$250k to $5000 a month?

17 Replies

Somewhat hypothetical question. If you had $250k to start with. Could you turn that into $5k+ a month? How (generally or specifically) would you do it? Thanks!

Sure...over the course of 10 years!

In all honesty, that's a tall order with the exception of some strategic hard money lending or completing a couple solid flips per year, but that is active income. I assume you are asking more of a way to get passive income flowing from your investment? 

If so, sure, you could do that over time very easily. A BRRRR a year in a growing market would get you there after a few years. Even faster if you house hack your BRRRRs.

If I had that amount in hard cash, I mean personal capital, you can invest in luxury short rental holiday properties in Dubai, you could make a bit over that monthly. Tourist are always visiting Dubai and need a nice place to stay. You can make good returns this way 

Yes easily done. But it will depend on your area of course. If you're able to find areas where rental property units (not buildings)are going to be somewhere around 70k to 110k-ish and they meet or approach the 1% rule. Say a duplex at 170k, 1 at 223k, 1 at 175k, a 5 plex at 359k and a triplex at 249k. Cashflow in order above: 790, 920, 1110, 1750, 1231. Imagine 20% down on each, except the 2nd one at 223k -- owner occupied. These are my purchases in the last 14 months. I've been investing since 2009. These will require some work, but nothing major (again, speaking to my portfolio). I started with a duplex in late 2008, early 2009. I am not talking about purchases prior to 14 months ago.

@Corby Goade . Good feedback Corby. You're envisioning this with SFRs, yes? Or were you also thinking some MFR? I'm thinking MFR is the way to go. Thx for responding!

@Terry N. Yes, I generally invest in SFHs, but that mostly a function of my market, not necessarily my preference. 

Many new investors say they want to start with multis, and it's possible with a house hack on a smaller mutli, but in almost every case, it's really difficult to start with a larger multi in your first few deals. 

Unless you have exceptional resources, a house hack or two is a perfect way to start and create cash flow for yourself. That could be a fourplex and you live in one of the units. 

@Jeffrey Furtado . Thanks so much for this insight. By owner occupied you mean house hacked? How much did you have to put down on that? How did you finance these? Small local banks?

Are you self managing, or is that an expense you factor in? Was there not much rehab needed?

How much CapEx do you retain? And how about reserves. Seems like with that many units a good amount of reserves would be worth holding. But that income is solid. If you are able to hold it your getting some good buildup for reserves and or to snowball this mother truck down the road. Which is what I want to do. But with caution and clarity. Thank you again!

Originally posted by @Terry N. :

Somewhat hypothetical question. If you had $250k to start with. Could you turn that into $5k+ a month? How (generally or specifically) would you do it? Thanks!

 I mean that’s a 24% return on your 250k.  If you are looking for passive then not so much.  Flip things or strategic investments as a hard money lender and probably after 5-10 years.

I’m paying 8% for that amount of Hard money right now.  So triple that seems unlikely out the gate. 

Originally posted by @Terry N. :

Somewhat hypothetical question. If you had $250k to start with. Could you turn that into $5k+ a month? How (generally or specifically) would you do it? Thanks!

Sure, you could do "out of country" investing in Arizona like this: Just follow the numbers.

3 Ways to Wealth in Real Estate – Fix & Flip, Buy & Hold, Turnkey (Cash flow) – Here’s How

https://www.biggerpockets.com/forums/311/topics/780022-3-ways-to-wealth-in-real-estate-cashflow-flip-hold-here-s-how

 

@terry n. 5% down on the owner occupied. Every few properties or few years lets say, do one owner occupied. House hack is simply a new term for owner occupied. 5% down on duplex, 10% on 3 or 4 plex. All through big banks, with exception of one through a credit union -- all 20% down, with exception of 3 that were owner occupied over the years -- with one of those Owner occupied in recent 14 months (keep in mind i gave you my portfolio acquisitions forecast 14 months, anything prior to that time frame would be dated info for your purposes). But in the end, yes, you can get your cashflow goal with your 250k starting capital. Then keep saving your cashflow, refi or heloc when appropriate, and then work on 10k cashflow.

As for capex, everyone follows different rules or guidelines. PM me if you would like more details. 

Renos have differed with each property, so that's a hard one to comment on. Ive also done various off market deals, so while they needed money and work, theybwwre priced very well. Others needed little to no work, others just cosmetic. Again, too many variables. Jump in and get your hands dirty my friend. I've never looked back with regret on amy purchase, but I have looked back with regret on ones I did not purchase.

@Eric C. Does that translate to approx $1,700/mo.

Not sure I’m understanding (not surprising). You are paying 8% for $250k...

I’m talking about starting with $250k of non-borrowed cash.

I do see what you are saying about the 24% return. I should have clarified I meant over a 3-5 year period. Thanks for your comments.

Do you have the $250K in cash or is that the total amount you can borrow?  If the former, then buy some duplexes or single family homes and borrow the rest of the  money from a bank.  How much you can borrow, will determine what you can do.  If you buy a duplex to live in and rent the other half, you'd need 5% down.  Otherwise you will need 20% down.  Then the mortgage will reduce your cash flow for a bit.

What some do is buy a place that needs a bit of work, fix it up, rent it out and refinance.  This lets you pull out some of the money you put into it.  Of course you need to buy right, don't overdo the renos and be able to rent it such that it covers all your monthly expenses.

Originally posted by @Terry N. :

@Eric C. Does that translate to approx $1,700/mo.

Not sure I’m understanding (not surprising). You are paying 8% for $250k...

I’m talking about starting with $250k of non-borrowed cash.

I do see what you are saying about the 24% return. I should have clarified I meant over a 3-5 year period. Thanks for your comments.

 If you have 250k in cash to invest.  You could do medium sized multi family up to a million purchase price that would allow you to immediately cash flow.  You could reasonably make 5k a month after 3-5 years and some other investments using the cash flow.  


@Terry N. Over a few years, absolutely. Do some flipping and wholesale deals, to flip the capital over and over. Than start holding some doors.

I started with only $35K and two years later had grown to right at $7K mo clear cash flow.

@Terry N. - You are looking for a 20%+ return. Definitely possible, but you'll need to be creative. 

The highest return on your investment will be a house hack. I am not sure you can do that affectively in Brooklyn. So you might need to think about moving or picking another strategy.

I'd recommend doing rent by the room investing in markets that are in cities that are still semi-affordable. Cities like Denver, Seattle, Austin, Chicago, etc. These cities are affordable, but rents are just high enough and people want to live there just badly enough where they are willing to rent out rooms. By splitting a 5-bedroom up by the room, you can get about $1,000 more per month in rent. At least that's what it is in the Denver area. 

These are the only ways I have consistently seen cash on cash returns in the 20% range or higher. 

Maybe I’m doing my numbers wrong but $250k cash can be leveraged up to $1M loan and invested in a multi family/small portfolio at 6% cap rate to achieve $5k a month. Easier said than done but 6% cap seems average to me. But again maybe I’m missing something.

Originally posted by @Terry N. :

Somewhat hypothetical question. If you had $250k to start with. Could you turn that into $5k+ a month? How (generally or specifically) would you do it? Thanks!

My first objective would be not to directly use the $250K. I'd recommend getting approved with an HML. The $250K show's the HML you have enough cash to handle any gap funding on your own. Purchase an SFR's to renovate using the HML $, reserving your cash for emergencies. Flip 2 properties then buy a multifamily property to cash flow using the $ made from flipping. Wash & repeat. Reserve your cash to gap fund your project or to handle emergencies.

or get approved with an HML- Find multifamily to renovate, rent then refinance. Again only using your funds for reserves and/or gap fund your own project.

After doing this a few times you'll have $5K per month.

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