Fastest route to $10,000/Month Passive Income

108 Replies

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?

@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?

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.

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.

@Matt Jennissen

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.

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.


Originally posted by @Matt Jennissen :

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.

Originally posted by @Justin Reader :

@Nicholas U no offense intended... but!

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.

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.

Originally posted by @Mike Dymski :

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?

Thanks again, Mike. 
 

 

Originally posted by @Huy Le :

@Matt Jennissen 1.5 million invested in syndications with an 8% preferred return

Thanks Huy, not really an option for me at this point or within my timeline.  

Originally posted by @Jim J.:

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. 

Thanks, Jim!

Originally posted by @Tony Kim :
Originally posted by @Matt Jennissen:

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. 

Thanks Tony!

Originally posted by @Justin Reader :

@Nicholas U no offense intended... but!

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). 

Originally posted by @Zachary Ray :

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.

Originally posted by @Kenneth Garrett :

@Matt Jennissen

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!

Thanks for the advice Kenneth, appreciate it. 

Originally posted by @Darius Ogloza :

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. 

Thanks for the input. 

 

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