Baltimore, MD · Member since 2019 · 80 posts · 47 votes
7y
My short-term goal is to have a minimum of 48 properties in 3 years @ $200 per month = $9,600 per month passive income. My ultimate goal is 100 properties @$200 = $20,000 per month of passive income.
Springfield, MO · Member since 2017 · 158 posts · 114 votes
7y
@Jim K. You are making a lot of assumptions in your post. At the bare minimum, if you put more down on a house, your monthly cash flow increases because your loan is lower. Very simplistic but it’s true.
Wilmore, KY · Member since 2017 · 4 posts · 3 votes
7y
I think the better way to evaluate is cash on cash return. I may be in the in minority but 10% is where I consider to buy. I recently found a 22% and jumped all over it. It was on a $75k purchase with 15% down loan. Wont make me rich but I believe it is the most efficient use of my cash.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
7y
@Michael Baradell
With 20% down, 30-year fixed interest rate mortgage, completely turnkey (rehab completed where the seller fully extracts the value-add), subtracting PITI, 8% vacancy, 10% PM, 5% maintenance, 5% cap-ex, absolute minimum would be $100/door, ideally getting $150/door or more. My worst is probably $120/month and best about $200/month after all the above. I could say it's rent - PITI like many do, but that's not a true number. I do zero work, zero rehab, zero dealings w tenants, etc. Completely passive. While those numbers may seem weak to many who are able/willing to do the rehab/value-add and/or tenant dealings themselves, I do none of that. For a completely rehabbed home that's completely passive, I'm okay with it.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
7y
@Michael Baradell
Here are real examples of last deals.
1. Bought two four plexes near a Western Oregon Campus. $315K price for 4 2 bed/2 bath units one block from campus. $60k down at 4.75% owner carry. Put $100k cash to rehab, took rents from $600 to $1100 per unit.
2. Bought 4 plex in Albany, Or. owner carry, $260k price with $30k down and $81k cash to rehab. Two vacancies when I bought and other two units were $625 each. Now I average over $4000 in rents with all 4.
3. Bought 5 plex for $371k with 20% down and commercial loan at 4.25% first three years, and 10 year balloon payment. Put $30k to rehab and doubled those rents, and gave tenants the garbage bills.
4. Bought 8 plex in Forest Grove for $642k, with 20% down with commercial loan at 4.75% we rehabbed all the units and went from $3000 ish rents to $8500 ! Its near Pacific University
My son manages the 8 plex as he lives in Beaverton, Or and I manage the 3 four plexes and the one 5 plex. I do NOT use any software, and many will not believe me but I have next to ZERO vacancies! I do one year leases near college campuses and advertise, screen and then show months prior to any vacancy. Is it easy? Not at all, and I am busy this time of year, but I run this better than any property manager would ever dream of. Retirement is the goal!
@Mark Cruse I agree with your cash flow assessment.
With 20% down, 30-year fixed interest rate mortgage, completely turnkey (rehab completed where the seller fully extracts the value-add), subtracting PITI, 8% vacancy, 10% PM, 5% maintenance, 5% cap-ex, absolute minimum would be $100/door, ideally getting $150/door or more. My worst is probably $120/month and best about $200/month after all the above. I could say it's rent - PITI like many do, but that's not a true number. I do zero work, zero rehab, zero dealings w tenants, etc. Completely passive. While those numbers may seem weak to many who are able/willing to do the rehab/value-add and/or tenant dealings themselves, I do none of that. For a completely rehabbed home that's completely passive, I'm okay with it.
I absolutely love this. Many people are ok with doing all of the work but what about people like my wife and I who want to invest in RE but also want to continue doing the careers we love? I am perfectly fine with $100 per door through a reputable TK provider such as Memphis Invest. I am not trying to get rich right now through cash-flow. My goal is to be able to retire early at say 50 or 55.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
7y
@Jessie Nunley, thanks for the kudos. I’m with you on the retire early at 50(ish) plan. I go back and forth, but my thoughts at this point are that I’m planning for a two-phased retirement:
Phase 1: Continue to build up turnkey real estate portfolio (also do some syndications, etc.) and have that cover my basic living expenses in about 15 years. In the mean time, I’m focused on reducing unnecessary expenses, increasing savings rate, and continuing to build assets (both retirement plans, rental properties, etc.). At a minimum, I’m thinking to scale up to 10 SFRs over the next 5 years and then (possibly, this is what I am always debating) killing off those 10 mortgages over the following 10 years (ROE is low, but cash flow should sky rocket). Then I can focus on passions, etc., for a little additional income.
Phase 2: At traditional “retirement age,” I will have the option to take distributions from qualified assets I’ve built up over the years that will have compounded nicely over multiple decades.
@Jessie Nunley, thanks for the kudos. I’m with you on the retire early at 50(ish) plan. I go back and forth, but my thoughts at this point are that I’m planning for a two-phased retirement:
Phase 1: Continue to build up turnkey real estate portfolio (also do some syndications, etc.) and have that cover my basic living expenses in about 15 years. In the mean time, I’m focused on reducing unnecessary expenses, increasing savings rate, and continuing to build assets (both retirement plans, rental properties, etc.). At a minimum, I’m thinking to scale up to 10 SFRs over the next 5 years and then (possibly, this is what I am always debating) killing off those 10 mortgages over the following 10 years (ROE is low, but cash flow should sky rocket). Then I can focus on passions, etc., for a little additional income.
Phase 2: At traditional “retirement age,” I will have the option to take distributions from qualified assets I’ve built up over the years that will have compounded nicely over multiple decades.
I also have a very similar plan. I would like to get to the 10 SFH number and then combine that with the military retirement my wife and I will each get when we turn 60 (we are both guard members). We estimate that 10 paid off SFH and our military retirement will give us $15-20k passive every month. That may not seem like a high number to a lot of the folks on BP but we live extremely modest lives with literally $0 debt until we purchase our first rental property. Perhaps our goals will change down the road but I think it is smart to start small and think about investing in a rational way instead of worrying about the immediate cash flow. We are very big believers in the power of delayed gratification.
I think some of you are over thinking this. We know cash flow can vary. We know there are unexpected expenses. We know you have to take into account multiple factors but it's basic, if a person is making $400 a month after everything is paid then that's it. That's what most people want to know. We know a lot goes into it but if one property is making $200, another is making $400, and another making $1000, currently thier cashflow is $1600.
No, for the most part most investors are overestimating rents & underestimating expenses (especially capex). On SFH's Capex is much higher (per unit) and usually isn't properly taken into account. That's why you see plenty of people on BiggerPockets say they look for deals with $300+/unit on a SFH. That is highly unlikely with 25% down if you properly take all expenses into account. Now it's not impossible, but definitely not the norm. Capex isn't just a simple 5-10% of EGI.
Contractor · Nashville, TN · Member since 2017 · 82 posts · 25 votes
7y
$200 seems very low with the possibility of vacancies and repairs. It makes sense when you have 20 or more units but that’s takes time. What are Brandon and David suggestions? I would feel comfortable at $500 but not sure how realistic that is.
$200 seems very low with the possibility of vacancies and repairs. It makes sense when you have 20 or more units but that’s takes time. What are Brandon and David suggestions? I would feel comfortable at $500 but not sure how realistic that is.
Thank you in advance for any replies
when you speak about cash flow, you should be taking ALL expenses into account. So that means vacancies, repairs, Capex, management, utilities, trash, permit fees; etc etc etc.
Contractor · Nashville, TN · Member since 2017 · 82 posts · 25 votes
7y
Ahh, that seems reasonable. I’m so used to percentages though, If I was making $200 on a 100k deal then making $200 on a 200k deal it would be hard for me to wrap my head around that, but I suppose I need to realize the equity I have or took out of deal.
Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes
7y
My target is $200/month/unit after everything at the start assuming 25% down. Over time, I would expect that to grow as rent increases since P&I are fixed for the lending I utilize. Depends on your market though as certain markets have limited cash flow opportunity.