Turn $100k into $5k/month positive cash flow

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Turn $100k into $5k/month positive cash flow

Arthur Zaragoza
Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes
Looking to turn $100k into $5k/month in positive cash flow in 1-2 yrs Hi, I just sold my rental property and refinanced my primary residence. Now I have a bit over $100k to invest and would like to scale into a business. A few options I have been considering: - New construction - BRRR - Commercial/multifamily - commercial/retail/business/strip malls My situation: I live in Toronto, Canada where the market is very expensive, taxes and cost of living are high. I have a real estate license which works for my benefit however I would like to relocate with my family somewhere warmer near the ocean with a lower coast of living and enjoy a better quality of life and scale my business. I am considering the west coast in Victoria, BC or somewhere in Vancouver Island. I will be closer to my parents that reside in Seattle, WA. They also have plans to invest in real estate to help with their upcoming retirement and they are open to partner up with me. I understand the Canadian to American dollar is at .7 to 1 right now however the ROI in the US seems better and I could also leverage my parents good credit to obtain financing. I have around 5 years of industry experience as a (home owner, landlord and realtor) and would like to be hands on with the transactions, managing some of the rehabs and hands off with management. Any ideas and recommendations would be greatly appreciated. Thanks in advance.
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Logan AllecBusiness Member
Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
10y

$5k/month...that's $60k per year...off of $100k invested...OK let me know if you figure out something with a 60% annual return within 12 months.

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  • Samuel Sedore
    Real Estate Agent · Kitchener-Waterloo-Cambridge, Ontario · Member since 2013 · 408 posts · 90 votes
    10y
    Originally posted by @Arthur Zaragoza:

    Hi Samuel,

    Thanks for your feedback; I’ve been hearing great things about Kitchener-Waterloo. If I decide to stay put in Ontario I will defiantly reach out to you.

    Thanks a happy new year!

    @Samuel Sedore

     Anytime my friend I plan on staying put for a long while! I started hosting some investor meetups as well if you ever have the interest in coming down checking one out.

    1Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Arthur Zaragoza I'd have to agree with others that $100k to $5k/mo cash flow in 1-2 years is extremely unlikely. The cash flow alone would be a 60% ROI and that doesn't include equity growth by mortgage pay down and appreciation which could easily push your true ROI to 80% or 100%.

    I once heard an analogy of thinking of our goals and achievements as a fraction with the achievements on top (numerator) and goals on the bottom (denominator).  The trick is to get the fraction to equal one  You don't want your goals to be so large that your achievements are small by comparison and you end up with a fraction less than one and are disappointed.  Conversely, you don't want to have such tiny goals that your achievements are big by comparison and you have a number greater than one, feel great, but have actually undershot your potential.

    You might first want to ask what an achievable ROI is with $100k and develop your goals from there.

    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Larry Turowski, I don't see anything wrong with @Arthur Zaragoza's goal. It may take longer than 2 years to achieve, but should NOT require more of a stake than $100k. With wisely bought properties, the BRRRR formula WORKS!

    1Reply
  • Arthur Zaragoza
    OP
    Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes
    10y

    @Larry Turowski

    Thanks for you analogy Larry, I will rethink my goals and expectations however I still believe I can and will turn that $100k into $5k/month in PCF if not in 2 years certainly in 3 - 5 years! PS. I have an extra $100k HELOC lined up in case I need back up so really I have $200K available to leverage but will do my best not to touch the HELOC or vice versa. I just need to figure out how and where to start this journey hence why I am here on BG, too learn and possibly inspire fellow investor!

    ***5 years ago I was renting and receiving government support! (I was a struggling musician/music producer) I set a goal to use real estate investing to help me get back to music and build an amazing home studio to start producing again and I am getting close to it!

    1Reply
  • Lee Jackson
    Peterborough , Ontario · Member since 2015 · 111 posts · 15 votes
    10y

    You have a goal! Great start! Hope to hear more, on how it works out.

    2Reply
  • Richard Dunlop
    Investor · Detroit, MI · Member since 2014 · 755 posts · 462 votes
    10y
    Originally posted by @JD Martin:
    Originally posted by @Logan Allec:

    $5k/month...that's $60k per year...off of $100k invested...OK let me know if you figure out something with a 60% annual return within 12 months.

     LOL no doubt! I was thinking the same thing - if anyone knows this secret let me know!

    I know but I'm not telling...

    2Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Brent Coombs:

    @Larry Turowski, I don't see anything wrong with @Arthur Zaragoza's goal. It may take longer than 2 years to achieve, but should NOT require more of a stake than $100k. With wisely bought properties, the BRRRR formula WORKS!

    Definitely the strategy works, but the goal was to do it in 2 years.  You can turn $1K into $5K cash flow per month if you wait long enough.

    0Reply
  • Wilson Churchill
    Madison Heights, MI · Member since 2014 · 472 posts · 132 votes
    10y

    I could imagine one way of making this happen: Buy five or more discounted properties for 20k or less, fix them and rent them, then refinance them after six months. Use the proceeds to buy five more, then repeat after another six months. You would then have 15 sfr's. If each rented for 700+, using the 50% rule, your cash flow would be $5,250 before mortgage payments. The hardest part would be finding five discounted properties to buy within a short period of time.

    2Reply
  • Adam Hershman
    Las Vegas, NV · Member since 2015 · 237 posts · 107 votes
    10y
    Originally posted by @Arthur Zaragoza:

    Looking to turn $100k into $5k/month in positive cash flow in 1-2 yrs

    Hi, I just sold my rental property and refinanced my primary residence. Now I have a bit over $100k to invest and would like to scale into a business. A few options I have been considering:

    - New construction
    - BRRR
    - Commercial/multifamily
    - commercial/retail/business/strip malls

    My situation:

    I live in Toronto, Canada where the market is very expensive, taxes and cost of living are high. I have a real estate license which works for my benefit however I would like to relocate with my family somewhere warmer near the ocean with a lower coast of living and enjoy a better quality of life and scale my business. I am considering the west coast in Victoria, BC or somewhere in Vancouver Island. I will be closer to my parents that reside in Seattle, WA. They also have plans to invest in real estate to help with their upcoming retirement and they are open to partner up with me.

    I understand the Canadian to American dollar is at .7 to 1 right now however the ROI in the US seems better and I could also leverage my parents good credit to obtain financing.

    I have around 5 years of industry experience as a (home owner, landlord and realtor) and would like to be hands on with the transactions, managing some of the rehabs and hands off with management.

    Any ideas and recommendations would be greatly appreciated.

    Thanks in advance.

     I think the option with the best chances of success for cash flowing $60K a year on a $100K investment is to visit PCH.com

    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Adam Hershman, you jokingly said "I think the option with the best chances of success for cash flowing $60K a year on a $100K investment is to visit PCH.com". Or perhaps you weren't joking? 

    (Well, it works better as a joke than as a genuine comment)...

    How about instead, you look seriously at what @Wilson Churchill wrote!?

    That applies to you too, @Larry Turowski. 2 years IS possible! Cheers...

    0Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Brent Coombs You are doing a disservice to new investors by letting them think that turning $100K into $5K/mo cash flow in 1-2 years is possible.  It is so completely unlikely that it may as well be patently false.

    Can you even make up a realistic scenario as to how this would happen?  I know it will have to start with make a lot more money first.

    1Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y
    Originally posted by @Larry Turowski:

    @Brent Coombs You are doing a disservice to new investors by letting them think that turning $100K into $5K/mo cash flow in 1-2 years is possible.  It is so completely unlikely that it may as well be patently false.

    Can you even make up a realistic scenario as to how this would happen?  I know it will have to start with make a lot more money first.

    No it won't. Let's extrapolate Winston's idea. Step 1: Buy just 4x $20k properties (carefully sourced in hard-to-find sweet spots of say, the Mid-West) and rehab them with your remaining cash, and of course, rent them out. Then, because you bought cleverly, they will appraise at $50k each as soon as the rehabs are done. Therefore, Lenders will allow you to Borrow $100k because of their appraisals. Step 2: Buy four more similar ones straight away with that borrowed $100k, rehab and rent. Step 3: Six months later, repeat Step 2. Step 4: Six months later, repeat Step 2 again.

    At the end of 2 years? You have bought 20 properties at an average cost of $25k including rehab, that rent out for an average of $500/m (but which NET you @$250/m after expenses including mortgage), = NET $5000/m!

    Larry, you might have plenty to say about my math - but hey, who's to say you can't net even MORE! 

    Please don't say this is "patently false" thinking, because there are MANY here on BP who use something similar as their ongoing business model.

    Is it easy? Of course not. Will everyone who tries it succeed? Ditto.

    Is it do-able? Absolutely!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    A good goal, but difficult to achieve quickly as a lot have mentioned.  One of the biggest business mistakes people make is trying to grow too quickly.  Within a few years a 60% return is achievable without taking on crazy risk, IMO.

    There are a lot of hungry investors looking for money partners.  I would consider leveraging my time as well as my cash with a talented, vetted, rehabber.  Just something not mentioned yet. Best of luck either way @Arthur Zaragoza! 

    2Reply
  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Brent Coombs:
    Originally posted by @Larry Turowski:

    @Brent Coombs You are doing a disservice to new investors by letting them think that turning $100K into $5K/mo cash flow in 1-2 years is possible.  It is so completely unlikely that it may as well be patently false.

    Can you even make up a realistic scenario as to how this would happen?  I know it will have to start with make a lot more money first.

    No it won't. Let's extrapolate Winston's idea. Step 1: Buy just 4x $20k properties (carefully sourced in hard-to-find sweet spots of say, the Mid-West) and rehab them with your remaining cash, and of course, rent them out. Then, because you bought cleverly, they will appraise at $50k each as soon as the rehabs are done. Therefore, Lenders will allow you to Borrow $100k because of their appraisals. Step 2: Buy four more similar ones straight away with that borrowed $100k, rehab and rent. Step 3: Six months later, repeat Step 2. Step 4: Six months later, repeat Step 2 again.

    At the end of 2 years? You have bought 20 properties at an average cost of $25k including rehab, that rent out for an average of $500/m (but which NET you @$250/m after expenses including mortgage), = NET $5000/m!

    Larry, you might have plenty to say about my math - but hey, who's to say you can't net even MORE! 

    Please don't say this is "patently false" thinking, because there are MANY here on BP who use something similar as their ongoing business model.

    Is it easy? Of course not. Will everyone who tries it succeed? Ditto.

    Is it do-able? Absolutely!

    So, you at least admit that it is not going to happen in one year.

    Still, this is more than not easy.  It is VERY difficult to find properties that you can get all your money back from in 6 months.  I know.  I've successfully done it.

    And there are MANY here on BP who use what model? BRRRR? Don't conflate the model with the velocity. Many of us use the model. But I doubt there are MANY how are doubling their money every year.

    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Larry Turowski, if the OP didn't formulate a goal, then sure, it's not gonna happen.

    But, he DID! And, it CAN!

    0Reply
  • Arthur Zaragoza
    OP
    Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes
    10y

    Thank you everyone for your support, I really appreciate your feedbacks. I will repost again in a few months for some updates! Happy investing and have a great 2016!

    0Reply
  • Samuel Sedore
    Real Estate Agent · Kitchener-Waterloo-Cambridge, Ontario · Member since 2013 · 408 posts · 90 votes
    10y
    Originally posted by @Arthur Zaragoza:

    @Larry Turowski

    Thanks for you analogy Larry, I will rethink my goals and expectations however I still believe I can and will turn that $100k into $5k/month in PCF if not in 2 years certainly in 3 - 5 years! PS. I have an extra $100k HELOC lined up in case I need back up so really I have $200K available to leverage but will do my best not to touch the HELOC or vice versa. I just need to figure out how and where to start this journey hence why I am here on BG, too learn and possibly inspire fellow investor!

    ***5 years ago I was renting and receiving government support! (I was a struggling musician/music producer) I set a goal to use real estate investing to help me get back to music and build an amazing home studio to start producing again and I am getting close to it!

     Thats awesome! 1 year ago I was working construction and renting now I have 2 rental properties, just set your mind to it.

    1Reply
  • Tom Stromar
    Investor · Nanaimo, British Columbia · Member since 2012 · 60 posts · 5 votes
    10y

    Hi Arthur - we are currently working with some folks that are exploring the development of a medium MFR, once we have some idea of the construction costs, we can pass along the scope as an example

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    10y

    Though exceptions can be found or developed, I would suggest assuming that risk and return are commensurate.  Therefore, it is worth thinking about the risk you're willing to take and the lifestyle you'd like to enjoy while trying to generate your target return.  Are you okay dodging bullets and plunging toilets personally to generate that 60% return?  Or are you more risk averse and okay with generating a 20% annual return and being able to sleep at night?

    Though it's wise to share information and learn from others, never assume their experience will be the same as yours.  Real estate investing and your strategy will be unique to you, therefore you should spend time thinking about (1) your particular goals, (2) the lifestyle you'd like to lead, (3) the risk you're willing to take, (3) the amount of work you're willing to put in. 

    Once you decide these things, BE super critical of all information.  Trust but verify.

    Useless information is usually freely given.  But there's a reason it's freely given and it may not be applicable to you, your goals, and the specific strategy you're executing.

    Real estate investing is a business.  Businesses can be similar, but they are all unique.  

    FYI: I'm a conservative investor and will not risk the loss of my principal. I'm comfortable generating a return of over 12% cash on cash, 20%+ IRR while developing unique ways to minimize risk, providing high-quality rentals to my tenants, and sleeping well at night.

    I have friends who buy and flip 20+ SFR rentals in Detroit, deal with unsavory people, but likely generate over 60% returns annually. They're comfortable with that. I would not be.

    1Reply
  • Eddie T.
    Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes
    9y

    @Arthur Zaragoza Can you give us on update since it has been 12 months from one you first posted this.

    0Reply
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