Best use of 100k for income stream

5 Replies

Lot of variables in this question but I'll try to keep it simple. My ability to retire depends of course on an income stream. Current plan is to sell my home and use the equity to pay off my rental property. The duplex rental currently rents for $900/side, so $21,600/yr gross total. I will have other living arrangements, so I do not need to replace my current home with another.

Feel like there may be better choices to use the approx. 100k to create an income stream similar to the duplex. Thinking is, can I use the money to create a similar income and keep the duplex so my tenants will be paying it down for me. Hate to stop other people from creating more wealth for me which is what I feel like I'm doing by paying it off. 

Look at four-plexes? Bread and butter 3/2/2 in my area are around 130k with monthly rent about $1,100, so hard to replace the duplex income with 100k down.

Thanks for any help with my plan which hopefully goes into affect in three years!

I would probably buy 2-4 single family homes that don't need too much work in decent neighborhoods. I'd purchase foreclosed homes with cash and potentially leverage them after they are fixed up and rented out for 900-1500/mo each. I'd purchase local within a 1.5 hour drive. I would look to have at least 200k in equity from these homes after about 10-20k in repair costs.

Well, the trick will just be to find something where the numbers work and go from there. Maybe fourplexes in the area just flat won't cash flow, but maybe SFRs will. I'd imagine in Arkansas there are cash flow options. Particular property types and in particular areas. Find the right combo of those two things- the magic of where the cash flow is- and you're in.

In terms of maximizing the returns on the money that you can invest, it's all about leveraging. There are certainly people out there who aren't comfortable with leveraging, and that's fine, but it really is the best way to maximize what you have. 

I actually use the example of a $100k property in this article, comparing the returns of paying cash for one $100k property versus leveraging ~4 of them.

https://www.biggerpockets.com/renewsblog/2015/04/1...

So if you are comfortable with leveraging, and then you find the magic cash flow spot near you, boom!

To add on to @Ali Boone 's reply, you can also leverage that 100k to buy a multi-family for up to 500k! and if you shop smart (at least 1% rent to purchase ratio), you'll have 5k in gross rents coming each month.  How does that sound @Bruce Reeves ?  One of the benefits of buying multi family - you have one transaction to deal with for financing the 80%, that's a cost saver in itself.

@Bruce Reeves I invest in Central Arkansas which is WAY AWAY from NWA and that whole ecosystem.  Frankly, I don't know if Bella Vista is an integral part of that whole Fayetteville -> Bentonville string or if it's too far north.  Anyway, what I do believe is that in Arkansas (tons of other markets) it's not so smart to chase pure cash-flow returns.  Pro-formas on my properties in Conway are much worse than many parts of LR and NLR.  And those nice pro-formas and great looking pictures have gotten me to fly out and look in those areas on more than one occasion.  I've always come back a little on the disappointed side.  When I look at NWA (as a whole) I think it has much more future growth potential than Central Arkansas.  I think factoring in appreciation for NWA makes much more sense than central Arkansas.  Consequently, I don't know that immediate cash-flow would be my primary driver in that market.  

Sure, you could see how some quads pencil out.  If they're newer builds you might get stuck paying some portion of utilities but I do think (in general) they will pencil out better than SFRs.  But the nice part about those bread-and-butter SFRs is that if you have a good one in a decent neighborhood you can get tenants staying from 3-5 years.  I own apartments and I can tell you that I'm getting very few tenants that last more than 2 years.  It's just the nature of the beast.  So I guess my "moral of the story" is that you really have to factor in the area, if appreciation is reasonable to plan for, what the next decade looks like, the potential for more frequent tenant churn with a quad than a duplex, etc.  And, quite frankly, do they build quads is decent neighborhoods in your area.  

@Bruce Reeves I’m in the same area and I think we are in a sit and wait game or go out and do your own marketing game here in NWA... I feel a correction coming on and that will be the time to buy. Multis are scarce and SFHs are getting over paid for by folks with too much money and not enough sense. If it were me I’d be patient and jump on good deals as they present. Come out to the meetup and we can discuss more!

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