Encouragement Needed - Looking to Get Into Rentals

Chicago, IL · Member since 2016 · 29 posts · 8 votes

Hello,

I'm 26 and looking to get into the rental business. I'm truly inspired by everyone's stories and hope to one day too create a cash flow stream for myself through rentals.

I spent time today looking into properties online and running figures. After doing some calculations though and factoring in the costs listed on this site to consider as well as the mortgage it seems that I will only be profiting on average about $300/month.

I could be leaving something out in my calculations and in no way am I thinking this will be a "get rich quick" avenue, but it is hard picturing much sucesss with such low margins. Any words on the subject would be more than appreciated!

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Paul Ueber

Flipper/Rehabber · Fort Wayne, IN · Member since 2015 · 10 posts · 2 votes

If you want to really hit big cash flow right away, leverage is fastest way to do it. But if you're hitting $300 net a month then that's nothing to scoff at. In terms of Fort Wayne, I'm finding a lot of good houses for my buyers in the 46808 area right now with a low cost of entry. Good area and with upside due to impending riverfront development.

Illinois is a tenant friendly state from what I understand vs landlord friendly Indiana. Rental market just across border from Chicago in Indiana is killer if you're looking in that area.

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Phil Bottfeld
Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
9y
Kyle if you start now and buy one rental per year (assuming $300/monthly cashflow with no hiccups)... You will have several hundreds of thousands of dollars in annual net rental income by your 50s. It takes time but the hardest part is getting the snowball started. It is kind of like a diet but once you start losing the weight and start seeing results, you start to really buy in. Hope this helpful.
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Kyle Wilkins
OP
Chicago, IL · Member since 2016 · 29 posts · 8 votes
9y
@Phil Bottfeld Phil, this exactly what I needed to hear. Thanks so much for commenting!
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Account Closed
Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
9y
Chicago and IL, not the best place to invest. The unstable property taxes can really screw with your returns. I invest here because I live here and work very hands on with rentals, otherwise would invest elsewhere where higher ROI's are more common.
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Kyle Wilkins
OP
Chicago, IL · Member since 2016 · 29 posts · 8 votes
9y
@Account Closed That is kind of what I was thinking but wanted to get another opinion. Although I'll be living there as well but having family in Fort Wayne, there will be the first place I look
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Kyle Wilkins
OP
Chicago, IL · Member since 2016 · 29 posts · 8 votes
9y
@Derek Luttrell You and I sound like we're cut from the exact same cloth. I have spent a lot of time myself down in Bloomington so it sounds like we're aware of the same areas. Everyone seems to have the same thought process I have in regards to Chicago. I believe I'll look in Indiana for now and may consider Chicago once I am to get a portfolio up and running. Congrats on your closing next week!
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Shaun Patterson
Property Manager · West Palm Beach, FL · Member since 2012 · 296 posts · 143 votes
9y
My simple math equation would be what's 300 x 10? It sounds small now but in anything you do the numbers add up with scale and on top of that your expenses go down with scale. Keep the focus up and after the first few things will start to snowball.
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Dave VisayaPro Member
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Audio Engineer and Investor · Cebu City, Cebu · Member since 2013 · 7k+ posts · 881 votes
9y
Hey @Jim Schock @Kyle Wilkins here's the book: http://biggerpockets.com/nomoney
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Jason G.Pro Member
Rental Property Investor · Long Island, NY · Member since 2015 · 434 posts · 495 votes
9y
@Kyle Wilkins, if an investor purchases one SFH and the net income is $300 and is relying solely on that income to purchase a second property, then it will take a very long time be able to scale to the amount of properties necessary to become financially independent. They can use the BRRRR strategy or work out different strategies for using OPM to expand. Personally I've just closed on my first investment SFH and plan on purchasing a second one in the next two to three months from saving money over time for the down payments and taking out conventional mortgages for the properties. From my income and my partner's we can save up enough for approximately two down payments a year and I'm in the process of taking out a HELOC on my primary residence to allow for the purchase of several more additional properties in the span of a year and a half to two years. Like @Phil Bottfeld and @Shaun Patterson mentioned, once you have ten SFH or more, you are looking at a much more significant cash flow. Instead of netting $3,600 a year, at ten properties you are now netting $36,000 a year. If you just stopped there and let the properties pay the mortgages itself for the next thirty years you will be retiring with a six figure income.
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Andrew McNulty
San Diego, CA · Member since 2015 · 12 posts · 1 vote
9y
@Kyle Wilkins You sound like you're a little disappointed by the $300 number. Just out of curiosity, did you have a specific cash-flow number in mind that you were expecting? I only ask because I am not from that area and I'm curious how well properties cash flow in Indy. Also, is Indy seeing much appreciation?
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Andrew SyriosPro Member
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Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
9y
Buy and hold real estate is a get-rich-slow scheme. You're not going to cash flow a lot per month with just one rental. But as you build a portfolio, that cash flow will go up. Then you add appreciation and principal paydown over time, and you'll eventually find yourself with a good amount of wealth.
Podcast Guest on Show #121
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Account Closed
Contractor · Los Angeles, CA · Member since 2015 · 887 posts · 323 votes
9y
@Kyle Wilkins I have not read through everyone else's responses but think about implementing the BRRRR strategy. This way you can scale quicker if you like. Of course when scaling always be sure you have the systems in place to handle the growth and you are doing so wisely. All the best to you!
Jorge
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