Investor · Virginia Beach, VA · Member since 2014 · 38 posts · 7 votes
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!
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
12y
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.
Rental Property Investor · Annapolis, MD · Member since 2014 · 214 posts · 140 votes
12y
@Micheal Waldrup Hi from a fellow Vet, living in Navy town (Annapolis)
Everyone will have a different take on your question.
What i would do: I would do leave your money where it is now, and pretend that I does not exist, and start thinking creatively. Having money available, can and will kill creativity to get anything done, especially in RE investing. And there are always willing participant who will try to help you to part your money from you!
Don't worry time will come when you might really need that money, for a deal opportunity of a lifetime. But that should only be years down the road when you understand the "ins and outs" of RE investing.
When i was in the Air Force as an E-5 i started to buy properties all no money down, borrowing RE agent's commission to apply it towards closing cost etc so i would have no out of pocket cost. Next thing you know i had 5-6 SFRs in solid neighborhoods some of my tenants were O-3s and O-5s. This was back in the late 90s.
Now i have larger portfolio (I do "buy and hold" ) and even thought i don't have to, i still buy a property, or two with non of my money down.
So I am sure you will figure out what is the best way to do it for your particular situation!
Longevity is the key, not to becom a burnt out RE flipper. I want to be exited about RE investing in 30 years from now to. And for me the only way to do that is not flipping (I probably would ware me out like a corporate job) but just buy a property or two here and there.(on fantastic terms of course)
I am in similar situation as you, (except I choose to give up my day job in 2003) . I have been a "Buy and hold" since 1997.
Austin, TX · Member since 2013 · 103 posts · 19 votes
12y
@Val Csontos Thanks. I spend 2/3 of my time on my job; 1/3 on real estate. Plan to switch the two percentages around eventually--but I love my job--as I work for myself -- and after 30 years at it, I'm almost good at it (lol).
Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes
12y
Wholesaling is mentioned throughout this thread. I am certainly no expert, but I have never understood how this can be a viable strategy. Don’t most real estate investors find their own houses to purchase? I see that as part of my job since the purchase price is so important. Why would an investor need a middleman?
Investor · Hattiesburg, MS · Member since 2014 · 280 posts · 98 votes
12y
My plan would be to work for seven years on producing the income. Buy one 50k foreclosure or estate house now and get it rented for a net of 12k/yr. Take the other 25k and use as seed money for a flip each 3 months and shoot for 20k+ profit on each, flip three and keep every fourth one. After 7 years should have flipped about 25 properties and kept 6 plus original rental bought with 50k. Income should be a bit over what you need based on inflation, etc.
Investor · Virginia Beach, VA · Member since 2014 · 38 posts · 7 votes
12y
Thanks everyone for the advice!
I certainly have a lot to think about and will make sure I keep everyone up to date on how it goes. There are a lot of options and a lot of differing opinions as I expected. There's also a good bit of realism salt (in the wound) thrown in which is absolutely necessary and appreciated.
I'm going to be taking the slow and steady route. For everyone concerned about my family and finances; I understand in the context I asked the question that it seemed I might be taking too big of a risk. This is not the case, but I appreciate the thought. I have other savings and emergency funds. I have insurances continued both through my wife who is in the medical profession, and through my remaining in the reserves for an amount of time after my discharge. I also have an EXTREMELY marketable skill in nuclear power as a fall back. Not to mention receiving 6-figure job offers 7 months from my discharge, one of which I will be deciding to take in November. This is why I'm turning down a $95k bonus to stay in. They have to offer these bonuses to keep enough people from going out getting easy 6-figure+ jobs. (I really hope this doesn't come off wrong, it's the reality of my situation right now, just sharing.)
I'll certainly be sticking around and learning from you all. In the meantime, it won't hurt to spend a little money here and there 'finding my swing' per-se in REI. Thanks again everyone for your contributions. See you around!
Investor · Nashville, TN · Member since 2014 · 104 posts · 15 votes
12y
An important question to ask of you and your family is are we willing to lose $ 70,000 ?
Or half of that ? There are no guarantees , but perhaps if you could " quantify " the amount of risk of capital you are willing to take then you might consider your options. The 30 year US Government Treasury bond rate is about 3.65% . The 1year rate on T Bills is below 1% .So if the "risk free " rate would generate you $700 to $2500 ( depending on the term to maturity) what does that say about how much risk you need to take to generate 10% ?
You have to " start somewhere" but maybe with less than 70k
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.
Good Luck
I will respectfully disagree with this post other than the last two words. First, never say can't. It can be done! Is it easy, realistic for a newbie, or something anyone can do? Absolutely not, but I repeat, it CAN be done. Also, I mostly disagree with the comment regarding BP. I have personally posted many problems, failures, and mistakes. Learning from mistakes is the best teacher and any investor claiming they have never losses on an investment, I say, be very careful with that person, they are either lying or their first failure is right around the corner. One of the BEST things about BP a Nation is the majority of the pro members NOT sugar coating things, on the contrary, we tell it like it is!!! Try reading my occupants from hell thread/story, clearly that was a failure!
Investor · San Antonio, TX · Member since 2013 · 88 posts · 44 votes
12y
@micheal waldrup
Alot of good comments but I will make a couple of points that I didn't see from others upon skimming their comments.
I think the value of having a good W2 income is extremely helpful especially when you start out. In my opinion financing is almost as important as finding a good property. If you have a W2 income over 100K with a credit score > 720, you are in a very enviable position because you have access to the best fannie-freddie loans. You only get 4 golden loans, and after that you get 6 more "silver" loans for a total of 10 fannie loans.
If you have 7 months before ETSing from the navy this is what "I would do" if I wanted to be aggressive in REI.
-purchase as many 1-4 fannie mae confirming properties as possible while you have your W2 income. Ask friends and family if you feel comfortable. Once your W2 is gone it will be that much more difficult for you to get low interest loans. Banks prefer W2 income over a 1099 independent contractor any day.
-role your TSP into a self directed IRA. Look into LLC-IRA because it makes investing in REI easier. However, there is a learning curve on this topic but I think its worth looking into. Experiment with doing rehabs and flips with this TSP money. Think of this as your "fun" money. You weren't going to see it until you hit 59 years anyways so what is there to lose? I say this tongue and cheek but I think you get my point. Research entrust, pensco, and other companies. If you are leaving as an O3-O4 which it seems like you are if you are making 95K sign on bonuses, then you probably have some money in the TSP so this might be a great starting point.
With that said let me give you a CASE example of one potentially aggressive strategy on REI. Its not for everyone but its worked for my partners and I. Its definitely an aggressive strategy but if you do your home then I know it can definitely work. Since you are apparently in a market that have properties that can cash flow this is something to consider.
CASE EXAMPLE:
- We bought a $70,000 house that needed rehab for all cash ( I guess you can use hard money or your new self directed IRA). We put in $15,000 in rehab, and got the place occupied by a tenant with a monthly lease of $1100. After 1 month we get the placed appraised for $110,000. We find a bank that will give us 70% LTV on the new appraissed price and do either a "Delayed finance purchase" or do a "cash out refinance". The delayed finance purchase is a fannie-freddie loan and you have a 6 month window to get this done but you will probably get the best rate around. These are the "golden loans" I mentioned earlier. However, they will only consider you if you can show them 2 years of stable W9 income and taxes and recent paystubs. Thus the importance of qualifying while you still have your military salary. You can also do a cash out refinance through community banks and even do non-recourse cash out refinance through North American Savings Bank.
The whole point behind this strategy is to maximize SAFE leverage with long term fixed debt. I would avoid anything shorter than a 10 year loan. Anything shorter than a 10 year loan I consider "UnSafe". You want to have multiple exit strategies on any deal. This deal allows 3 exit strategies: #1: you can sell the property after 12 months. 12 months is the cutoff time so that the IRS doesn't categorize you as a dealer and allow you lower capital gain taxes #2 You keep it as a rental for truly passive income as long as it cashlfow #3: if we hit high inflation or increased inflation, you have a second gold mine because you are causing "inflation induced debt destruction" Jason Hartman told me about this and I thinks its totally valid. On the above deal if everything works out, I will get $77,000 on my cashout refinance which allows me to control a property with SAFE leverage with only $7000. The 10 year ROI on this investment is around 450%. Amazing! No stock investment can yield you these results unless you invested with Bernie Madoff prior to his arrest.
I then start the whole process again, and again, and again. The goal is to have as much cash flow while utilizing SAFE leverage that will eventually pay down all of your properties until your personnel "critical mass" is reached. This process will also give you hands on teaching and experience about all phases of real estate investing so that you can know which aspect you are best suited and to focus going forward. These aspects include deal evaluation and acquisition, financing, property management, rehabbing, sales, and networking.
I appreciate the comments from
@Robert Piller and the other peoples about REI being a long term commitment. Even if one is very motivated, smart, and lucky, I think it would realistically take 3-5 years to hit a passive cashflow goal of $100,000/year.
Best of luck to you. Thanks for starting the forum post.
Investor · Arlington, VA · Member since 2014 · 151 posts · 37 votes
12y
There are lots of opinions on here.
Locally, I would look into downtown Norfolk, Old Towne Portsmouth, and Downtown Newport News @Micheal Waldrup
Virginia Beach is good too, but the cost is higher. I find the said cities I've mentioned to be a better value in terms of profit to maximize what you have.
Quiting your 9-5 is a nice goal and something I have considered to reach for, its not something that can realistically done with-in a few years. From one Nuclear Engineer to another, I can understand the beaucracy and other nonsens that come with it. My goal now isn't necessarily to not have a 9-5, but find a field I enjoy as an occupation.
Investor · Virginia Beach, VA · Member since 2014 · 38 posts · 7 votes
12y
Thanks again everyone.
This is all a lot to think on, so I'll just let this thread fall off. I have tons of great recommendations as well as some better perception on the realistic side of REI.
You were all so helpful! Let me know if I can help you all in any way.
Please let this thread die now. :-P haha Too much already to chew on.