines I want going is continue PMLing on flips, but I want rental properties to products cash flow and appreciation to continue to leverage & stack.

I’ve found a couple markets I’m interest in, and have a current company I plan to work with.

My dilemma and stall right now is I don't know if I should take my entire capital and purchase one house flat out, and collect the cash flow and then HELOC that property to go get 2 more properties so I'm only paying interest on the equity line. Or, do I spread my capital out and go purchase 2-3 properties to begin my out of state investing. In hopes those cash flow and produce appreciation to then leverage.

I am leaning toward buying a 100 - 120K property, which would wipe out my emergency funds. But would be able to fully leverage the property to go put 40-50K down on 2 more properties. Welcome to different perspectives. Thanks.

[Taylor L.]

Assuming you can qualify for a loan and you're buying deals that cash flow well even after debt service, then go for long term debt. 

So far, low income renters have been the hardest hit segment by the Covid unemployment crisis. Renters at the higher end of the income spectrum are more likely to be able to work from home and thus maintain an income.

Our emergency funds should never be dipped into for anything other than an emergency, in my opinion. Buying an investment property is not an emergency. 

No matter what you buy, be sure to hold some capital for large unexpected repairs. Undercapitalization is going to impact more investors than anything else during this crisis. 

Don't buy a property hoping it'll cash flow, know or be reasonably confident that it'll cash flow. You just need to hit multiple base hits in a row, you don't need to swing for the fences on every deal. You can control for that by finding or hiring a mentor to review your numbers.

Regarding markets, get it really narrowed down. One or two markets at the most. Then focus on building deal flow in each market.

Just keep putting one foot in front of the other. Daily action.