Rental Property Investor · Nashville, TN · Member since 2016 · 179 posts · 42 votes
Hello gurus,
I am new to investing. My plan is to have 10 units/SFH/Condos etc in 10 years. I plan to buy and hold them and rent it for positive cash flow. The plan is to have something around 13k in rents from all the units
I am 35 year old and my present salary is $120k.
What should be the game plan to accomplish this goal? Please advice
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
10y
First, you have set a goal, which is the $13k in rents (I'm assuming you mean cash flow), and that is more than most...the defined goal...the $13k is fine.
Second, you really don't have a plan. "...to have 10 units/SFH/Condos etc in 10 years..." isn't a plan. A plan is how do you get to the $13k/month. My question is "how did you arrive at 10 units in 10 years?...and why?
Third, if it takes you 10 years to get $13k/month, you're in the wrong market...and you're doing it wrong.
What you need to do is define a more detailed set of financial goals, that involve specific income to pay off your total personal debt (profits) and your monthly bills (cash flow), and break them down to a series of "measurable milestones". Then, you need to develop criteria for a series of "steps" (properties), with each "exit" from one property becoming the "entrance" to the next property, that leads you through your milestones and to your goals. Now, you need to find a market where your "property criteria" describes the majority of properties in that market...and camp out there. This may not be "your own backyard". Simply being "where you live" is a terrible reason for investing in a market. The logic being you know that market. Well, that "knowledge" might be telling you "don't invest here". The fact that is in your own backyard is not a good reason for choosing a market.
Now, pick off your steps one by one, and you will find your way to your goals.
Don't:
1 - ...stray from your plan by chasing what I refer to as "shiny objects of distraction"...no matter how good that deal might look.
2 - ...rationalize a bad deal into a good one, or you'll get out of the game faster than you got in.
3 - ...listen to those that want to tell you that if you lose money in the beginning it's OK since you are learning. If that was true, the REI that lost the most money should be the smartest person in the world.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
10y
First, you have set a goal, which is the $13k in rents (I'm assuming you mean cash flow), and that is more than most...the defined goal...the $13k is fine.
Second, you really don't have a plan. "...to have 10 units/SFH/Condos etc in 10 years..." isn't a plan. A plan is how do you get to the $13k/month. My question is "how did you arrive at 10 units in 10 years?...and why?
Third, if it takes you 10 years to get $13k/month, you're in the wrong market...and you're doing it wrong.
What you need to do is define a more detailed set of financial goals, that involve specific income to pay off your total personal debt (profits) and your monthly bills (cash flow), and break them down to a series of "measurable milestones". Then, you need to develop criteria for a series of "steps" (properties), with each "exit" from one property becoming the "entrance" to the next property, that leads you through your milestones and to your goals. Now, you need to find a market where your "property criteria" describes the majority of properties in that market...and camp out there. This may not be "your own backyard". Simply being "where you live" is a terrible reason for investing in a market. The logic being you know that market. Well, that "knowledge" might be telling you "don't invest here". The fact that is in your own backyard is not a good reason for choosing a market.
Now, pick off your steps one by one, and you will find your way to your goals.
Don't:
1 - ...stray from your plan by chasing what I refer to as "shiny objects of distraction"...no matter how good that deal might look.
2 - ...rationalize a bad deal into a good one, or you'll get out of the game faster than you got in.
3 - ...listen to those that want to tell you that if you lose money in the beginning it's OK since you are learning. If that was true, the REI that lost the most money should be the smartest person in the world.
Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
10y
I can only echo what @Joe Villeneuvehas said. If it takes you 10 years to get 10 units then you're doing it wrong.
I would start with ensuring that your personal finances are squared away first. There are a ton of books that will get you in the right mindset before you take on rentals. Don't be mistaken, rentals are NOT fast cash and they are certainly not easy to just pick up and start doing.
Think of rentals more like a craft. You're going to suck REALLY bad starting out. You're going to lose money and unless you're some kind of rental savant you're going to take a couple lumps on the head before you figure it out.
The books I would recommend starting with:
--To get your personal finances under control--
The Richest Man In Babylon
The Millionaire Next Door
Rich Dad Poor Dad
--To get you ready for rentals--
Hold: How to Buy, Hold, and Rent Houses for Wealth
The Book On Rental Property Investing
If you read these books you will be on the right path. I can't stress getting your own life in check first. As 'The Millionaire Next Door' points out, after an income of $100,000 or so it really doesn't matter how much more you make as it does matter what you do with it. You already obviously play great offense. Now you need to work on your defense.
Rental Property Investor · Dallas, TX · Member since 2015 · 283 posts · 179 votes
10y
Great post above!
I would add: it sounds like you wish to have these properties paid off in full. 10 houses bringing in 13k. Would require around 1600-2000 a month rent from each property. Gross income about 16-20k should leave you with a NOI of 10ish k.
With a salary of 120k, let's assume you are a super saver and are able to save 50k a year. (You live off of 40 k, since 30 or more goest to taxes).
If you're in Austin, those properties that rent for 1500-2000 will prob cost you 120k- 300k. If you just used your cash from your job. It would take 3-6 years (not counting pos cash flow) from your super savings to pay off one unit. Granted, you could utilize leverage and get cash flow of 100-500 a house, but cash flow in the upper range would require a 30 year finance (if buying traditionally).
So simply finding a SFH deal at 10-20 percent discount, then using debt pay down from tenant and your own income would probably leave you with 2-3 properties in ten years (not factoring in speculation of dep/appreciation)
So creative deals are necessary for you to achieve your goals. Or you may need to invest/ work in RE a bit. Wholesale a little here, flip a couple there (work), followed with buy and hold a few along the way.
Rental Property Investor · Nashville, TN · Member since 2016 · 179 posts · 42 votes
10y
@Joe VilleneuveThanks for the response and the info. The subject line '10 units in 10 years' is a reflection of how new I am in this field. I joined BP a week back. I am a beginner and still don't know how much money you can loose or gain in this real estate world
I think now I understand that the question should have been 'How to make 10k to 13k grand on rents' in next 10 years. I think the first step in the process of getting to 10k is to find a source of income which can pay off my monthly bills and debts and then think much bigger. Right?
Rental Property Investor · Nashville, TN · Member since 2016 · 179 posts · 42 votes
10y
@Anthony R.Thanks for the info on the books. I will definitely read them. I decided to quit watching the stupid Netflix and spend time listening to podcasts and read books. I am fed up of my 9 to 5 job even if it pays more than 100k. That's why I need to create a source of income for myself so I can get out of my job
Rental Property Investor · Nashville, TN · Member since 2016 · 179 posts · 42 votes
10y
@Logan TurnerI only plan to buy in the range of 125k to 140k. Sounds like my plan is really silly. lol. Lets say I like to make 10k income by 2026. What is your advice on where to start?
Investor · Montgomery, TX · Member since 2014 · 386 posts · 151 votes
10y
Great advice here. I think my first post introducing myself had similar goals, 10 houses in 10 years. that was a year and a half ago and I now have 4 rental houses.
Most important part is to get started. Your plans and goals will change as you truly learn the business and market.
Investor · Austin, TX · Member since 2015 · 12 posts · 10 votes
10y
@Chai Jonnit may be beneficial for you to join several meetup networking groups in the Austin area. I have been to several where they will have a key note speaker about Buy and Hold, different strategies to obtain the properties, financing (conventional or portfolio loans) and cash out refinancing. With the real estate market in Austin being close to the top (who knows how high it will go or when it will fall), it would be wise to attend meeting and network to learn how to obtain property below current market price. One thing history has shown is that the market will fall and if you are holding properties that you obtained at a high market price, your rentals may break you.
@Joe VilleneuveThanks for the response and the info. The subject line '10 units in 10 years' is a reflection of how new I am in this field. I joined BP a week back. I am a beginner and still don't know how much money you can loose or gain in this real estate world
I think now I understand that the question should have been 'How to make 10k to 13k grand on rents' in next 10 years. I think the first step in the process of getting to 10k is to find a source of income which can pay off my monthly bills and debts and then think much bigger. Right?
If you define the "source to pay off..." is your cash flow properties, then yes.
Where should I start? I am already reading the posts, listening to podcast. Will start reading the books too. Whats the next step after education? One thing I am sure is stick to the plan for next 10 years. There is a sense of urgency in me but at the same time I guess I have to be patient and learn the basics before investing.
Look into the possibility of acquiring multifamily properties. You can always look to partner with someone if you think you don't have enough capital. Buying one SFH per year may be risky only because if that unit goes vacant, there will be no one to pay the mortgage. With a multifamily, you have multiple tenants paying.
The place to start is with the books I recommended. Those will get you in the right mindset. I mean honestly, you SHOULD be able to do a great deal with your current level of income. Are you maxing your 401k contributions? Have you spoken to a CPA about the tax implications of owning rentals? Rental properties have four income generators and taxes are paramount. Start with the books, and build a nest egg that you're okay with risking. Also find someone in your local community that is holding rentals and ask them about the area. Maybe the area you're in is a 'pig with lipstick'.
Multifamily is definitely the way to go. I live in Jacksonville FL and am currently looking to invest in apartments in the area. PM me if you would like to connect.
I would highly recommend reading Ken McElroy's ABCs of Real Estate Investing and Wheelbarrow Profits by @Gino Barbaro. They both are great for laying out the "Why" and "How" of multifamily investing. Good Luck!
Rental Property Investor · Nashville, TN · Member since 2016 · 179 posts · 42 votes
10y
@Anthony R.My company does not provide 401k. I do IRA but its like $5500 per month. But I have saving around $120k (stocks, cash, other). I will definitely read the books. I am looking into a a 2BD/2BATH condo in Austin. But, its very expensive anywhere in Austin. So holding back till I get more educated
Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
10y
The thing with rentals is 'knowing your numbers' (key phrase in "The Book On Rental Property Investing"). If you don't know your numbers then you might think it's a deal because it has a ton of rent being reported but you don't realize that after expenses it's actually a 'pig with lipstick'.
Knowing your numbers is key. Condo's, in my limited research and opinion, are tough. They usually have a built in HOA that cuts into your income. Without seeing the property though I can't provide a detailed analysis. There is always deals out there. You just have to figure out what your numbers are and then find them. A deal for me may not be one for you and vice verse.
Where should I start? I am already reading the posts, listening to podcast. Will start reading the books too. Whats the next step after education? One thing I am sure is stick to the plan for next 10 years. There is a sense of urgency in me but at the same time I guess I have to be patient and learn the basics before investing.
Start by writing down, and committing to a plan. First step is to enter all your bills in order of priority, from top to bottom, in two sections...total bills, and monthly bills. Next, split them up into milestones (groups) that are achievable groups. Then, figure out what the criteria must be for the properties to satisfy your milestones. Now, go find a market that has a lot of properties that match that criteria....and, "start your engines".
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
Don't set your goal on the number of doors. Set your goal on cash flow. I have SFR that bring in $855-$1495 per month. Big difference in income! I have the one bringing in $855 per month advertised on BP Marketplace. The one that brings in $1495 per month is not for sale at this time. I intend to 1031 out of the lesser expensive house and into a nicer higher rent property (of course I will have to invest more cash). With 120K a year income, you probably have enough income to start buying. If nothing else, purchase your residence. I would set a goal to put aside at least 25% of my income for investing if that is feasible. Don't sit on the sidelines for years like some people do. Get educated, make a plan, and act on it. There is NO better way to financial freedom than RE. I never have to work a day in my life and that is a great feeling!
Dallas, TX · Member since 2015 · 22 posts · 5 votes
10y
@Chai JonnThanks for posting your idea - kudos! You inspired me to finally chime in.
I am about 30k behind Chai John and want to own a multifamily unit as well. Right now I live just outside of Washington, DC and most property in the DMV (DC-MD-VA) area is so expensive (I'm open to relocating). I thought I'd start small by purchasing a duplex, but here, even those are either exorbitantly expensive, require considerable work, or both. However, when I wander over to similar listings in Dallas, I see several units I can afford right now that require little, if any, renovation. It seems like the markets in the DFW, San Antonio, and Tampa are much more favorable to a rental venture than here.
My questions are: 1) what, in your opinions, are the best market for rentals; and 2) is it feasible for me to start with a duplex (I don't have to live in it unless it's the best thing to do) and work my way up from there?
Limerick , PA · Member since 2016 · 14 posts · 5 votes
10y
I'm glad I came across this post because I have a similar goal, 65 rentals in 10 years. I've already started getting my personal finances in order (Spending less and saving). Read two of the books mentioned above already. All the responses confirms that I'm heading in right direction. I do admit that there's a lot to learn and itching to get out there and make my first purchase too but hadn't considered Joe's last point.
I live in DC, and own two multifamily properties in the Trinidad neighborhood in NE DC. Are you planning to buy something and live in it? That's what I've done, is gotten FHA loans that require them to be owner occupied, and so it is less cash down. Also, don't forget to factor in the cost of property management if you buy something that is so far away!