20k a month in passive income?
Tampa, FL · Member since 2017 · 2 posts · 13 votes
I am just begening in real estate investing obtaining as much knowledge as I can before I dive in. I understand that real estate is a slow grind and in by no means of getting rich quick. My first goal of mine was wanting to produce 30k a month in passive income but then i thought that may be reaching for someone just starting out.....so i lowered it to 20k.......Any idea how much time and money it would take to accumulate that many assets? Can it be done? Where do i start? Im currently in Florida and I also live in California. For capital I'm willing to invest in the venture is in the range of 1.8-2.3m.
Lend $2M at 12% and you'll obtain your $20,000/month passive. I would say that's pretty easily attainable.
Passive income is not difficult, tricky or unusual at all. What would be be unusual is a portfolio of small properties that qualify as passive. A few of the posts here already point you in the direction of 100+ units and I definitely agree. The key factor in 'passive' is that others work the management. Property needs to have 85 - 90 doors min. to economically justify professional Property Management. Drawing from my experience with passive CRE I would be investing in several properties in the 150 - 250 door range, all passive. I don't have anything not in double digit. One other note, in my opinion the best indication of returns for this kind of asset is IRR. It gives the overall, over time performance.
Piece of cake as they say.
I highly doubt this is THE Doug Martin.
Multi family properties can be more of a headache, but with the right management and tenants, it's great. It definitely has more cashflow than retail/commercial.
I've managed 15-20 doors for the last 9 years and I'm looking to acquire more doors and a few smaller commercial strips.
@Doug Martin You should partner with someone thats doing big apartment building aquisitions and let your money ride with them, get a modest return while learning. With that kind of money buying anything less than 60 units I think will be a waste of time. Achieving $20k a month is not hard at all if you wouldn't mind getting involved a bit. Good Luck in finding your niche and please share once you do your first deal
if you have 1.8-2.3 million you are golden. Just be careful not to fall for something stupid. But ten percent COC will get you 20k a month. You have all the money to make that happen.
If I were you I would invest in guys who have a great track record of syndicating deals. You will make good money, build wealth. Your kids, kids, kids will be rich if you do this right. They will also take care of all the heavy lifting and you will learn a ton (if you want to). Then if you feel like Doing it yourself you can. If you don't you don't have to. Either way your rich.
Lucky bastard! You owe it to all of us scrapping not to blow this. Good luck.
@Doug Martin isn't it crazy that $2M invested one time could generate you enough money to live fairly comfortably for the rest of your life? I say you've got the cash, start slow because a big $2M dollar deal is something you have the capital for but not likely the experience. Know your pro forma well. If I had the CASH for that and just starting I would go stick it into 5-10 units that could use some light value add.
How much time have you spent thinking about your investment strategy? Any idea on markets? Type of assets? @Mark Gallagher suggests lending, and this seems like it could be an easy path to your goal. Of course hard money lenders are EXTREMELY keen to what is and what is not a deal worth lending on. This might be a limitation for you at this point. I know it would be for me.
What are you thinking you will feel comfortable doing to start investing? What are your inclinations?
@Doug Martin, I'm hard to convince that there is truly such a thing as "passive" in the business of direct real estate investing. You are either actively looking for properties, actively supervising your property manager(s), actively obtaining financing, actively sorting out the accounting, etc etc.
Certainly none of that means that this business isn't the best business there is (spoken like a true career real estate investor), but I'd hardly call it passive...especially at scale. You could buy a larger properties to centralize management, but with little to no real estate experience that's a recipe for failure, not to mention that it's difficult to do due to the challenges with financing and getting the brokers on your side.
To maximize your "passive-ness", you should consider aligning yourself with an experienced investor that has been around long enough to have survived a few real estate cycles. They bring the skill and the labor, you bring the capital. Their experience and network will allow you to build a portfolio that can outperform one you are likely to build on your own, and you get to be more passive than going solo. The key is to align with the right partner. The wrong choice would hurt more than help.
@Doug Martin one word for you "DIVERSIFY". If I was in your position, I'd find out who the big dogs are in the markets you already spend time in and I'd be open to backing their expansion deals for 10% guaranteed return plus a percentage of the profit. There are guys out there killing it averaging 25% or higher annual returns who are limited by capital to expand. Find a fire and pour gasoline on it...as they say.
I would think that with that type of money to invest you could purchase a few apartment complexes that would help you accomplish your goal in short order. My partner and I just purchased one in the midwest that should be netting us between 5 and 6k per month, and we only invested 100k!
Like others have said, I think I would focus on learning about a strategy before deploying capital.
@Doug Martin
Hi Doug! The amount of time needed really comes down to how involved you want to be. We syndicate deals where we raise money and purchase larger apartments and we are currently invested in 1750 units. We hire a 3rd party mgt. company to handle the day-to-day operations and we manage them. While I have a lot of flexibility, syndicating deals and overseeing the 3rd party mgt company is a full-time job for me. It can vary a lot, but a syndicator will make 3 or 4 times as much as a passive investor in a deal. But, the syndicator has a lot to do up front from a time perspective and financial perspective.
A passive investor has to meet deal sponsors (syndicators) and you will want to make sure you can trust them. You can pretty much review a deal, invest, review monthly reports, and collect checks. It is very passive and takes very little time. Although I syndicate deals, I also invest passively in deals myself and it takes virtually no time after I decide to invest. I have also invested with hard money in a fund, but prefer apartment investing…but, you could always do both.
Finding deals is the hard part. Even if you have the money, that does not mean you can go out and find your own deals. You need strong relationships with brokers to get deals. Sellers/brokers want to make sure you can close the deal and this requires a track record. You can partner with others that already have a track record.
If you tried to deploy $1.8-2.3M in SF, this would likely take you a long time to deploy. Investing in a few MF deals would certainly be a good option. Or, maybe you do both…buy some Single Family and buy some Multi-Family. I have done both and I personally prefer MF over SF. You get the economics of scale and with MF you are buying a business so you have a lot more control on how much you can increase the value of the business. With SF, your value is pretty much determined based on the comps.
I would say no matter what you do, get educated. Even if you are going to just be a passive investor, you will want to make sure you know what you are doing.
If you like to read...I recommend reading books by Ken McElroy - Rich Dad Advisor. (ABC's of Real Estate Investing & The Advanced Guide to Real Estate Investing). These are both easy reads and gives a good understand of Real Estate Investing...as well as Apartment Investing.
Mark & Tami Kenney
Hi @Doug Martin I think you have some good advice so far in this thread. Some things I can add
1. Diversify. Don't have all your investment in one market where a disaster or economic downturn will kill you. Even keep some in stock, bonds and t-bills in a low fee index fund (that is boarderline sacrelidge on this site but since you already have a good nest egg good to stay diverse)
2. You are an accredited investor based on your income and net worth so that gives you access to investments that others don't have so you can use that to your advantage with access to things like realtyshares and wunder capital but those things are less regulated and because you are "accredited" the government assumes you are smart or responsible enough
3. Get a good tax person who can give you good advice. $50k a month in W-2 Earnings may end up being a lot less than $30k/mo in real estate gross because of depreciation and other perfectly legal deductions. I.E. you get ot keep more of your real estate earnings.
4. Try one rental before you get too deep into being a landlord you may hate it. If you are a sweetheart and people see you as a rich ballplayer tennants may take advantage of you. Buy in an LLC and hire a good property manager
5. Consider commercial real estate in safe markets. I think Amazon etc. are hurting retail. Consider a medical office building near a good hospital or senior housing as good growth markets.
6. Listen to at least 50 bigger pockets on 1.5x to 1.7x speed in the car on flights, the gym etc. to see how many avenues there are out there.
7. Talk to other people you know and trust that have gotten into real estate.
@Doug Martin don't lend unless it's through a retirement account. Want to pay as much tax as possible? Lend via your personal name.
Someone like you should not be investing in real estate, rather, you should invest in people in real estate.
You will want to look for companies that are syndicating deals. "Syndicate" means pooling investor funds and buying large apartment or commercial buildings. You will also want to look for investment opportunities offering tax credits. Again though, don't take down a deal yourself, invest in a company.
Why invest in a company? Because it's extremely passive and you are leveraging (hopefully) decades of industry knowledge via the team running the deal. Trust me, there are plenty of highly reputable real estate companies looking for funds.
I'm a CPA and I don't run an investment company. This is just the advice I have learned to follow myself and the same advice I provide to my high net worth clients. It's not good use of your time or money to learn about real estate investing and to find a deal yourself.
@Doug Martin one major risk you have to worry about is being a key target for scams. That makes it harder for you than the average person. Football players or any ultra high income earners are targeted because they are seen as less financially savvy and more importantly they have MONEY. Sometimes it isn't even a scam as much as it is a risky investment.
Hard money lending can come with lots of risk. I would personally rather own the real estate than give money to someone else and hope it works out.
The great news for you is that you have solved the hardest problem, which is having money to invest. I think a big mistake someone in your situation could make is passing money over to wealth manager. Not only is there risk of theft or mismanagement, but even just the annual 1-2% management fee skims a ton off the top. The truth is even the best wealth managers really cannot beat the market.
That brings me to my first suggestion which is investing your money into a whole market index fund. You can open an account online and do this yourself. Literally just park your money in one of these funds and you will see an average return of 6-8%, much better in some years and flat in others. I know this sounds boring, but it is really easy and you can do it yourself. You own a little piece of every company on the stock exchange. If Apple has a bad year, maybe Coca Cola has a good year. Your risk is very low. Of course this only gives you around $10K per month, so half your goal.
Another idea is to invest in a large apartment complex. You should be able to purchase something worth over $7M and put 25% down. I would look for an apartment building in a great market and nice part of town. You will have leasing and maintenance staff operating the building. You will need to watch what is going on closely to make sure they are properly managing it. I wouldn't expect much better cash flow than investing in index funds in the early years. The difference is that as rents increase your cash flow will increase. I can see you getting to $20k worth of monthly cash flow within less than ten years this was.
A third idea is purchasing commercial real estate such as an office building that is also worth around $7M. If you are renting to corporate clients, you should see much more steady leases and income. Overall you will have less management issues to worry about, but your rate of return and cash flow may not be as good as an apartment complex. Lots of doctors and lawyers get into commercial because they would rather deal with a smaller number of tenants. Also, most of these leases are triple net which means tenant pays all expenses. You could possible buy one building worth $7M and have one corporate tenant there for 20 years.
One other suggestion I would make is to try to keep your life style grounded. I know when people are famous this is very hard to do. The more money you can save now and less luxury you get used to, will make it easier on you in the future.
You should connect with @Kevin Bupp and @Charlie Dehart. They are based in Clearwater, FL and invest in mobile home parks. While mobile home parks aren't the most glamorous investment, I've come to the conclusion that they are one of the best real estate asset classes to own. Kevin and Charles have a great Mobile Home Investing podcast that they share some very valuable info on. I think they just set up a mobile home park fund you can invest in, seems like that would be the definition of mailbox money if the returns offer what you're looking for.
Hi @Doug Martin Welcome to BP.
If you reach out to Emmitt Smith, he would seem to be a great mentor to you as he is doing very well in the REI world. Best of luck to you!
Hello from Bushnell, Fl.
I know you have had a lot of advice and I have read through all of it .. some really good ideas .. although i don't have a million dollars to invest.
If i did i woukd try to take try to take @Rich Weese up on his offer to sit down with him at a lunch .. he is not asking for or needs your money .. he is just offering to help guide you .. wow.. what a offer .. I would buy him lunch anytime he has time for me .. like i said , I don't have money to invest .. Just the opposite,.. but, I do work with a couple investors that have that type of money and I partner with them on flips ..they provide the financial part and I supply the rest .. all the titles go in their name or their business name and the rehab funds are allocated weekly per needed basis ..along with a weekly report by me on the progrees including pictures and video's if needed .. I don't think you are looking for someone like me but .. like i said .. I myself would love to sit down to lunch with @Rich Weese if not for any other reason than he has decades of experiance and wealth of information and I would be a fool not to sit and listen to him if he wanted to share any of it .. I don't have that kind of money but i will one day .. because I have drive, and honesty and determination .. all qualities you most likely posses and because he and I live pretty close to each other ... after all we are in the same county ... you reading this Mr Weese ? just name the time and place.... as for you Doug Martin .. I hope and pray only the very best for you as i do everyone ..
God Speed,
Michael Short
@Account Closed
I try to read anything that is tagged with my name. I especially like the chicken wings at city fire in Brownwood. Any time you would like to buy me lunch, I'd be more than happy to sit down with you.. As I said before, I'm not after your money either. I just love to talk about real estate and eat chicken wings. Have a great week.
Wow, thank you so much .. I would love to meet with you soon .. I will send a colleague request and see how my week is shaping up .. I just love real estate also and getting a chance to sit diwn with someone of your knowledge would certainly be a real treat ..
I did try to drop the hint .. i hope i wasnt to obvious ..lol.. I'll have to look up City Fire .. im not familer but Im sure my wife knows where its at .. she's a wing lover also ..hehehe .. hope to connect soon ..