Evans, GA · Member since 2014 · 124 posts · 21 votes
This is a question that came to my mind earlier today and I know that it's possible but I want to see what is the best and fastest way to acquire 20 rental properties in one year?
Doors or even buildings doesn't mean all that much without context. For me it was a question of the outcome. I was looking to create an asset base that would allow my wife and I a specific lifestyle. As a business owner who didn't have any formal retirement plan or some large corporation matching in a 401k, the strategy was up to us. We started with a simple plan. We needed 140k a year after taxes. I sat down with what I knew (3br houses in Santa Cruz, CA) and figured that if I could repeat my 1st success, it would take 12 of them with the right circumstances to achieve the goal. So I set out to acquire the right 12. By the time I bought my third, I learned enough to realize that there were significant obstacles to acquiring 12 (mortgage among others), but that getting the 12 wasn't the goal, the asset / cashflow base was. So we pivoted and began acquiring multi-res. It took 7 years to have 10 doors and it is quite likely we will be around 20 this year.
My point is, 1 property, 20 properties or 200 properties doesn't mean much. A more practical question might be, considering the following working capital + experience + relationships, how do I get the following outcome (money / time ...).
@Jeff Plair Quick question Jeff, I assume you are looking for your first deal and you goal is to obtain more than 1 property in 1 month. So are you making atleast 10-20 offers which will get you 1-2 properties in 1 month?
Once you make an offer, do you have the cash available to close the property quickly and get things moving on?
I would suggest defining goal is a great first step, but without tactical steps for execution , the goal is meaning less and very ambitious
Speed is not the key. Stable and sustainable cash flow or income is important.
Building a portfolio of 20 properties in 1 year is like driving a race car as soon as one learns driving. Investing is long term game
. I am encouraged by your passion and sure you shall do wonders.
I assume you have either have cash and/or line of credit to pay for 20 properties. Then it is easy really. Find an area where many investment property companies do business like in ohio, florida, memphis, atlanta etc. these companies have plenty of investment properties ready for sale - rehabbed, tenanted and managed by their handpicked property management firms- complete with comps as to ROI, COC etc. buy 5 each from 4 competing investment companies and walah, you have 20 properties just like that!!
Closing 20 in a year would be pretty easy. After you do a couple and have title, insurance and lending in place you just have to put a house under contract and send one email to all three. They will do the rest and you just have to show up to closing with some $$. If you are all cash you can take the lender out of the picture and it is even easier.
After you close it is easy if you are handing them off to a property manager. If you are managing you will just have to do/coordinate what needs to be done to each to lease them out and do the standard management loop on each.
I like the idea of one property with 20 doors. That's the fastest way to get 20 rentals for sure! I have owned many rental properties - mainly SFRs - and as I get back into the rental game (after being out for 15 years) I am focusing on multi-family. This is where serious, long term rental income comes from, IMHO. At the top of my game I had 87 doors, mainly SFRs, with a management company charging 6% to watch over the properties. I liquidated these over the years to get cash to buy homes at the auctions in a much larger city. Not sure if that was the wisest thing to do, but it was a fun ride for a decade! Now building rentals up again for the long haul.
Perhaps a cash flow goal is a better goal than number of units. Would it be better to hit 20 units with no positive cash flow. Or 5-10 units with very strong positive cash flow.
If the goal is to acquire a certain number of units then that may be an incentive to take weak deals because you can pull them off, instead of focusing on great deals.
Shane said it best, the quantity of doors is of less importance than the total cash flow you get. Having goals and a plan to achieve them is key.
While you may be taking a big bite by going with the one apartment with 20 doors, dont let fear stop you from that. Managing apartment units is not that much different than 20 single family homes and I can argue all day long that the economies of scale and ease of having one location to go to is more beneficial than the 20 SFR plan. One could argue that the SFR plan may have better appreciation over time. True, possibly, but the one apartment will likely cash flow better and be one transaction rather than 20 saving you closing costs, legal, and exiting out of 20 homes is a lot more difficult than exiting out of one 20 unit apartment building. Some food for thought!
Keys: Know your market, know operating expenses, vacancy factors, average cap ex expenses, and know how to manage both tenants and property managers.
As a new, very conservative investor, starting out...I would advise that you get your systems in place. Make sure you have your initial investment begin to cash flow. Then weigh the scenarios for advancement. You will soon see the benefit vs. Time invest and weigh how you can, safely, move forward.
Best of luck!
Steve
This is a great post, love all the great thoughts. What I'd like to know is after all expenses are paid, what is a good goal to get per door? I've heard @Brandon Turner talks that his goal is $100. Is that what most investors go for in buy and hold strategies? Just curios.
This is a great post, love all the great thoughts. What I'd like to know is after all expenses are paid, what is a good goal to get per door? I've heard @Brandon Turner talks that his goal is $100. Is that what most investors go for in buy and hold strategies? Just curios.
Sure, $100 per door monthly is a good target, below that and you have yo work harder to accomplish the monthly income goal. Above that and you can work less to achieve the same cash flow goal.
@Jeff Plair it's great to think big. Its better to plan thoroughly. You need a plan of how you will find good cash flowing properties in good areas. The main holdup for most investors is money. It is easy to buy 20 with cash if you have it. It is harder if you have 20% down and get a conventional loan, and it is dam hard to do if you are broke with no money. First plan your cash goal. How much cash flow per door, and start looking. We have a saying in the horse business How do you end up with a million dollars in the horse business? Easy start with two million. If you do not have good investment criteria you could become house poor, by not buying the right kind of properties. If you find the right kind you will probably need professional management which you will need to learn how to interview and select. You grow your business based upon what it can generate not on how big you can make it. For example if you are in business and want to employ 20 people you can do that, the trick is to build your business so the income stream and work demand justify hiring 20 people. Hope this helps.
Great thread, Jeff. I think some good advice has come in. I am in a similar situation. We have 3 rentals and want to really expand our holdings. I think there is a balance to be sought- and each individual has their own balance.
For us, it's not having too many properties mortgaged, having cash on hand for opportunities, problems and emergencies, and finding and acquiring the right properties.
Unlike most, we do love our condo rentals. We have a great HOA that, while a bit high on the monthly assessment ($270 give or take a few), includes utilities, basic cable and HVAC maintenance. It is a complex for older tenants, and our tenants love knowing they write one check each month to cover it all. Our cap rate is a little lower than we would like, around 7.5%, but overall we are happy.
I will be curious to see how you progress, us being in similar situations. I am about ready to try some different things- a 4-plex, more SFRs, rehabbing and flipping, etc.
I think the bottom line is we all will find our own way and our own balance. Best of luck to you and keep us posted. I will do the same, though am in somewhat of a holding pattern for the next month or two.
Before you dive in and think about going after 20 properties... I would ask yourself what your goals are. Are you doing it because you want cash flow? Do you want equity? Do you want to just be able to say you knocked out 20 in a year? What do you want out of it.
When I started in 2001/2002, I did that. I started acquiring like crazy without a real thought to what I was trying to do. I believe over 25 in the first two years, yet with no real direction other than making money... that was a mistake as I had no direction, no model that I was following.
In my experience, the reason of "making money" will only take you so far. Had I realized I was a long term cash flow investor when I started I would have made some very different decisions. Be sure what you are trying to achieve, then plan acquisitions/flips/etc... based on what you are trying to accomplish.
@Maurice P. Thanks for that wisdom, Thats where I am now. Making goals and a plan. I heard this saying once and it stuck with me, "If your goal is nothing, you will hit it every time"