8k/ month to quit my job?

39 Replies

Hello BP,

I am beginning the process for the purchase of my first Multi family investment to kick off my goal of reaching 8k in cash flow/ month. I have calculated that at $250 Net Cash flow / unit I will need 32 units to hit that goal. 

My plan is to 1031 exchange my multi family properties after a couple of years to purchase an apt complex.

That being said, My question is: What suggestions can you guys give to make this a reality sooner rather than later? Whats a realistic timeline for executing a plan like this?  Or is this plan not the most efficient way to achieve this? Can this be done in 2yrs?

Thanks a Million!

Gaston

Basically it depends on finding the right deal, having enough cash to close the deal, and being able to sell your multi family unit for what you need to sell it for. There are so many factors it's impossible to know for sure if you can do it in two years but it sounds like you have a good plan.

Good goal but 2 years will be tough. Things take time. Let's say you can make 8% cash flow on your money, 96k/yr takes a 1.2M investment. Maybe you add some value but also maybe you have some issues. And you have to learn how to be good at everything. You'll get there, just a little longer than 2 years would be my guess. I don't know exactly when I hit 8k/month but it certainly wasn't at 2 years.

Im just starting, as you are, and my 5 and 10 year plan look a bit like this:

5 year goal: 15 units which produce at least $100/month in cashflow each ( or the equivalent). $1500/month in passive cashflow. I plan to accomplish this in a similar way you are, using multi family props.

10 year goal: own 50 units which produce at least $100/month in cashflow (or the equivalent). $5000/month in passive cashflow

Im not sure how much capital you have available, but a 2 year plan for 8k in cashflow (to me as a newbie) seems like quite a tough goal to achieve. 

Remember to aim high, though! go for 10x your goals and 3x your current salary if you want to retire based on cashflow from your assets. (one part of the x3 salary is for you to live on, another for investments, and another just in case)

Why risk it? Focus on your roots, and you will bear fruit. $8k is ok but not great. You want to pump hard in your young years so your not that 58 year old bank teller at Wells Fargo working 40 hours a week because you wanted to take the easy way out when you were given the option. Don't get complacent. My inspiration is this dude named #%*^ that works at the bank. He's the nicest guy in the world, but is working there every time I go in. Do you want to be that guy? Get more money, and build a bigger snowball. It will work out better in the end!

Thanks for the motivation everyone! @Hunter Fitch @Patrick Ryan  8k is just the bare minimum that I would need to be able to leave the corporate world, live off of, and still save enough to be able to continue investing. However, that would not be anywhere near the end goal for me. Ideally I want as much cash flow as possible. 

@Gaston Barua Best of luck reaching your goal on your desired timeline. I would caution you to push back your work-quitting deadline until you have a few years of actual numbers from your property(ies) and you are certain of your cashflow stability. Our cashflow numbers can swing depending on what happens with our vacancy, expenses, and also what CapEx happens in a given year.

Answer is... maybe. 

Here's where I notice some interesting bits; (and its not just specific to you, a lot of people post similar things)

Your math is fine, 250*32=8000.  The part that I rarely see if just how much capital is required to generate that amount. 

My recommendation on 1031's are only if there's additional leverage or advantage to be had. For example, you upsize to take advantage of significant maintenance (i.e. heat/heating systems/property manager) cost savings.

There's the "right deal"- the "ok deal" and "bad deal"- the unicorn is the "too good to pass up deal" which I won't really ever consider because its not likely to happen, at least to me. I have heard of quite a few people who it did happen to however.

I don't know what a good rate of return is in your area. But if you get 10% returns, and you make 250/net per unit/month=3000/yr, means that your unit cannot cost more than $30k each. 

If you make a great day job living (which it sounds like you do) use it to your advantage now to get loans. Becomes much more difficult when you dont have a regular "full time" job.  You can really leverage your income by taking out mortgages, but also by paying down those apts.

If the question was, can I make 8k a month within 2 years or I will die then yes there are plenty of ways to make that happen.  If your job is stable, and you like your job then I don't think this is the position you are in. In which case I would suggest you start off a bit slower, maybe saving up along side of your investment.  

The quickest way to get to 8k monthly cashflow  would be to invest 480k with a 20% cash on cash return in a turnkey property. Or 320k at 30% cash on cash.  If you are putting away enough cash each year from your job where that is a realistic picture within a reasonable amount of time, go for it!  However, if that is not reasonable I would focus on repositioning. 

Repositioning meaning buying a property that needs some work.  I like the idea of a neighborhood that went from c to b but the property in question is a c property. Over the course of the year or two, you change the property to a b property and raise the rents.  Hopefully cashflowing in the meantime.  Raising the value of the building substantially more than the amount of cash that was put into it. That is just one strategy for repositioning.

While you have a job, I would focus on getting some numbers on the board.  Create a track record for investing where you have shown that you can do it. If your goal is to be in complexes, I would stick to properties that are above 4 units. Get a commercial loan on it, and season it for a few years. That way when you come back looking for a loan on a much bigger deal, you have a positive record. 

just don't quit your job.. keep stacking up the rentals you will soon find that 8k a month won't be enough especially in PV... as we make more we spend more.. we get married we have kiddo's we put kiddos in private school we save for collage.. we buy nicer cars etc etc.. some parts of the country that's a nice number west coast.. not so much.. as your spending habits mature at the same rate you age.

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@Gaston Barua I'm with @Jay Hinrichs on this one. Everyone needs to stop racing to that moment where they quit their day job. Real estate is a great place to invest excess capital. We need jobs and business to create excess capital that we can invest. Rental real estate is a slow game. It takes years and years to recoup your initial cash investment.

Let's look at some of the successful investors here on BP.

@Joshua Dorkin & @Brandon Turner  run this site.

@Jay Hinrichs is a lender.

@Chris Clothier runs memphis invests.

@Joel Owens is a commercial broker.

@Wayne Brooks is a realtor.

@Brie Schmidt  is a broker and runs a turnkey website.

Myself I run Holton-Wise.

All those mentioned above do something a little different, but note that they all have a job and or income producing business of some kind.

I hit 5k after expenses, last year and my motivation to do more had really slowed.   In Atlanta ( inside 285) prices have really jumped.  It seems stupid to stop?  But really on the fence.  Any thoughts? 

Don't take on more debt just to buy Jeff.

I know some investors who bought great deals and then average deals. The average deals take the cash flow away from the other properties to a neutral position and also cause a drag on the overall portfolio being able to get new loans. 

Owning real estate is a job in itself.   If you want to do some wholesaling or flipping then it's great to get out of 9 to 5. At least you have control of your hours and days. 

But most people who retire early discover all the things they want to do require more money than when they worked.  So you need to maybe double your initial number otherwise you may be stuck at home watching TV instead of being able to live your dreams.

A couple of things ...

1)Make sure you are running TOWARDS something you love (REI) and not just running AWAY from something you hate (your job)

2)There is a big difference between quitting your job and being financially independent but still working because you choose to and enjoy it. Focusing on the later is a better approach IMO for most.

3)Cash flow is an important thing, but it is not the only thing. Focus on the cash flow over the long term, not just the short term. Remember that not all cash flow is created equal, so also consider the quality (not just the quantity) and consistency of the cash flow as well as how hard you will need to work to collect it. There is appreciation too (both forced and market), which creates both equity AND cash flow over the long term and is where true wealth is created, especially for Californians.

Is 2 years possible? Absolutely! 

How much cash are you starting with? 
How much real estate experience do you have?
Where do you plan to invest? 

Aside from good luck (or bad) and homeruns (or trainwrecks), those questions will probably have the biggest impact on how long it takes to grow to your target. 

@Gaston Barua  you have a great goal, now lets look at how to execute that goal.  For starters you are probably going to have to invest outside of CA.  Cash flow in CA sucks. I live in Pittsburgh, we are the #1 cash flow market in America. To hit your numbers, you will need (for simple math) 10 free and clear properties bringing in $800 per month, that is pretty easy in my town.  You can get that cash flow out of a $50,000 property.   So you will need $400,000 in total to make this happen.  Even if I assume that you have no cash at all.  You can wholesale to build a pile big enough to do a flip in(using hard money), then you can flip with an average of $50k in profit per flip (you can do better than that) You could be out in 2 years or less.  

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