Taking RE to the next level...

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Taking RE to the next level...

Brad Clarizio
Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes

Hi everyone,

I sat down yesterday to do my rental accounting for May, and I can't help but think the business model I've been following is scaleable, so I'm looking for guidance on taking my business to the next level (or not?).

Currently, I own 7 units in Columbus, OH  that I self manage while working a full time, long hour, relatively stressful job. No kids now, but I know that when my wife and I do, I'll come to a crossroads on my business vs. my job (likely sometime soon). All 7 of my units are profitable, and I'm currently sitting on around 300k in equity between the 7 houses (I've invested well and at the right time in Columbus). I've thought about the following:

  1. Sell all 7, take the ~250k after expenses and do a 1031 exchange to use as a down payment on a 20+ unit apartment complex (~1M or so)- this option would bring my career decision making process quicker. 
  2. Take on a partner- I've heard positives and negatives with this approach, and I'd be EXTREMELY cautious on who I took on, but I know that at some point, I can only take this beast so far. 
  3. Do nothing- continue my existing model by acquiring 2 properties every 12 month period, knowing that I'll soon have to switch to having the properties managed as my career grows.

My ultimate goal is for RE to be my only career, however for now, I'm able to manage both. Although, certain days/weeks, it's been a bit too much and I know it's not sustainable. 

I feel as if I'm to the point where I'm no longer a beginner (I'm 26 but started at 21), but I'm not yet an expert. From a financial perspective, I'm doing well but I'm having an internal battle with what I WANT to do vs. what I feel like I should do. I want to do RE full time, so looking for guidance on what has worked for you on making that jump. Shameless plug: I'd love a mentor. 

Thank you,

Brad

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y

Brad figure out your "burn through rate" meaning the monthly amount you need to survive and would no longer require a job. Calculate in adequate reserves for your properties.

Now take stock of where you are currently at for example 2,500 cash flow versus needing 5,000 to quit that job.

Define your plan and then start working toward crossing those days off to reach your goal. Now instead of feeling "stuck and burned out" you see a clear path t breaking free that is getting closer and closer to happening.

If your job is not salary then you could possibly start taking more days off from the job as your cash flow increases. You might also take built up paid vacation and sick days etc. to reduce work days.

Additionally you could look at cutting even more expenses to quit the job sooner such as eating at home everyday versus spending 300 a month eating out etc. Cutting out cable to just have internet to save 100 a month etc.

Another option is to change fields and go work for a real estate company so that you switch work to something you enjoy even though it might not pay what you make now.      

Podcast Guest on Show #47
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  • Allen Fletcher
    Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
    10y

    @Brad Clarizio

    Are your properties still profitable if you stop self managing? If so then I would transition all management to someone else. This would reduce your stress and increase your free time. If they are not profitable when they are managed you should continue to look for deals and consider management a must. Then you can roll over your current portfolio bit by bit for one that requires little input from you. Doing this also has the added advantage of leaving your current income intact so you can continue to build your portfolio, why sell what you have worked so hard to acquire (unless you really want to) when you can use your current acquisitions to feed your future acquisitions?

    You have a great problem by the way, I think many people wished they had a problem like yours,

    Allen Fletcher

    0Reply
  • John HornerPro Member
    Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
    10y

    Brad, I'd love to get together, I live in HIlliard also.  I was in your shoes about 2 years ago!  For me, I wasn't happy until I quit the day job and took my RE Investing career to the next level.  It feels risky at first, but it's amazing how much faster you can grow your RE business when you can devote 100% of your working time towards it!  You are in a perfect position (aka prior to kids) to take the plunge, but at the same time it turns out my true motivation came when we had my first child!

    Also, we have found ways to get that equity out of those properties without selling or the 1031 and I have some local banks that I know do this!

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    @Allen Fletcher

    Thanks for the quick reply. Truthfully, I haven't went too far down the rabbit hole of PM, so I'm unsure if they would still be profitable. My net cashflow is about 50% of gross income, so they are "cash cows" when it comes to RE.  The biggest thing I see with having someone manage them is that most of the time, they don't require a whole lot- but when it rains, it storms. I just have it in my mind that 90% of the time I can do it and 10% I can't, yet having them managed is 100% cost. 

    The other thing is, and I have to be cautious because I'm on a public forum- I don't LOVE my profession anymore, I'm kind of getting burned out. That's why I see RE as a way out, and truthfully, can't stop thinking about how to make it my FT job. 

    And you're right- it is a good problem to have. :) 

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    @John Horner

    I'd love to meet up. I've been successful on my current path, but my mind doesn't stop when it comes to taking a step forward...and a big step at that. 

    I'll send you a PM. 

    0Reply
  • Isaac Beane
    Flipper/Rehabber · Columbus, OH · Member since 2016 · 25 posts · 6 votes
    10y

    Hi John,

     My name is Isaac and I'm a rather new investor in Columbus, OH. We are in a very similar situation as Brad, but we only have two duplexes at this time. One of the duplexes is free and clear so we were thinking about selling it, using a 1031 and purchasing something like a 8 to 12 unit apartment building. But if you can refer any local banks to pull equity out that would be great. We have done a few flips and are still interested in pursuing  that on the side as well. Any advise is greatly appreciated. We are also looking for quality General Contractors that are accustom to working with investors, if you have any you can recommend. Thanks.  

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    I'd love to hear others thoughts on this!

    1Reply
  • Sean Dawson
    Investor · Columbus, OH · Member since 2015 · 134 posts · 48 votes
    10y

    @Brad Clarizio I see in #3 "Do nothing- continue my existing model by acquiring 2 properties every 12 month period, knowing that I'll soon have to switch to having the properties managed as my career grows" 

     that it looks like you kind of know what to do.  Do you have the expense of a property manager built into your numbers?  By this time you know that its not a get rich quickly deal.  We still manage our 2 duplex's but have a PM for the 12 unit.  And to be honest the money is built into the duplex's as well.  It's just when we say ehh... enough is enough.  But for now I like taking my kids there and looking at the furnace, h20 tank and cutting the grass.  I'm hoping that I am showing them an alternative way of making money that may not be evident right now, but when they get older the seed might be planted.

    Why not refinance what you have instead of selling? Thats what we did and we were able to put the 25% down on the new purchase and still have over 40% equity in what we had.  

    Did you goto the Anthony Chara seminar last week?  Nothing earth shattering, but well worth the time.  It was all about multifamily investing.  We learned we are doing the numbers correctly (Thanks @Brandon Turner and @Joshua D. podcasts were/are fantastic) and learned a few other tidbits.  

    We're on a 5 year mission (without the green chicks) to get out of the rat race.  Might take longer, might be shorter, but we have a plan and are working towards it.  That makes a huge difference with any job you may now have.  Not totally like Office Space, but almost...

    1Reply
  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    10y

    You're welcome @Sean Dawson!

    Podcast Guest on Show #92
    0Reply
  • Shawn Peden
    Spokane, WA · Member since 2016 · 55 posts · 12 votes
    10y

    @Brad Clarizio Lots of good info it seems so far, I like the idea of refinancing and getting the equity back out of the properties to reinvest. That's what I have been planning for our goals, yet I have a long ways to go it seems before I get to that point. Wish I had your problem now!! I certainly wish you the best of luck in whatever you do decide to do and cant wait to hear about it.

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y
    Originally posted by @Sean Dawson:

    @Brad Clarizio I see in #3 "Do nothing- continue my existing model by acquiring 2 properties every 12 month period, knowing that I'll soon have to switch to having the properties managed as my career grows" 

     that it looks like you kind of know what to do.  Do you have the expense of a property manager built into your numbers?  By this time you know that its not a get rich quickly deal.  We still manage our 2 duplex's but have a PM for the 12 unit.  And to be honest the money is built into the duplex's as well.  It's just when we say ehh... enough is enough.  But for now I like taking my kids there and looking at the furnace, h20 tank and cutting the grass.  I'm hoping that I am showing them an alternative way of making money that may not be evident right now, but when they get older the seed might be planted.

    Why not refinance what you have instead of selling? Thats what we did and we were able to put the 25% down on the new purchase and still have over 40% equity in what we had.  

    Did you goto the Anthony Chara seminar last week?  Nothing earth shattering, but well worth the time.  It was all about multifamily investing.  We learned we are doing the numbers correctly (Thanks @Brandon Turner and @Joshua D. podcasts were/are fantastic) and learned a few other tidbits.  

    We're on a 5 year mission (without the green chicks) to get out of the rat race.  Might take longer, might be shorter, but we have a plan and are working towards it.  That makes a huge difference with any job you may now have.  Not totally like Office Space, but almost...

    Hey Sean...thanks for the perspective. I guess for me, I'm reaching my ropes on the corporate world faster than I ever intended. I could definitely leverage my equity without selling, which is likely what I'll do, but depending on what path I take it will cut my margins down so far and increase the risk too much. For example, I have a house I paid 69k for, put 17k down and at this point owe almost exactly 50k. It's worth 110k, but if I took out 40k in equity, that payment+mortgage would be so close to the rent it would be dangerous, and I'd be under water if I ever went 1-2 months without a tenant. I just have to be careful not to over leverage. Also, one of my properties is residential but was rezoned as commercial, so I'm not able to take any equity out unless I'm doing a commercial loan. 

    I am meeting today with a Franchise owner of a daycare...it would require me to sell all of my rentals. However, I would own the land and building that I'd be erecting for the daycare, which is nearly $1M in value. At this point, I'm undecided where I'll land. I just know I have land somewhere other than where I am now...soon. 

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y
    Originally posted by @Sean Dawson:

    @Brad Clarizio I see in #3 "Do nothing- continue my existing model by acquiring 2 properties every 12 month period, knowing that I'll soon have to switch to having the properties managed as my career grows" 

     that it looks like you kind of know what to do.  Do you have the expense of a property manager built into your numbers?  By this time you know that its not a get rich quickly deal.  We still manage our 2 duplex's but have a PM for the 12 unit.  And to be honest the money is built into the duplex's as well.  It's just when we say ehh... enough is enough.  But for now I like taking my kids there and looking at the furnace, h20 tank and cutting the grass.  I'm hoping that I am showing them an alternative way of making money that may not be evident right now, but when they get older the seed might be planted.

    Why not refinance what you have instead of selling? Thats what we did and we were able to put the 25% down on the new purchase and still have over 40% equity in what we had.  

    Did you goto the Anthony Chara seminar last week?  Nothing earth shattering, but well worth the time.  It was all about multifamily investing.  We learned we are doing the numbers correctly (Thanks @Brandon Turner and @Joshua D. podcasts were/are fantastic) and learned a few other tidbits.  

    We're on a 5 year mission (without the green chicks) to get out of the rat race.  Might take longer, might be shorter, but we have a plan and are working towards it.  That makes a huge difference with any job you may now have.  Not totally like Office Space, but almost...

    Hey Sean...thanks for the perspective. I guess for me, I'm reaching my ropes on the corporate world faster than I ever intended. I could definitely leverage my equity without selling, which is likely what I'll do, but depending on what path I take it will cut my margins down so far and increase the risk too much. For example, I have a house I paid 69k for, put 17k down and at this point owe almost exactly 50k. It's worth 110k, but if I took out 40k in equity, that payment+mortgage would be so close to the rent it would be dangerous, and I'd be under water if I ever went 1-2 months without a tenant. I just have to be careful not to over leverage. Also, one of my properties is residential but was rezoned as commercial if it ever burnt down, so I'm not able to take any equity out unless I'm doing a commercial loan. 

    I am meeting today with a Franchise owner of a daycare...it would require me to sell all of my rentals. However, I would own the land and building that I'd be erecting for the daycare, which is nearly $1M in value. At this point, I'm undecided where I'll land. I just know I have land somewhere other than where I am now...soon. 

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Brad figure out your "burn through rate" meaning the monthly amount you need to survive and would no longer require a job. Calculate in adequate reserves for your properties.

    Now take stock of where you are currently at for example 2,500 cash flow versus needing 5,000 to quit that job.

    Define your plan and then start working toward crossing those days off to reach your goal. Now instead of feeling "stuck and burned out" you see a clear path t breaking free that is getting closer and closer to happening.

    If your job is not salary then you could possibly start taking more days off from the job as your cash flow increases. You might also take built up paid vacation and sick days etc. to reduce work days.

    Additionally you could look at cutting even more expenses to quit the job sooner such as eating at home everyday versus spending 300 a month eating out etc. Cutting out cable to just have internet to save 100 a month etc.

    Another option is to change fields and go work for a real estate company so that you switch work to something you enjoy even though it might not pay what you make now.      

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    2Reply
  • Amir B.
    Rental Property Investor · Elk Grove, CA · Member since 2016 · 306 posts · 76 votes
    10y
    Hi Brad, Thanks for sharing your situation. I personally would hire a property management company. I think the free time is worth paying someone else. I was wondering since you started so young. How were you able to purchase seven of them? What I am trying to ask is how did the banks lend you more money?
    0Reply
  • Aaron Vergason
    Rental Property Investor · Erin, NY · Member since 2016 · 130 posts · 32 votes
    10y

    Hey brad, very cool situation you are in. I also bought my first rental at 21. I was salary and I worked an average of 65 hours a week at my job. I started buying more rentals. Once I had 12 properties I knew I needed to either work less at job, get a new job or hire managers. Our small city has no property management companies so that isn't an option.

    I first decided to try and work less hours at my job.  That lasted 6 months before boss wanted me back at 60+ hours again, so I found a manager to help me.  I also searched out a new job in a similar field that was much better hours. Best part is, I now have a baby daughter and my job is less stressful and less hours and I still have a great manager who deals with the not-so-fun landlord stuff.  

    I wouldn't try to grow faster so you have more income to fully support yourself unless your wife makes enough to cover your basic needs. I tried doing that and I ended up forcing the numbers on deals to look like they work, and when they didn't the decisions got tough. Remember too how expensive other things are with out w2 income like health insurance.  Especially when growing your family. 

    I'm also 26 now so I'm no expert, but I'm going through the same kind of stuff you are, except I don't have 50% of my gross a profit. If I did, that would be sweet!

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y
    Originally posted by @Joel Owens:

    Brad figure out your "burn through rate" meaning the monthly amount you need to survive and would no longer require a job. Calculate in adequate reserves for your properties.

    Now take stock of where you are currently at for example 2,500 cash flow versus needing 5,000 to quit that job.

    Define your plan and then start working toward crossing those days off to reach your goal. Now instead of feeling "stuck and burned out" you see a clear path t breaking free that is getting closer and closer to happening.

    If your job is not salary then you could possibly start taking more days off from the job as your cash flow increases. You might also take built up paid vacation and sick days etc. to reduce work days.

    Additionally you could look at cutting even more expenses to quit the job sooner such as eating at home everyday versus spending 300 a month eating out etc. Cutting out cable to just have internet to save 100 a month etc.

    Another option is to change fields and go work for a real estate company so that you switch work to something you enjoy even though it might not pay what you make now.      

     @Joel- what you just said is such a simple idea, but has been eye opening for me. I think I'm over complicating all of this. I need to find out what I have to make, get there, and then make my decision. I love your thought about finding something in RE. Obviously, that's my passion, so why not pursue it? Thanks for the sound advice! 

    1Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y
    Originally posted by @Amir B.:

    Hi Brad,

    Thanks for sharing your situation. I personally would hire a property management company. I think the free time is worth paying someone else.

    I was wondering since you started so young. How were you able to purchase seven of them? What I am trying to ask is how did the banks lend you more money?

     Hey Amir...one of the reasons I haven't hired a property management company is because I don't want to be disconnected from my houses. Plus, I have invested so much in getting them up and running, including extensive rehab in almost all of them, they really don't require a lot of maintenance, so I have a hard time paying a PM company to collect rent and deal with the occasional issues.

    I was able to purchase these so fast because I flipped 3 houses in Columbus in 2011 (the bottom of the RE market here) and cashed out and bought 3 rentals. I took the money from those and kept on going. I only have a mortgage on 3 of my 7. 

    0Reply
  • Sean Dawson
    Investor · Columbus, OH · Member since 2015 · 134 posts · 48 votes
    10y

    Wow Brad, seems like you might be switching one job for another.  Franchisee of a daycare seems pretty work load intensive to me.  Different strokes for different folks and all.  

    There are a few podcasts about your "Freedom number"  check those out, not sure of the podcast number.  Natali Morris I think had one.  

    Disconnected from my units is what I am actually going for.  I want the passive cash, and just want to be able to talk to the manager about issues, not do the dirty work anymore.  At least til the kids get old enough then I'll make them do it!  Mike Rowe school of Business 

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    I'll definitely check out the podcasts. 

    I met with the franchise owner on Friday and have decided it's not for me. I am all in on real estate, speaking to a bank at 11:30 today about a late equity loan against my properties. 

    John Horner and I met Friday as well. He gave me the confidence that you can leave corporate and be successful. I'm well on my way. 

    0Reply
  • Amir B.
    Rental Property Investor · Elk Grove, CA · Member since 2016 · 306 posts · 76 votes
    10y

    Great, Brad. Thank you.

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    10y
    Originally posted by @Brad Clarizio:
    Originally posted by @Sean Dawson:

    @Brad Clarizio I see in #3 "Do nothing- continue my existing model by acquiring 2 properties every 12 month period, knowing that I'll soon have to switch to having the properties managed as my career grows" 

     that it looks like you kind of know what to do.  Do you have the expense of a property manager built into your numbers?  By this time you know that its not a get rich quickly deal.  We still manage our 2 duplex's but have a PM for the 12 unit.  And to be honest the money is built into the duplex's as well.  It's just when we say ehh... enough is enough.  But for now I like taking my kids there and looking at the furnace, h20 tank and cutting the grass.  I'm hoping that I am showing them an alternative way of making money that may not be evident right now, but when they get older the seed might be planted.

    Why not refinance what you have instead of selling? Thats what we did and we were able to put the 25% down on the new purchase and still have over 40% equity in what we had.  

    Did you goto the Anthony Chara seminar last week?  Nothing earth shattering, but well worth the time.  It was all about multifamily investing.  We learned we are doing the numbers correctly (Thanks @Brandon Turner and @Joshua D. podcasts were/are fantastic) and learned a few other tidbits.  

    We're on a 5 year mission (without the green chicks) to get out of the rat race.  Might take longer, might be shorter, but we have a plan and are working towards it.  That makes a huge difference with any job you may now have.  Not totally like Office Space, but almost...

    Hey Sean...thanks for the perspective. I guess for me, I'm reaching my ropes on the corporate world faster than I ever intended. I could definitely leverage my equity without selling, which is likely what I'll do, but depending on what path I take it will cut my margins down so far and increase the risk too much. For example, I have a house I paid 69k for, put 17k down and at this point owe almost exactly 50k. It's worth 110k, but if I took out 40k in equity, that payment+mortgage would be so close to the rent it would be dangerous, and I'd be under water if I ever went 1-2 months without a tenant. I just have to be careful not to over leverage. Also, one of my properties is residential but was rezoned as commercial if it ever burnt down, so I'm not able to take any equity out unless I'm doing a commercial loan. 

    I am meeting today with a Franchise owner of a daycare...it would require me to sell all of my rentals. However, I would own the land and building that I'd be erecting for the daycare, which is nearly $1M in value. At this point, I'm undecided where I'll land. I just know I have land somewhere other than where I am now...soon. 

    This feedback is not related to your OP, but if your rentals can not cash flow as you would like at 80% LTV, you may want to consider selling and reinvesting in properties that meet your return thresholds. This assumes no appreciation potential as you are more interested in immediate cash flow to live on and maximum liquidity to purchase additional units.

    Your strategy is working and if you want to accelerate the pace, you may have to continue to value add and flip rather than hold.  Your next flip could be an apartment and that could provide the capital to have enough buy and hold units to live on.

    On the refinance scenario, those proceeds will be used to purchase another property; so, you can look at them as debt on the new property rather than the current property having to cover that incremental debt payment.  It's just semantics but if you can find a property that can support that level of debt, with your value add skills, you likely can make it work.  Fast pace sometimes requires taking more chances and leverage and being good.

    Congrats on your success...good stuff.

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    Thanks guys...I started the process today to pull approx 150k out of my houses to reinvest. The flips around here are minimal is Columbus is extremely hot, but it's a possibility. 

    I'm thinking the 150k will create about a 2k a month expense (they'll be mortgages) and out of that I'm hoping to add 3-4k worth of rent. 

    I want out of where I am within the next 6 months. Not sure I can even make it that long.

    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    10y

    That's great.  Have you decided what you are going to purchase?

    0Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y

    Not yet, looking at potentially 2-3 50k properties "all-in" costs. I don't want to go too low because that brings additional headaches.

    Also, I just did my burn rate calculation, estimating a 10% vacancy, 5% cap-ex and 5% repairs (remember, I always rehab all my places from the start) and I'm exactly $1,000 a month SHORT of where I need to be to cover my bills as they stand today. So, my goal is to add $1,500 in net income and I'd be comfortable. 

    0Reply
  • David Thompson
    Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
    10y

    Hi Brad,

    A lot of folks come to this crossroads...cruising along accumulating SFRs and then you wake up one day and say, is this it.....yes, can continue but is there a faster way....this job is really sucking my soul.  You start thinking about how to scale this...its now a P/T business, you learn more and decide that MF creates more cash flow than SF per $ spent, you may have to pay higher financing costs once you go beyond 10 loans (including your home), more time w/ more properties, etc....all lead you to think of a different strategy.

    This is where I started into small MF because I wanted to leave my corporate job for good and MF could get me there quicker per dollar saved and invested.  I would start exploring the BP sight on MF articles, read some books and see if its for you.  If your goal is cash flow to replace job and get there faster, its time to look into MF strategies IMO.  You could sell some of your SFRs and start into some small MF via a 1031 to start.  I don't think its an all or nothing proposition either.  I still keep some of my SFRs because in our town demand clearly outstrips supply and hence are appreciating very well and mine are hassle free.  Small MFs may not appreciate as much but that trade off is more cash flow. So a balanced portfolio is a nice option here, in doesn't have to be sell all SFRs and go full bore into MF either, keeping a balanced, diverse portfolio to give you options as your investment career continues to grow / evolve.

    Dave

    2Reply
  • Brad Clarizio
    OP
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    10y
    Originally posted by @David Thompson:

    Hi Brad,

    A lot of folks come to this crossroads...cruising along accumulating SFRs and then you wake up one day and say, is this it.....yes, can continue but is there a faster way....this job is really sucking my soul.  You start thinking about how to scale this...its now a P/T business, you learn more and decide that MF creates more cash flow than SF per $ spent, you may have to pay higher financing costs once you go beyond 10 loans (including your home), more time w/ more properties, etc....all lead you to think of a different strategy.

    This is where I started into small MF because I wanted to leave my corporate job for good and MF could get me there quicker per dollar saved and invested.  I would start exploring the BP sight on MF articles, read some books and see if its for you.  If your goal is cash flow to replace job and get there faster, its time to look into MF strategies IMO.  You could sell some of your SFRs and start into some small MF via a 1031 to start.  I don't think its an all or nothing proposition either.  I still keep some of my SFRs because in our town demand clearly outstrips supply and hence are appreciating very well and mine are hassle free.  Small MFs may not appreciate as much but that trade off is more cash flow. So a balanced portfolio is a nice option here, in doesn't have to be sell all SFRs and go full bore into MF either, keeping a balanced, diverse portfolio to give you options as your investment career continues to grow / evolve.

    Dave

    Thanks Dave...I'm definitely open to MF- right now I have 1 duplex and it truly is my highest flowing property. When I did the numbers, I realized how little I am making on my previous primary residence. It's a SF that has about 60k in equity, but after the vacancy, CapEx and repair number I used above, I'm only cash flowing $100 per month. If I sold that one, I could take 40-50k from the equity (I have to factor in the expense of selling) and buy a SFH with cash that would flow 300-400. The one I'm referencing is just so low maintenance...it's my best property in the nicest area (it'd be considered an "A" property by all accounts), but it simply isn't flowing as high as the others. Thoughts? Duplexes are common here but they aren't in the hottest areas.

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