Cash Flow and Financial Freedom

4 Replies

Hi BP community, I'm seeking everyone's advice. My goal is to generate $6,000 a month in cash flow in 10 years so I could have the option of quitting my job if I wanted to. I'm hoping to purchase my first rental property this year, I have enough for a down payment on a 2 flat (FHA loan) plus a couple thousand for reserves, I plan to house hack.

I have a W2 job, making 50-60k a year. I'm am able to save 1,000 a month.  I do not have any loans nor debt, my car is paid off.  I am currently renting, I do not own a home and I live in the Chicagoland area.  My goal is to generate 6k within 10 years with the LEAST amount of properties!  Do you guys think this is doable given that I would need to put down 20% on these rental properties? 

Any suggestions? How would you guys go about it? Or would you recommend single family homes because the down payment may be less than a multifamily?

Thanks for taking the time to help me out everyone!

Congrats being debt-free @Elsa M.

This will completely depend what type of assets you are buying for what price & terms and who will be managing it. Condos for instance will charge HOA fees, limiting your net cash-flow.

A PM will run 14-16%+ as they charge a month's rent to place a tenant, take an extra month to turn a unit and charge you premiums and overrides for the work.  This will of course add years to your timeline of getting to net $6k per month.  

I've paid off property with money saved by self-managing.  Paid off property 'cash-flows' much better than property with debt.  

It’s more than doable.

I personally like the idea of fixing the property to rent it out. More commonly known as the BRRRR strategy here on BP. Take this for example:

Buy a house for $100k. Let’s say rehab will cost $30k. (First you need a rehab loan. A lot of hard money lenders will do 85-90% financing on these loans. So you’d bring down 10-15 percent. Loan amount would be anywhere from $110.5k - $117k. Once it’s fixed up you can refinance it off of the projected ARV. Let’s say the ARV is $185k. And let’s also say we can refinance up to 75% to be conservative. We now can finance up to $138k and still have a quarter of the houses worth in equity to remain. This can cover your refinance costs, or potentially even put money back in your pockets. This way essentially have very little to no money in the home, and you can turn around and buy more properties. This requires more knowledge of contractors, conditions of homes, and a little more risk. But with more risk, comes reward..

Hope this helps. Try reading as many books as you can and keep seeking guidance and success will follow.

Thanks @Steve Vaughan and @Wil Reichard , So if I am not planning on doing the BRRRR method, because I don't want to deal with all the rehab that will be needed, how else would you go about it, given my situation?

Step 1: Find a good market. 

What I started to do was purchase a home with an FHA loan. (3.5%) down. I live in the house for a year, then move and acquire another home using the FHA. Obviously these have to be great deals at great prices because most rental numbers can work with 80 LTV, but my houses are at 97.3 LTV so it requires more cashflow or a better DSCR. I act as if each home I acquire for myself with the FHA will work numbers wise on a rental.

Hope this helps! 

Also, dig DEEP into BP podcasts and books in general. They'll give you more information than any one person could!

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