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Chris Hill
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$40k/month goal. Which strategy will get me there faster?

Chris Hill
Posted Nov 25 2022, 10:39

I'm 41 and want to retire in 10 years.  I have a few options to reach my goal of 40k a month, 10 years from now, but need some help.

Background:  I have two investment types. 

One -  I have 14 condos, all with loans/leveraged. 7 of them are on one commercial loan at 3.9%  which is a 10 year term (8 years remaining) at which point I will need to refinance. The other 7 loans are all on 30 year loans between 2.5-4.8%. Current cash flow is $10K a month.   Gross rents, 24k.

Two -   I'm in 10-15 syndications.  They are all class B, and I plan to reinvest all of them after the first event, and do it again.  If those successfully do 1.5X, twice, over a 10 year period, at which point I would put all funds into a class A (9-10%) for the remaining future, they would produce $20-25K a month.  Obviously, lots of IFs there, but very possible.   I would need to continually find future deals to keep that CF going indefinitely.  I've been in them for 3 years already and all are performing above target. 

Here are my two options as I see them, and I'm sure there are others.

1.  Pay off condos - If I take all current condo CF, and snowball all 14 loans, those will be paid off in 10 years, and combined CF from condos and syndications in 10 years would be roughly $45k.  Goal reached.  I know it doesnt make sense to pay down low interest rate loans, have the renters pay it off over 30 years, etc.  But I dont want to wait 30 years.  I have the discipline to put 10k a month towards loans for 10 years, knowing the end goal is in sight.

2.  Reinvest the 10k (120K per year) into more syndications.  If the 120k did 1.5X, twice in 10 years, and then I cash out each year after 10 years, it would be roughly $30k a month.  But I would have to continually put 120k in per year indefinitely. 

MY QUESTION - which option would get me to my goal of 40k in 10 years?  I think my math is sound, but could be wrong.  Option two would appear to have greater cash flow at year 10, but I'm not as clear.  Option one is very clear to me.  Which option helps me achieve the goal faster, and with less variability.   For easy numbers, I'm leaving out taxes. 

I'm not trying to start a pay down vs reinvestment argument, just curious which route is more effective. As yes I could diversify more, CRE, STRs, flips, more SFR out of state, etc, but they aren't my wheelhouse.

Thanks for reading, hoping for people smarter/more experienced than me can chime in!


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Jay Hinrichs#1 Private Lending & Conventional Mortgage Advice Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
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Jay Hinrichs#1 Private Lending & Conventional Mortgage Advice Contributor
  • Real Estate Broker
  • Lake Oswego OR Summerlin, NV
Replied Nov 25 2022, 11:42

seems to me this is just a math problem and since you have been so successful to date I dont see why you would come to the internet for advice you should be giving advice on how you were able to do so well so far.

direct ownership has least risk and most control.. 

syndication your not in control .. so there is that.            

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Kevin Ludwig
  • Rental Property Investor
  • Colorado
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Kevin Ludwig
  • Rental Property Investor
  • Colorado
Replied Nov 25 2022, 12:00

Easy.... Use HELOC to buy 5 or more single family investment homes. Use the cash flow from these investments to paydown your apartment loans quicker. Let these homes appreciate in value (most homes double their value in 10 - 15 years). Sell these homes to payoff your apartment loans. Live on the beach and enjoy pure cashflow without debt. Enjoy your coconuts.

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Chris Hill
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Chris Hill
Replied Nov 25 2022, 12:45
Quote from @Jay Hinrichs:

seems to me this is just a math problem and since you have been so successful to date I dont see why you would come to the internet for advice you should be giving advice on how you were able to do so well so far.

direct ownership has least risk and most control.. 

syndication your not in control .. so there is that.        

Definitely agree with control comment.  I like option number one because it is simple, I know it will work, and I have sufficient knowledge to pull it off. I know the simple concepts, blocking and tackling, but I’m guessing there are other ways to achieve the goal faster.  

unfortunately, my advice would all deal with luck. Buying the condos when they were dirt cheap and rent has gone crazy. But I’ll take all the luck I can get.

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Chris Hill
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Chris Hill
Replied Nov 25 2022, 12:46
Quote from @Kevin Ludwig:

Easy.... Use HELOC to buy 5 or more single family investment homes. Use the cash flow from these investments to paydown your apartment loans quicker. Let these homes appreciate in value (most homes double their value in 10 - 15 years). Sell these homes to payoff your apartment loans. Live on the beach and enjoy pure cashflow without debt. Enjoy your coconuts.

Interesting idea. I would probably have to buy out of state to pull it off, and unfortunately, I don’t have much experience there

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Ruchit Patel
  • Bay area, CA
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Ruchit Patel
  • Bay area, CA
Replied Nov 26 2022, 20:47
Quote from @Chris Hill:
Quote from @Kevin Ludwig:

Easy.... Use HELOC to buy 5 or more single family investment homes. Use the cash flow from these investments to paydown your apartment loans quicker. Let these homes appreciate in value (most homes double their value in 10 - 15 years). Sell these homes to payoff your apartment loans. Live on the beach and enjoy pure cashflow without debt. Enjoy your coconuts.

Interesting idea. I would probably have to buy out of state to pull it off, and unfortunately, I don’t have much experience there

You are already doing great. You don't need random people's advice!! If you still want, we can connect and I can explain how I invest out of state ( as I am in California ) for cash flow as well as for huge equity in new construction contracts. 

Nowadays, you don't need the experience to do SFR, as there are many turnkey providers in the market and many of them are high quality.

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Chris Hill
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Chris Hill
Replied Nov 28 2022, 19:51

Thanks for the responses.  Is there anyone out there who had a similar decision (pay off rentals or buy/invest more) that can look back 10 years and say “I wish I would’ve done this over that?  Ultimately that’s my question.  If I start paying them off, 10 years from now, will I be saying man I wish I would’ve used that cash for investments instead of buying down?  Paying down should reach my goal, but I prefer to learn from others experience 

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Doug Garrison
  • Investor
  • Greensboro NC
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Doug Garrison
  • Investor
  • Greensboro NC
Replied Nov 29 2022, 04:42

Hey Chris,

I did number one. 

10 years ago I started to see retirement looming. At that point in time I had about 10 mortgages on 12 properties. Most were 4.5 to 5.5 percent interest so the math was a little easier. We put in a little extra cash from outside but for the most part I just made sure that I didn't draw anything out of the rental business and used all the cash flow to pay down mortgages. Even as rates fell I resisted the urge to refinance anything and stayed with the plan. We also had a chance to buy a 12 unit package of duplexes but I resisted taking on extra debt even though the numbers worked.

Now we have 14 properties and one remaining mortgage of about 1800 per month. Nothing crazy long distance either, all are within 20  minutes of my house in my hometown.

It's not 40K per month but it's more than enough for us to live on.

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Chris Hill
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Chris Hill
Replied Nov 29 2022, 16:58
Quote from @Doug Garrison:

Hey Chris,

I did number one. 

10 years ago I started to see retirement looming. At that point in time I had about 10 mortgages on 12 properties. Most were 4.5 to 5.5 percent interest so the math was a little easier. We put in a little extra cash from outside but for the most part I just made sure that I didn't draw anything out of the rental business and used all the cash flow to pay down mortgages. Even as rates fell I resisted the urge to refinance anything and stayed with the plan. We also had a chance to buy a 12 unit package of duplexes but I resisted taking on extra debt even though the numbers worked.

Now we have 14 properties and one remaining mortgage of about 1800 per month. Nothing crazy long distance either, all are within 20  minutes of my house in my hometown.

It's not 40K per month but it's more than enough for us to live on.

This is great!  Exactly what I was hoping to hear.  Looking back, are you glad you paid them off, or do wish you would have used that cash to buy more?  What helped you make your decision?

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Clayton Silva
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Clayton Silva
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Replied Nov 29 2022, 17:07
Quote from @Jay Hinrichs:

seems to me this is just a math problem and since you have been so successful to date I dont see why you would come to the internet for advice you should be giving advice on how you were able to do so well so far.

direct ownership has least risk and most control.. 

syndication your not in control .. so there is that.        

I would second this.  The control aspect of the syndication would have me most nervous if I was planning on living on the cash flow.  I would not want to constantly have to reevaluate a syndication deal every 5 years or so if they sell. At the end of the day, you should do whichever one pulls at your investor heart the most frankly.  I don't think either is a bad option, but control is super important especially in RE for tax purposes when it comes time to timing a sale.

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Paul Moore
  • Commercial Real Estate Fund Manager
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Paul Moore
  • Commercial Real Estate Fund Manager
  • Lynchburg, VA
Replied Nov 30 2022, 13:45

Hi @Chris Hill! Congratulations on your success so far. You are in an enviable position and have done better than 99.x percent of the population. 

You can clearly do the math and you got some great advice above. I'm going to answer from a different angle. I am going to ask if you really want to manage condos and other properties on your own as you enter your 50s, 60s and beyond. There is absolutely nothing wrong with managing these properties but as you know, the hassle factor can be significant. Maybe it isn't for you but I find the vast majority of real estate investors I speak with find there is a bigger hassle to expect when managing properties. If that's what you want to do it seems like you are on a great path. 

On the other hand if you, like me, and many other investors I know want to get rid of the hassle and some of the specific risks of owning and managing properties yourself, the syndication route is the obvious way to go. 

I know I am significantly oversimplifying this but I am just throwing this out there for readers to remember the hassle factor and how it should be figured into your decision. Good luck and happy investing! 

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Chris Hill
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Chris Hill
Replied Nov 30 2022, 20:43
Quote from @Paul Moore:

Hi @Chris Hill! Congratulations on your success so far. You are in an enviable position and have done better than 99.x percent of the population. 

You can clearly do the math and you got some great advice above. I'm going to answer from a different angle. I am going to ask if you really want to manage condos and other properties on your own as you enter your 50s, 60s and beyond. There is absolutely nothing wrong with managing these properties but as you know, the hassle factor can be significant. Maybe it isn't for you but I find the vast majority of real estate investors I speak with find there is a bigger hassle to expect when managing properties. If that's what you want to do it seems like you are on a great path. 

On the other hand if you, like me, and many other investors I know want to get rid of the hassle and some of the specific risks of owning and managing properties yourself, the syndication route is the obvious way to go. 

I know I am significantly oversimplifying this but I am just throwing this out there for readers to remember the hassle factor and how it should be figured into your decision. Good luck and happy investing! 

Great point.  I have self managed for the past ten years as they are close by, newer, and minimal maintenance.  But yes, when I’m older, I would turn it over to a pm.  If I hit my monthly goal, it would be more than sufficient to cover pm.

i gotta say, I’m leaning towards pay off.  I know what the end result will be, even if the cash flow is less. 

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Doug Garrison
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Doug Garrison
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Replied Dec 1 2022, 03:44

Chris,

We are very happy with this decision. 

My goal when we started years ago was to do real estate as a retirement plan. I worked in construction and never had any other retirement options. I never paid any attention 'cash on cash' 'ROI' or any of these things. I looked for a property that would break even, or at least come close with a 15 year mortgage. I wish I could find the old post but I basically got called an idiot because I argued that one of my houses that cash flowed a negative 700 to $1,000 per year was still a good investment. Whatever, I don't post here much anymore.

It's hard at times not to get excited about buying more properties. The fun part for me is to buy run down properties, put in a bunch of my own labor and bump up the rents.  The last 2 properties we bought were for cash since we had the cash flow from the properties in savings. 

The decision was fairly easy since the math worked. Also, since I've managed all my properties myself I like being in control. Rather than pay a management company 10% I'd rather just let my tenants pay 10% less than market and stay for years......

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Kenneth Woodruff
  • Investor
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Kenneth Woodruff
  • Investor
  • Lancaster, PA
Replied Dec 1 2022, 04:01

@jay 

@Jay Hinrichs said, you have a great amount of experience that should be used to your advantage.  Start a Podcast, give lectures, create that financial path AND do your pay down.  There are so many ways to make money in our world, and you have a great knowledge base that would benefit both you and others if it was shared.  

For the record, we are in year 7 of a pay down strategy much like you described, and there are times I think im an idiot for not leveraging more.  We do add properties, but because of some early career missteps we decided to always have plenty of exit strategy, which is why our pay down came into play.  Good luck on your journey.  

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Paul Moore
  • Commercial Real Estate Fund Manager
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Paul Moore
  • Commercial Real Estate Fund Manager
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Replied Dec 12 2022, 12:10
Quote from @Chris Hill:
Quote from @Paul Moore:

Hi @Chris Hill! Congratulations on your success so far. You are in an enviable position and have done better than 99.x percent of the population. 

You can clearly do the math and you got some great advice above. I'm going to answer from a different angle. I am going to ask if you really want to manage condos and other properties on your own as you enter your 50s, 60s and beyond. There is absolutely nothing wrong with managing these properties but as you know, the hassle factor can be significant. Maybe it isn't for you but I find the vast majority of real estate investors I speak with find there is a bigger hassle to expect when managing properties. If that's what you want to do it seems like you are on a great path. 

On the other hand if you, like me, and many other investors I know want to get rid of the hassle and some of the specific risks of owning and managing properties yourself, the syndication route is the obvious way to go. 

I know I am significantly oversimplifying this but I am just throwing this out there for readers to remember the hassle factor and how it should be figured into your decision. Good luck and happy investing! 

Great point.  I have self managed for the past ten years as they are close by, newer, and minimal maintenance.  But yes, when I’m older, I would turn it over to a pm.  If I hit my monthly goal, it would be more than sufficient to cover pm.

i gotta say, I’m leaning towards pay off.  I know what the end result will be, even if the cash flow is less. 

Hi @Chris Hill you said that you're leaning towards paying it off. I know what the end result will be even if the cash flow is less. 

Though the cash flow might be less, you will certainly be in a safer position. I am a big student of Warren Buffett and I'm relatively certain he would do exactly that if he were in your shoes. It's hard to go wrong with someone who could lose 94% of their value (Berkshire-Hathaway) over the past 56 years and still beat the S&P 500. It's an amazing statistic and really true. Good luck and happy investing!

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Chris Hill
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Chris Hill
Replied Dec 13 2022, 08:00

Anyone else have experience like this where you decided to NOT pay off your units, and instead invested more?  Particularly where you could look back 10 years and say I’m glad I did that, and cash flow is much greater because of it?

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Drew Sygit#5 All Forums Contributor
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Drew Sygit#5 All Forums Contributor
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Replied Jan 11 2023, 06:58

One of the best features of real estate investing is LEVERAGE.

You can use cash to get loans and have tenants pay off those loans.

Syndications don't allow you to leverage your cash.

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Reed Rickenbach
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Reed Rickenbach
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Replied Jan 11 2023, 07:06
Quote from @Drew Sygit:

One of the best features of real estate investing is LEVERAGE.

You can use cash to get loans and have tenants pay off those loans.

Syndications don't allow you to leverage your cash.


 Assuming your syndication of choice is levered (they almost always are), you are still leveraging against real estate. In this case you're also most likely leveraging vertical integration from the syndicator, etc.