how much would you need to generate 75-100k a year in cash flow?

Question

Hello,

I have to cash to invest but my short term goal is to generate enough cash flow to replace what my previous 9-5 job was providing.

If you wanted to generate 75-100k a year in income where would you start.

I am leaning toward small multi family, but not sure what is the best way to leverage the financing so I can get as many units as possible.

DSCR loans seem to be the best way but I'm not sure. Any suggestions.

Open to any markets, long distance investing doesn't scare me.

Scott Wolf · Answer

That's 1.5%, not 15%.  75,000/5,000,000 = 0.015

Bill B. · Answer

You can easily get there with 6 paid off homes. Buy a primary move there for a year, buy a new primary and make the previous one a rental. When you get to 6, or 8 or 12 if you need more money. Just send the extra rental money towards paying them off while you’re working.

I got to 12 in under 7 years and had them paid off in 12. Most of this was pre BP and getting free expert advice on any questions. It should be super easy barely any inconvenience today.

JD Martin · Answer

🤣 I thought my math looked suspect! I meant to say something else altogether but I let my fingers do some foolish walking! That's what happens when you get older and start doing math in your head. I meant to say 500k of equity to make $75k @15%.

I could edit all of this but I'll leave it up as a warning for all the kids out there ,😃

Muhammad Amawi · Answer

Hey Michael,

I agree with everything JD mentioned. To add some to that:

My suggestion to find the best way to leverage your financing would be to talk to a licensed professional who can take your unique profile and situation to find the best options for you. I typically would recommend using a broker since they'll be able to pull multiple options from different lending companies. That way you won't necessarily need to do a ton of shopping.

DSCR is always a great option in the investment space as you're qualified off of FICO, debt service cover ratio (typically ranging from .85-1.25 or not needing at all based on FICO), and having proper reserves (anywhere from 6-12 months is what I come across) amongst a few other determining factors. There are also options to do this in personal name or LLC with short term rentals being ok in certain situations.

To give you a market, the Cleveland market is pretty hot. I'm native to Cleveland and can say that Lakewood, Edgewater, West park, Ohio city, Tremont, Brooklyn and old Brooklyn are all great areas to check out on the west side of Cleveland. I'm sure @Michael Magno would be able to provide a lot of value and insight on the Cleveland market and surrounding areas.

Brock Mogensen · Answer

I noticed you said get as many units as possible.  I'm an advocate for doing higher quality deals instead of focusing on the number of doors.  Obviously more doors is better, but at the end of the day it's about the cashflow coming in each month.  And more doors does not always correlate to more cashflow.

That being said, you can assume an 8% average return on your investment to be conservative. So you could need to invest around $1M to achieve your goal..if you are doing it the traditional way

James Wise · Answer

Saw Cleveland get mentioned as a possible landing spot for the OP. It's true these numbers can be achieved in Cleveland but Cleveland is a very tough market to invest in if you don't have an in depth knowledge on the local economy and things of that nature. If you are looking into Cleveland I recommend reading The Ultimate Guide to Grading Cleveland Neighborhoods before making any buys. For every new investor I see killing it in Cleveland I am seeing another one get slaughtered because they had no idea what they were buying.

Matthew Cervoni · Answer

Michael,

There are a lot of different ways you can start investing to achieve this goal. I would start with the asset class you find most interesting as people will usually do a better job picking and managing investments that excite them. Then I would recommend having some sort of tracker so you can gauge monthly passive cash flow. (The tracker can also help you identify assets that are bringing in your targeted ROI and, just as important, assets that are dragging.)

Once you reach your target passive income, don't forget to have a little extra for a rainy day (don't touch the principal), reinvesting to continue building wealth, and taxes.

Best of luck in your journey! I'm right there with you!

Matt

Marcus Auerbach · Answer

Play with the BP rental calculator. Plug in one million for a hypothetical property value and then make some assumptions on expenses - you'll get a good feel for what to look for.

You can go into high cash flow units, you'll need fewer and less capital, but you'll pay a price in form of management headaches. The opposite side of the spectrum requires a lot of capital. I started at the mid point and then moved more to the equity side and liquidated some of the lower quality properties. But you start from where you are today. Most people can get there in 8-10 years.

Nicholas L. · Answer

@Michael Mastantuono

where to start: house hacking

buy house hack

go from there

how much would you need to generate 75-100k a year in cash flow?

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