$75,000 for maximum cash flow. How would you do it?

39 Replies

I'm currently comfortable with using $50k - $70k of my savings to invest for maximum cash flow. I have to add that caveat (cash flow) since I'm due to get out of the Navy here in 7 months. I'd love to not have to go back to Nuclear Power when I get out. I hope to only maintain a job for a year or so after discharge to move into real estate and investing full time. I'm already so passionate about it, my wife is tired of hearing about it!

My question: How would you use $50k - $70k to try to replace a normally $5k - $7k / month income? Is it even possible realistically?

I'd just like to get a feel for what others here think. I've been devouring the forums and all of it's resources since I joined (1 month ago i think). I'm open to any options, lending, SFRs, Flips, etc. I'd prefer to do it locally (Virginia Beach or northern NC), but that's not a must. 

Just getting a feel. I'm not looking for someone to point me in a direction. I'm perfectly capable of solving the problems on my own, just wondering where those of you with expertise in this would start. 

Hope I didn't come off as totally helpless. There's a certain amount of that feeling I get with every question I ask here.. haha. Thanks everyone! 

With the right amount of experience and resources many who wholesale and rehab make that much and more. I know my share of those who flip back to back, making nearly 50k on up in under a 3 month spread. It's a lot to it though. Good luck. I'm former Navy myself.

@Micheal Waldrup  I guess it partly depends on your knowledge and experience. One good way may be to invest in a marketing campaign. Then wholesale and flip to build cash. After that you could invest in whatever area you prefer. 

Thanks for the answers!

I don't mean to ask what should 'I' do so much as 'what would you do?'.  

I've certainly thought about the wholesaling start, I'm actively learning the many steps in that process as well as creating some basic systems to start. I've already chosen 3 zip codes in my area to farm and have begun looking into the lists in my area. I am also building a simple website for it as I reply here. Already in motion @Walt Payne  as far as that goes.

Thanks @Mark Cruse  for your service as well. I know first hand how difficult it can be. 

@Micheal Waldrup  that was what I would do. It is what I am doing now to improve my own cash flow. My brother I have done a lot of rehabs, so that track makes sense for us.

Originally posted by @Walt Payne:

@Micheal Waldrup that was what I would do. It is what I am doing now to improve my own cash flow. My brother I have done a lot of rehabs, so that track makes sense for us.

 Great to hear! I'll be looking into contractors here shortly also. It's on my list in case a wholesale deal that comes across makes sense for me as a starter rehab. Thanks again! Hope you guys do great!

If the cash is coming from your TSP don't liquidate it. Roll it into an IRA and you will have more options for that money.

Originally posted by @Bryan Neal:

If the cash is coming from your TSP don't liquidate it. Roll it into an IRA and you will have more options for that money.

It's not from a TSP. It's just cash / relatively liquid savings. I won't be touching my IRA for investing right now. When I get more experience I may look into it though. Thanks for looking out!

I may be being pedantic (who, me?), but if you are talking about "cash flow" as money made off of an investment then I'd say no, you aren't being realistic in thinking that you can quickly create a $60,000+ cash flow with a 50k-70k nut. Over time? sure, if you are smart.

The idea of using that money to kickstart a flipping business is a different thing altogether than creating cash flow, IMO (job, vs investment, basically). With the right skills, making $60,000+ working as a flipper should be quite doable. 

It seems a bit ambitious to get yourself set up for a direct to seller marketing campaign and all that entails AND to learn the flipping business all at the same time. If I had that kind of seed money I would start by focusing on the flipping business. I would create a few avenues of deal flow that were outsourced (wholesalers, agents) and learn and perfect my rehab systems. Once I got that down I would look into marketing for my own deals and wholesaling the ones I didnt want.

Originally posted by @Jean Bolger:

I may be being pedantic (who, me?), but if you are talking about "cash flow" as money made off of an investment then I'd say no, you aren't being realistic in thinking that you can quickly create a $60,000+ cash flow with a 50k-70k nut. Over time? sure, if you are smart.

The idea of using that money to kickstart a flipping business is a different thing altogether than creating cash flow, IMO (job, vs investment, basically). With the right skills, making $60,000+ working as a flipper should be quite doable. 

 Great point Jean. By the way, I'm in Nuclear Power, precision with language is fine with me.

On your point, I think a better way to ask this is with the end result in mind. I'd simply like to replace a $50,000 - $70,000 / year job to start. Thanks for clarifying that thought for me. It's hard to realize a self imposed limitation without it being pointed out. 

Originally posted by @Russell Ponce:

It seems a bit ambitious to get yourself set up for a direct to seller marketing campaign and all that entails AND to learn the flipping business all at the same time. If I had that kind of seed money I would start by focusing on the flipping business. I would create a few avenues of deal flow that were outsourced (wholesalers, agents) and learn and perfect my rehab systems. Once I got that down I would look into marketing for my own deals and wholesaling the ones I didnt want.

 Also a great point Russell. As I mentioned above, I limited my thoughts about achieving this outcome. Cashflow isn't so much the goal as replacing an income, and I should be more clear about that.

Spreading myself too thin here is certainly a concern. I'll continue to research for a bit more time before I get too deeply into a path. From the information I'm reading, it makes sense that even as a wholesaler I'd have a good 3-6 month wait before a steady stream of deals anyways. It's clear now that a similar timeline (3-6 months for payoff of any significance) is achievable with any number of paths. Thanks for contributing!

Michael,

As a wholesaler, you have to be very persistent before you start seeing some real deals come your way. You will need to have a great marketing plan and stay with it for a few months before you find a real deal.

I come across so many wholesalers who start out thinking that it's an easy way to make some quick money, but that's far from truth.

If I were in your shoes and my goal was to make $5,000/month in passive income, I would work my way back. I would start with how many rental units I would need to get to $5,000/month net income. The number will vary depending on free and clear houses vs. leverage. Once you have that number in mind, you will know what kind of capital you need to hit that number. With the end capital number goal, you figure out a plan on how to get to that capital number in shortest amount of time possible depending on your resources availability. If you have about $75,000 available, I would allocate some funds to wholesale marketing and do a flip with the remainder.

Best wishes for your future success.

@Sharad M.  Thank you for replying. 

It's funny that you mentioned the working backwards method. I actually created a spreadsheet to do exactly what you are talking about last night. The further I got into it, the more I realized that (at least locally) it was near impossible to achieve that income with rentals and my current investment limit. I used the J.Scott rental analysis spreadsheet to analyze hypothetical rentals (HUD / Homepath / Homestep properties). In every scenario I ran through, my money was tied up at somewhere between 3 - 5 properties with income being nowhere near the $5k mark. Even with taking into account the great terms on Homepath financing and such. This exercise basically eliminated the idea for me of jumping straight into rentals since I'd prefer not to work in my current field for more than a year after my discharge from the Navy.

I like the path you chose with a basic marketing campaign and a flip to start. I imagine that has a lot to do with your current comfort level with real estate. I'm really torn between options when taking into account the comments of @Russell Ponce  as well.

Luckily, I have a Wife who can and is willing to help with much of this. I'm leaning towards the option of moving on with the marketing campaign and actively searching for a flip at the same time. Thanks again for your input!

You could also look into some high cash flow markets and invest there. $70k leveraged with a lender willing to go 80% LTV can go a long way. I'd say you won't be able to completely replace your income of $5-7k/month just yet. However, you can make a big dent in that goal, and can work on acquiring more as you get back into working in nuclear power.

If you keep your expenses low, use the cash flow from your new properties, and any other surplus from your job, you should be able to get up to that gross income goal eventually. It might take longer than 1 year, but you never know :) Possibilities are endless in real estate and as you acquire more, different options will open up for you that can expedite the process!

This is what I'm going through right now, I'm about 1/3 of the way to replacing my W2 Gross income and I had a similar amount to start with. I'm looking to replace $7k/month exactly actually.

@Mehran K.  marketing for your own flips/rentals is the best way to go (podcasts #18 & #37) and if you are set up to handle it and still focus on learning the rehab process then go for it. For me I prefer to focus on one aspect, systematize it and then outsource it but im not a nuclear engineer either lol. Best of luck to you, keep us updated.

Sharad said it best and was what I am going to reiterate here. If you strive for $100 cash flow per door with leverage applied, you need 50 doors to bring in $5000k monthly. With $75k, that can be done, but only by going big to start and being creative. Some ideas of that big and creative would be to buy multi family apartments, so 2 purchases of 25-30 doors. Using conventional financing and combine with money partner or partners, do a syndication (need experience and track record in RE for this typically), buy subject to or with owner financing (could be a wrap, straight seller note, or loan assumption).

Going one or even 4 doors at a time and conventionally will be literally impossible to get to your goal in one year and with only $75k. So, another option would be to flip or wholesale to build more capital while you maintain your job, then roll that added capital into the bit and hold purchases. If you add capital, you can get to your goal quicker. Hope that was specific enough to guide you better.

@Mehran K.  I've actually listened to #37, I'll be sure to download the #18 for the drive to work on monday. I feel confident in being able to focus with it. My wife is willing to help with what I need and is more than competent herself. I doubt (from reading your contributions) that your preference to focus / systematize is a reflection of your intelligence, it's probably more a preference of personality. :-)

I'll be sure to keep everyone updated. Thanks again all!

@Will Barnard  Great insight! 

I'd imagine jumping so quickly into so many properties would present it's own unique set of challenges. Probably more than any beginning investor could handle. I very much appreciate the reality 'slap in the face'. To me, the logistics of it all combined with the required amount of leverage for that many doors puts it clearly into my 'later' bucket. 

Thanks everyone for helping me to get clear on my goals and path. This is a fantastic community, and you all are testament to it. 

Now to make some connections and continue moving forward!

@Micheal Waldrup  

Can I answer a couple of your questions honestly? #1

: How would you use $50k - $70k to try to replace a normally $5k - $7k / month income? Is it even possible realistically?

You cannot....period! Your only hope to do this would not be in real estate but as a daytrader. Do you have the skills to be a daytrader? If not dont even try.

You do not mention your age.25--35--45? In any case you most likely better not quit your day job. Depending on what you build in real estate it may take 5-10-20 years to build up what you need to spin that much income off not to mention your family needs benifits ect to live on.  Try to remember a site like BP for the most part is very sugar coated.You are going to find very few "failure" stories on here. Most dont come to post to get on the wall of foolish deals. You also made mention of Homepath financing, They will certainly help you out on your owner occupied home but from there dont expect an investor loan. Very hard to obtain.

Not trying to pour water on your dreams rather throw out some reality to whats happening.  Good Luck

Originally posted by @Will Barnard:

Sharad said it best and was what I am going to reiterate here. If you strive for $100 cash flow per door with leverage applied, you need 50 doors to bring in $5000k monthly. With $75k, that can be done, but only by going big to start and being creative. Some ideas of that big and creative would be to buy multi family apartments, so 2 purchases of 25-30 doors. Using conventional financing and combine with money partner or partners, do a syndication (need experience and track record in RE for this typically), buy subject to or with owner financing (could be a wrap, straight seller note, or loan assumption).

I did this a couple weeks ago as an exercise and I realized that the number I needed to replace was much higher than I thought at first.  Let's say I take home $6000 per month.  I need to replace that $6000 after expenses, BUT also factor in the income tax bill at the end.  Otherwise will be a nasty surprise come tax time.  I really need to replace my GROSS income not my NET income.  Also, not sure if you have looked into the cost of insurance nowadays but holy moly.  Our insurance for a family is like $1400 a month and it's a $3000 deductible per-person, which means for the privilege of paying $16-17k per year of premiums, I get to pay another $12k out of pocket before the insurance picks up anything.  (Basically means my worst case is $30k per year of health costs.)

Can it be done in a year?  I guess, but assuming everything doesnt work out perfect, you can still take a measured, worst case scenerio and still make your number if you willing to take the time to get there.  I dont think there are a lot of sure ways to turn 50-75k into that kind of cash flow in one year.  If someone else has an answer, let me know- I am ready to form that partnership/

Personally, I would start off wholesaling. You can do it part time while keeping your day job. You can learn how to find great deals and build up more cash reserves at the same time. You'll need cash reserves if your going to go into buy n hold. Things will break that need repairs, etc.. Along the way, you'll find great deals you'll want to keep yourself for buy n hold.. and you'll have the cash to do so. You're doing the right thing by asking questions, going slow. Take your time, network and learn from those who've been there. With respect to buy n hold.. here in Phx some areas perform better than others with respect to CAP Rate, Cash on Cash, etc. You might be surprised where those areas are.. not necessarily where you yourself would want to live - but those areas provide the best leverage (more cash flow per your dollar spent). Do your research, take your time, don't over leverage. You don't get rich quick (or build cash flow quick).

@Micheal Waldrup Thank you for your service to our nation.  If I were you and I'm leaving the service with about $75,000 my strategy would be to keep as much of that cash in your account as possible.  Here's why; 1.  It will be a safety net/emergency fund. 2. Once you learn more about real estate and learn your current market, you'll understand where the deal flow is.  With a hefty amount of money saved, you'll be able to qualify for mortgages, hard money loans, even convince private money lenders much easier.  3. For future more complex deals when you have to produce a profit and loss statement, it will look far better with good chase reserves.  

So that brings me the next question regarding what to do to make an income.  I would not get a job outside of real estate to make money if at all possible.  If this is your passion then stay within real estate because you'll make ground much more quickly if you eat, breathe, and sleep real estate.  So I would focus on wholesaling instead of rehabbing.  Being new to real estate, rehabbing poses a lot of skin in the game.  You have to deal with real estate agents, hard money lenders or private money, project management, contractors, sub contractors, pay roll, insurance, timing the market, etc.  That's all doable as there are many successfully rehabbers however wholesaling is a better entry point in my opinion.

Think of it like this, get your wholesaling business going with a couple of deals a month. Systematize all of your processes and then hire these following positions. 1. Someone to answer/return all of your phone calls from direct mail. 2. Someone to cold call sellers from FSBO, craigslist, Zillow etc. 3. Hire an acquisitions manager to meet with the sellers, complete paperwork, handle cash buyers. Once you fully outsource your business (not completely because you'll still be involved to ensure it's still running effectivly) I would say that's the next best thing to passive cash flow.

This monthly income derived from wholesaling (which I would imagine would be substantial) will open your investment gates.  Think about it, as you're wholesaling and you come across a house that you would like as a rental then just keep it and add it to your investment portfolio for passive cash-flow.  Or you could use your cash from your wholesaling business to focus on acquiring 2-4 unit properties.  Or you could shift your focus on acquiring commercial multifamily properties which I believe is better for cash-flow vs. residential properties.  

So Michael I know this was a long post, haha, but the point is I believe that if you have an economic engine generating a good amount of cash, it will help you obtain the passive cash-flow that you desire much faster.  Ken McElroy, the top tier commercial multifamily syndicator in the U.S., explained his business model.  His main cash generator is his property management company which allows him to fund his syndication business and construction business.  Wholesaling can do the same for you.  Best of luck!  

I am researching tax deeds, which do have the potential of giving a high short term rate of return on low amounts of cash. You're in a tax deed state too.  I would research virginia tax deed sales rules online and on this site closely to see if people make that work. 

In my experience, the real estate. strategies that require significant cash have a relatively low rate of return.  I actively fix and flip but it's taken a while and a lot of cash to start making money. I see how people make a lot of money. I can tell you it ain't easy and I'm not there yet. Whether you make money is highly dependent on the local real estate and construction markets and an excellent network of realtors and contractors.

Although I have cash, I am looking at wholesaling, subject to's and wrap financing to increase cash flow.  

You have gotten a tremendous amount of good advice on this thread.  I would only add

Diversify... do not throw the 75K into one deal.  What is the least amount of that $75K you can use on your first deal.  Your first three deals are about learning not making money.

Don't leave your job until you have a repeatable model that replaces your salary.  Most of these strategies don't require a lot of hours per week.  And don't put a time limit on yourself based on what you "want".  Focus on showing up and doing it, that's what you control.

Everyone has had a job they want out of.  You will find that doing something for your future that you are passionate about will go a long long way to making any day job survivable.  But the stability of that job plays a critical role in managing financial risk for you and your family.  If you see the job as part of your large business plan, it has a different aspect.

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