Investing strategy for new investors for maximum cash flow

Starting Out
5yFollow

Investing strategy for new investors for maximum cash flow

Kyle Hilliard
Investor · Lansing, MI · Member since 2021 · 16 posts · 15 votes

Hey everyone,

This is actually my first post on BP, so I'm very excited! My wife and I are new to rental property investing and we are still trying to work out the best investing strategy for our goals, so I'm hoping you guys can give me some advice. Our first child was just born a few months ago, so our primary REI goal is to maximize cash flow so I can transition away from my 9-5 job to spend more time with my wife and son (my wife works remotely from home). My initial goal is to have rentals that produce a combined $1500-$2000/month in cash flow after expenses.

Our current primary residence is in East Lansing, MI and we plan to rent it out next summer once we have done some rehab. Based on the rental income estimate from Rentometer, I think the house would produce around $400 in cash flow after all expenses (maintenance, vacancy, CapEx…).

We have $55,000 to invest in new properties in the Lansing, MI area. Starting out, I think we would manage the properties ourselves to reduce expenses. I think we would feel more comfortable purchasing a SFH, but are definitely open to small multi-family if it would generate more cash flow for us. I've been thinking about buying a small multifamily and house hacking it, but I'm not sure if my wife would be open to this. I think she would consider doing it for a year if the numbers were convincing enough.

My questions is: what is the most efficient way to use our $55,000 to maximize our monthly cash flow?

Thank you all very much, and please let me know if I’ve left out any information that you need to make a recommendation.

1Reply
38 views

Most Popular Reply

Account Closed
Member since 2020 · 41 posts · 56 votes
5y

House hack a 4 unit. You won't regret it.

2Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    House hacking sounds like it would be your best option, but only if your wife is on board as well. To maximize cash flow right away you are going to need to find a vacant multi or write the contract to be delivered vacant so you can do an FHA and use cash to rehab or do 203k loan. That will get you to higher cash flow quicker. If you are going to rent out your house, where are you going to go? For $400 in cash flow, how much will you be paying to stay somewhere else before buying the next property? And if you buy another single family, are you moving back into your home after the summer?

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
    1Reply
  • Tucker Cummings
    Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes
    5y

    I would also opt for the househacking option. My wife and I are in the process of moving to Texas, where we will move into a 2-4 unit. She wasn't for it at first, but once I said we would just do it for a year to get familiar with the area, then move out and buy our long term SFH and rent out the other unit, she was all on board for it.

    Househacking can be a very easy way to get into real estate investing and dip your toe in. Good luck!

    0Reply
  • Kyle Hilliard
    OP
    Investor · Lansing, MI · Member since 2021 · 16 posts · 15 votes
    5y

    @Tucker Cummings

    That's exactly the plan that I was thinking as well. Purchase a 2-4 unit (using an FHA/other low DP mortgage), living in one unit for a year and renting out the other units, then purchasing a long-term SFH for ourselves that we wouldn't rent. Did you say anything specifically to get your wife on board with house hacking? Have you guys already closed on your multifamily in Texas?

    1Reply
  • Kyle Hilliard
    OP
    Investor · Lansing, MI · Member since 2021 · 16 posts · 15 votes
    5y

    @Jonathan Greene

    So with an FHA loan, all the units have to be empty when you move in? So you couldn't rent a unit out to pre-existing tenants?

    Our plan is to move out of our current home next summer, rent it out, and then use it as a rental permanently. We would either move into another SFH or follow @Tucker Cummings house hacking approach. Our current home is somewhat of a live-in-flip scenario. The house is pretty old and definitely needing some updating. I'm not sure if my wife would want to buy another SFH like that. I think ideally she would want something newer and more modern that we could move into right away. 

    0Reply
  • Tucker Cummings
    Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes
    5y

    @Kyle Hilliard @Kyle Hilliard @Kyle Hilliard

    No we haven’t closed yet, haven’t even began the search yet. We’re working out job logistics now (even though we have enough cash flow from other property to cover all expenses) before we move. And we have some refinancing with other property coming up that we don’t want to make a major financial change, like moving and job change, that might interfere with getting approved. Realistically the real search will begin probably around November.

    I think her seeing how much income we’ve been getting from rental property is what got her onboard. We acquired 9 rental properties in about 18 months and now cover all our expenses with rental property cash flow. So once we played it as “it’ll be a lot easier if we buy a house we can house hack, live there a year, simultaneously scope out other areas of town we would prefer to live, stack cash, then move into our long term house and keep the other as a rental and continue to subsidize our mortgage payment that way.”

    Was a no brainer once we looked at it from a logistical standpoint rather than wanting to be in the cute HGTV home right out of the gate. I think the biggest thing is that it prevents us from buying a house in an area we’re unfamiliar with as a our long term home and is end up hating the area we buy in.

    0Reply
  • Troy DeLong
    Real Estate Agent · Lansing, MI · Member since 2020 · 172 posts · 94 votes
    5y

    @Kyle Hilliard Hey Kyle. I'm actually on the hunt for a multi-unit house hack myself in the Mid-Michigan area. I would use your $55k for down payment money and possible rehab money. If you lived in one of the units, you could qualify for FHA at a 3.5% down payment. Then, you could either use that money to fix up the property, or use the leftover money to purchase another property with a conventional loan @ 20-25% down. Now, don't spread yourself too thin. You'll still have closing costs for all of these.

    I'd be more than happy to chat with you about the Lansing area if you're interested! 

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    Short term rentals will most likely have the highest return....given of course that you choose the correct area to do business in....

    1Reply
  • Kyle Hilliard
    OP
    Investor · Lansing, MI · Member since 2021 · 16 posts · 15 votes
    5y

    @Troy DeLong

    Hey Troy! Ya, my wife and I bought our first home in East Lansing(actually Meridian Township) about a year ago because I got a job at MSU. My wife is from Chelsea, so we are there and in Ann Arbor all the time as well. I think just based on the prices of homes, we'll probably focus most of our search in the Lansing area but are definitely open to places closer to Chelsea if it makes sense financially. Do you have any SFHs in the Mid-Michigan area? 

    0Reply
  • Account Closed
    Member since 2020 · 41 posts · 56 votes
    5y

    House hack a 4 unit. You won't regret it.

    2Reply
  • Kyle Hilliard
    OP
    Investor · Lansing, MI · Member since 2021 · 16 posts · 15 votes
    5y

    @Account Closed

    Thanks, Ryan. I think that’s what I want to do. It’s just a matter of pushing myself out of my comfort zone to actually do it, and convincing my wife to give it a shot for a year. 

    I’ve been looking into multi family properties but it seems like the majority of what I find are duplexes on realtor.com, Zillow, etc. I almost never see triplexes or 4-plexes. Is that because they are actually so much rarer than duplexes, or am I searching in the wrong places? How do you go about finding 3/4 unit properties? Are there any books out there on this topic?

    0Reply
  • Patrick Snyder
    Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes
    5y

    @Kyle Hilliard

    Do a quick search and find out what's required to be able to rent out your house in Meridian Township. It used to be pretty expensive for the license and inspections.

    As for the 55k, it'll all depend on how much risk you want to take on, and how much time and energy you want to spend to get that return. Lansing is very spotty too, and with the code compliance and high property taxes, cash flow can be challenging.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free