What’s your maximum number for single family homes?
Rental Property Investor · St Joseph, MO · Member since 2018 · 38 posts · 20 votes
I realize this is a totally subjective question but I’m going to ask it anyways. What’s the magic number for single family homes? How many is too many? How many for maximum efficiency? What’s the most you could self manage?
I realize this is a totally subjective question but I’m going to ask it anyways. What’s the magic number for single family homes? How many is too many? How many for maximum efficiency? What’s the most you could self manage?
Nah, you don't want to self-manage. Do it the way I do.
I find and buy a property "off market" using Subject To then I sell to a Tenant Buyer.
When I sell to a Tenant Buyer, since I am offering Terms that they otherwise can't get, I sell the property "As Is" for a "built in equity" of an additional $10,000 to $25,000 depending on the house. (I bump up the sales price what the value WILL be) then I get that (it is called "the back end" when they refinance or sell. The buyers are usually successful businessmen that can't get bank financing because they aren't W2. They have good income, money in the bank and want to buy a home.
I get a "down payment" up front of $20,000 to usually $25,000 then I get the monthly cash flow and then I get a "back end" equity payoff.
When I "Buy & Hold" and only rent it out, I have to take care of a tenant, fix the roof, replace the AC etc. Worry about them trashing the house, worry about vacancies. When I eventually have to replace the roof or AC it wipes out the profit from that house. The most I get up front is one month's rent. I continually have to find new sources of money for the next one, usually a bank. Bank's Stop Lending at 10 properties.
However, when I sell it to a tenant buyer, there are no real estate agent fees, I get $25,000 immediate cash, I don't have to worry about roofs, ACs, and tenants and I get the same cash flow. When the roof or AC goes, the Tenant Buyer owns the house, so he takes care of those. If the market tanks, my built in equity still exists. Each time I get a Tenant Buyer's down payment, that gives me Money to Buy the Next one and the Next one and the Next.
Pretty cool, eh?
I'm at 5 SFR's right now. Recently just sold my duplex, and looking to scale up into apartment buildings. I've had nice cash flow and great appreciation in just a couple years but it's too difficult to scale.
If your goal is just 5-10 units, pay them off someday, and live off of them it can be a great retirement plan. However I want 100+ units and know that it's too difficult to get to that level with SFR's and too hard to manage.
@Kenneth Garrett
Warren Buffett definitely has exposure to lower income housing but it is through Clayton Homes, the largest builder of manufactured housing out there. As for Invitation Homes, they do own 80,000 plus but they’re under the umbrella of Blackstone’s Real Estate division. Steve Schwarzman is the CEO & Jonathan Gray heads the RE empire.
The comments are spot on. Time, resources and goals are your variables. I work 50-60 hours a week at my w-2 and have 4 kids (all in sports). We are closing on SFH #5 this month and #6 next. Not sure I'm interested in multifamily bigger than 5 doors. But everyone has their opinion and goals. My 6 cash flow (with no capex, vac or maintenance included) $400-$500 a month per property. It's a B+ area, tenants are reliable and stay for the long term for the most part. We self manage and don't list with a realtor. I have a waitlist of qualified tenants, but have to show restraint in buying. 75% of assets are in the stock market. We are using REI as a supplement, side hustle.
*I believe our max is 8 sfh for our strategy.
The best deals I get are from those property sellers that sell their properties all wrong. A common way I get deals are from off market properties where the seller is in such a deep panic thinking that a real estate agent might get a cut of his money, that they sell at a considerable loss. Instead marketing their property to 1000's of people, I'm often their only buyer. It makes zero sense, and I love those deals.
Utilizing a property management company certainly might not be everyone's strategy; but in the spirit of this conversation, it will make you completely scalable.
For example - with my company, I employ an accounting firm that handles anything financial that we do for our clients. And that has gone a long way to making my own property management company scalable. When I take on new clients, at least, I know that anything involving money, is their burden (which they want) and not my concern. Without them I simply can't handle anywhere near the same amount of clients I can otherwise. And the thing is, they are ten times better at it than we ever were.
A proper property management company will make you money, not cost you money. In Philadelphia, we have a few of those companies, not just mine. I imagine that in most cities there are good property managers, just like there are very bad ones (Philadelphia has those also).
A property manager has non-stop marketing, overflow of tenants and tenants looking to move from one unit to another. So they should be able to greatly reduce your vacancy and increase your revenue through higher rent than could be gotten otherwise.
A property manager refers vendors constantly. So we have buying power with contractors that should greatly reduce your expenses. In theory, our contractors tend to show up faster, do better quality work, for less money. They want our constant stream of business, plus we make it easy for them, for things like gaining property access and getting paid. It doesn't always work that way; but it often does.
Since this is all they do property managers tend to have the best systems, in place. The best software the best utilities. All these matter in reducing costs, and increasing things like tenant experiences, like retaining tenants longer.
One way to be scalable, could be to use a property manager. A good one would make you more than they cost and 90% of the effort, work and hassle is their worry, not yours.
That said, real estate investing can rarely be completely "passive", including if you using a property management service. But your role, could be overseeing them, making sure they are indeed a good option and that you are maximized. Instead of overseeing each and every aspect of a property.
@Vivian Ji I use Avail.com as my property management platform. It’s fairly robust, very affordable and basically accomplishes my needs. I use it to market the property, screen applicants, draft leases and then manage properties. Tenants have a portal and they can submit all maintenance request which are then delegated to the appropriate parties. There are several similar options out there like cozy and I’m sure they’re all fine.
I also use lockboxes on my units for showings. I collect most of the applicants info up front through avail - including a photo ID - and if they are qualified I simply send them a pin that’s active at the time they want to view. They can then let themselves in and out. This has been game changing for me. I hated this part of the business and using this process has freed up so much of my time.
I occasionally need to have an additional document signed and I use DocuSign for that. We are completely paperless so I also use Dropbox to store any important documents.
I'm currently researching ways to automate my email responses. I've been tinkering with gmails canned responses and am exploring a VA to handle some those tasks. As we continue to grow I'll add a dedicated VA to essentially replace myself in the process.
I hope if anyone else has a system or a technology that they love they’ll share it too!!!
@Vivian Ji I use Avail.com as my property management platform. It’s fairly robust, very affordable and basically accomplishes my needs. I use it to market the property, screen applicants, draft leases and then manage properties. Tenants have a portal and they can submit all maintenance request which are then delegated to the appropriate parties. There are several similar options out there like cozy and I’m sure they’re all fine.
I also use lockboxes on my units for showings. I collect most of the applicants info up front through avail - including a photo ID - and if they are qualified I simply send them a pin that’s active at the time they want to view. They can then let themselves in and out. This has been game changing for me. I hated this part of the business and using this process has freed up so much of my time.
I occasionally need to have an additional document signed and I use DocuSign for that. We are completely paperless so I also use Dropbox to store any important documents.
I'm currently researching ways to automate my email responses. I've been tinkering with gmails canned responses and am exploring a VA to handle some those tasks. As we continue to grow I'll add a dedicated VA to essentially replace myself in the process.
I hope if anyone else has a system or a technology that they love they’ll share it too!!!
This is very helpful! Thank you.
I have some data massaging skills and programming skills so I am thinking to utilize that into our REI biz and make it more scalable..
I have not started anything yet but if I found anything, I will post here and share to the group.
My goal is 10 SFH, as I'm just looking to supplement a $3,000 a month pension (inflation will slowly drain its buying power, so turning to real estate to combat that effect) that I'll start drawing from in 2023 at the age of 53.
I currently own 4 rental properties and looking for #5. (Planning on buying 1 a year until 2023)
Right now...
Collect $4,580 a month in rent.
Expenses are $2,298.01 in total mortgage/tax/insurance and $409.15 in total PM fees
Net $1,872.08
Of course other expenses come and go (gutters need cleaned out, lease fee on a new tenant, annual pest control, etc.) so that net is never a fixed income, but very variable.
Right now I don't touch any of that money, as it goes into a business account to be saved for the next one.
My primary residence's mortgage is also due to be paid off in 2023 as well freeing up even more loot.
So, between $4K to $5K a month from the rentals, $3K on the pension, plus $2.5 from doing something else part time.
I figure maybe between $8K to $10K a month when all is said and done.
My PM teams have really been a blessing as they vet tenants with great benchmarks to find the best, as well as property inspections, and keeping me informed.
I just got an e-mail the other day from my PM in Alabama telling me that they went to our property for its inspection and found it in great shape and commented that this tenant takes really special care of the house and the tenant told the PM while he was there that they would love to stay there for many more years (they will be resigning for their 4th straight lease.)
Now that is music to a landlord's ear, a tenant who takes special care of your property and wants to stay for a long time. :)
My goals have changed in the last couple of years.
I'm not going for the 10 properties anymore and I stopped at 7, but then sold 2 for 1 for a big profit (double what I paid for it!) and now have 5 properties, 1 for residential, 3 for long term rentals, 1 for short term rental, and I've started buying mortgage notes which I have bought two so far where I am the bank and not dealing with property taxes, insurance, or repairs as these notes are for land lots with owner owned mobile homes.
I'm making good money as is without having to buy more properties, which I don't want to do anymore, I've reached my tolerance level, and want to avoid more cost to me in terms of, insurance, repairs, taxes, dealing with tenants, etc.
No, I have not paid off any of my properties, so to answer your question I was not paying them off before I bought another one. I don't pay it off because I want the tenants to pay off my mortgage with their rent. I get to write off the mortgage interest on my taxes.
My residential will be paid off in 2023 :)