Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
I’m at $1890/month passive income currently from 4 rental properties and want to scale to $10,000/month in the next 3 years. What is the most efficient or fastest route to get me there?
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6y
Nice to finally see a "$10,000/month" post where the OP actually owns a property.
You are at almost $2k per month already with 4 units...that is strong cash flow if it covers everything (including vacancy, management, cap ex reserves). Sounds like you need 15 or so more units and you are there. Keep doing what you are doing...scale it up using other people's money, commercial loans, and purchasing fixers.
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
@Brian Garrett as a syndicator, how do the numbers work out? Generally an acquisition fee and percentage of equity, but isn’t the end goal almost always to do value add and sell within 5 years? At that point, it almost seems more like a job than truly passive right?
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6y
Nice to finally see a "$10,000/month" post where the OP actually owns a property.
You are at almost $2k per month already with 4 units...that is strong cash flow if it covers everything (including vacancy, management, cap ex reserves). Sounds like you need 15 or so more units and you are there. Keep doing what you are doing...scale it up using other people's money, commercial loans, and purchasing fixers.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
Matt: I should have been more specific in my comment - Marin County is a steep market with a long history of increasing rents. Right now, Marin is benefiting from the substantial flow of people leaving SF in search of a backyard and home office. Building here is near to impossible. I see only upside pressure on rents. As for SF itself, rents have dropped from mind-numbing to merely nose-bleed level. Long term, I see no case for downward pressure as the city is stuffed into the end of a peninsula and has nowhere to grow. The prices are high but imagine achieving $10,000/month net by owning and having to manage only two SFR's with a tenant base that on average has at least one member with a graduate level degree or a wikipedia entry.
Keep doing what your doing. Your at about $450 per unit. I am assuming those are leveraged with mortgages. What if they were paid off? Would it generate $1000-$1500 each. Then how many do you need ten or less. Your 3 year pressure time line will cause you to go a different route. Add some flips in there for cash to buy more or pay them off or go bigger with multi-family. SFR are a slow methodical way to generate wealth. My goal is a minimum of 10K per month as well. I'm at $4500. In 5 years I will have reached my goal with SFR and some small multi-units. I say stay the course.
For income: your best bet is to keep trading those properties via 1031 exchange into bigger properties and using your profit to try and buy new properties. If you are making close to $2,000.00 in actual income a month that is great. I would lower your goal somewhat to $5,000.00 over the next 3-5 years. I use to be a financial advisor before my current job and I always advised people not to stretch yourself too thin. It sounds like you are doing a great job of where you are at.
Investor · Tampa, FL · Member since 2017 · 589 posts · 251 votes
6y
Your doing all the right things. Not every multi family property will prove better returns than your rentals now. A lot of benefits to owning single family homes.
I’m at $1890/month passive income currently from 4 rental properties and want to scale to $10,000/month in the next 3 years. What is the most efficient or fastest route to get me there?
How passive are you looking for? I think the fastest 'passive' way is to find distressed 4 unit properties, rehab each unit whenever there is a tenant turnover and jack up the rent to the market rate. That's what I do in a nutshell with low-income areas of Los Angeles. Low income is relative though. Section 8 rent comparable for a 2br/1ba in LA is just under $2,200/month.
Of course, it's debatable whether or not this can be considered passive....but I'm able to easily manage this while working a demanding W-2 job.
I also agree with Nicholas U's suggestion to exchange up to multi-units.
Lowering your goal is the worst piece of advice I’ve ever heard. Think outside the box and grind harder.
None intended lol. Making realistic goals are important in life. You should push yourself but people get into bankruptcy because they don't plan for a bad month. That is why I advise how I do. Yes I am cautious but that doesn't mean you can't be aggressive.
Investor · Member since 2019 · 25 posts · 24 votes
6y
What do you need to take the formula that's working for you now and get it to $10K? That's the question I'd ask. If you have your niche and something that is working, add what you need to build upon it.
Nice to finally see a "$10,000/month" post where the OP actually owns a property.
You are at almost $2k per month already with 4 units...that is strong cash flow if it covers everything (including vacancy, management, cap ex reserves). Sounds like you need 15 or so more units and you are there. Keep doing what you are doing...scale it up using other people's money, commercial loans, and purchasing fixers.
Thanks Mike! So it's actually 7 units, 2 single family houses, 1 duplex and 1 triplex. I'm cashflowing closer to $270 a month but definitely am setting aside 5% for vacancy, 7% for property mgmt (they're all professionally managed), and 10% total for cap ex/maintenance. That puts me closer to needing about 30 more units total.
I'm sitting at about $20,000 in cash reserves so feel comfortable with that amount with what I have currently. I think it's definitely high time for me to start scaling up using other people's money and working harder to find fixers.
My market is Duluth, MN. Great market for cashflow, not so great for appreciation/job growth. If you were me, would you stick with what works up there (2.5 hours from home, so already investing at a distance) or should I do some market research and pick a new market?
What do you need to take the formula that's working for you now and get it to $10K? That's the question I'd ask. If you have your niche and something that is working, add what you need to build upon it.
That is a great way to look at it, thanks, Jim. The formula so far has been really not much of a formula at all so that's a good starting point. I've mostly found properties on the market in Duluth on which the numbers made sense to cashflow well, besides my most recent which was an off-market deal. I think I've found that single family homes in that market cashflow really well near the college campuses, so I could pivot to focusing on getting more properties like that (2 of my single families fall in that category and are my best performing properties).
To scale, I need to build a process around generating off-market leads, establish relationships with more contractors, and be consistent with it.
I’m at $1890/month passive income currently from 4 rental properties and want to scale to $10,000/month in the next 3 years. What is the most efficient or fastest route to get me there?
How passive are you looking for? I think the fastest 'passive' way is to find distressed 4 unit properties, rehab each unit whenever there is a tenant turnover and jack up the rent to the market rate. That's what I do in a nutshell with low-income areas of Los Angeles. Low income is relative though. Section 8 rent comparable for a 2br/1ba in LA is just under $2,200/month.
Of course, it's debatable whether or not this can be considered passive....but I'm able to easily manage this while working a demanding W-2 job.
I also agree with Nicholas U's suggestion to exchange up to multi-units.
Thanks Tony. Not super passive, I really want to get to the point where I can replace most of my w2 income with this to have greater time flexibility to spend with my wife and kids, but not to the point where I want to kick my feet up and do nothing. So that strategy could work. I haven't seen a ton of 4-unit properties in Duluth but haven't looked into them much in other markets so that could be a nice way to go. Not opposed to section 8 either, I've had one section 8 tenant for 3 years now and she's been great.
Lowering your goal is the worst piece of advice I’ve ever heard. Think outside the box and grind harder.
Thanks for the input Justin. @Nicholas U I get where you're coming from, but my goal is to replace my w2 income so I can have greater time flexibility to spend with my wife and kids before the kids graduate and leave home (they're 3 and 9 months right now).
Your doing all the right things. Not every multi family property will prove better returns than your rentals now. A lot of benefits to owning single family homes.
Thanks Zachary. There are a lot of knocks against single family, but I agree there are a lot of benefits and wouldn't mind scaling up to 15-20 of those then maybe looking into multifamily. So many preach syndication, but it seems to me that space is so overheated right now, plus I don't love the idea of taking people's money into my own hands until I've actually done a larger mutli-family on my own, on a JV basis or something like that.
Keep doing what your doing. Your at about $450 per unit. I am assuming those are leveraged with mortgages. What if they were paid off? Would it generate $1000-$1500 each. Then how many do you need ten or less. Your 3 year pressure time line will cause you to go a different route. Add some flips in there for cash to buy more or pay them off or go bigger with multi-family. SFR are a slow methodical way to generate wealth. My goal is a minimum of 10K per month as well. I'm at $4500. In 5 years I will have reached my goal with SFR and some small multi-units. I say stay the course.
Good Luck.
Hey Kenneth. I wish I was at about $450/unit but those 4 properties are made up of 2 SFH's, 1 triplex and 1 duplex, so closer to $270 a unit. However the SFH's do cashflow pretty close to $450 on average, so I think that's where I should put more of my focus. They are all leveraged with mortgages, and rents are around $1800/month on average across the 4 buildings. So I probably would be right around that $1500 a month range per building. I've thought about going the flip route to generate more income to buy more of these, I'm just concerned I'll be left holding the bag with how hot the market is and a lot of people claiming a recession is imminent. Maybe if I bought right though and had an exit strategy involving BRRRR I could mitigate that risk.
That is awesome to be sitting at $4500/month. $10,000 must seem a lot more attainable at that vantage point! Nice work!
Matt: I should have been more specific in my comment - Marin County is a steep market with a long history of increasing rents. Right now, Marin is benefiting from the substantial flow of people leaving SF in search of a backyard and home office. Building here is near to impossible. I see only upside pressure on rents. As for SF itself, rents have dropped from mind-numbing to merely nose-bleed level. Long term, I see no case for downward pressure as the city is stuffed into the end of a peninsula and has nowhere to grow. The prices are high but imagine achieving $10,000/month net by owning and having to manage only two SFR's with a tenant base that on average has at least one member with a graduate level degree or a wikipedia entry.
Hmmm that sounds like a good spot to invest. Makes sense about the flow of people from SF with all the COVID stuff. Looks like rents in Marin County are around $5,000 a month for a 3-bedroom house, are there places that rent for higher than that to get to the $5,000 in cashflow you mentioned? Yeah the caliber of tenants in the area seems to be stellar.
Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
6y
@Matt Jennissen sounds like you're on the right track. BRRRR process if you can systematize it will be the fastest way to scale. It's been said a million times before but it just comes down to finding deals and finding a way to add value and continually recycle your capital creating more cash flow. Best of luck man.
Investor · Fall River, MA · Member since 2014 · 399 posts · 300 votes
6y
@Matt Jennissen this won't get a lot of votes, but invest $1,000,000 at 12% tomorrow and you've got $10k per month.
If you don't have the $1,000,000 worth of investment capital then the following is the fastest path and is something I have done recently in this market:
Find a portfolio or building that is worth $3,400,000 and get it under agreement for $2,000,000.
Raise all the down payment capital via private money OR have the seller carry a 10%-20% note and finance the rest with a traditional mortgage.
Spend the next year managing the property well, raising rents and keeping the expenses low for prep to sell the property at or above the $3,400,000 ARV.
if everything works well you will have it sold in a year and YOU can either hold $1,400,000 worth of paper on the sale by offer partial seller financing OR sell the property, pay the taxes and reinvest the remaining $1,000,000in a 12% interest bearing investment vehicle.
You could also buy 50 units that cashflow $200 per month, but it would involve more management.
Any of these options will work and I've done all of them.