Hi. Seeking advice on where/how to grow my portfolio

9 Replies


I'm 34 years old and have been investing in rental property for about 10 years. I started when i was in college and enjoyed it enough to continue buying them on the side. I'll try not to drag this on too long, but I'm looking for suggestions or advice on what to do as I move forward. I got married 6 years ago and we are ready to have children. We both work full time and run the rentals in the evenings, so I know when the kids come along something is going to have to give! I handle stress very well, but even now without children there are days in the summer during move out/move in rushes that I start to feel overwhelmed. I would like to continue to grow my business and have recently hired a maintenance man to help take the work load off of me, but I'm torn over where to expand from here. Here is a summary of my portfolio and our income:

Our combined income (excluding rentals): $140k+ (both have great benefits which makes it tough to quit either job)

401k & Roth Savings: Approx $395k

HSA Account: $44k

Savings (personal): $80k (we are not big spenders so this amount increases rather quickly. If I'm not eyeing a rental I'll usually pay down some of the higher interest loans.

Our portfolio is more heavily weighted towards lower income units. These require more work but give me a much better cash flow. It consists of:

54 total units:

-4 multi unit apt buildings (mix of low income and student housing)

-7 duplexes

-9 SFH (all Class B and A properties)

Monthly gross rents: Approx. $27,000

After all expenses we cash flow around $100,000 per year. That number could be higher, but we have started spending money on updating some units, hiring maintenance, etc... the reason our savings don't reflect this extra income is because most of that goes into buying more rentals or paying down loans...also that income is somewhat new. I also have roughly $140k in our LLC account that is being held for a possible upcoming purchase. Most of my big aquisitions have came in the past 3 years. Before that I probably averaged $30k per year cash flow.

The total value of the rentals is roughly $2.75 million. I owe roughly $1.8 million. About 1/3 of the loans are 30 yr fixed at roughly 4.5%. The rest are 5/1ARM over 20 years at 5.25%. Our bank has been good about letting us reset that 5 year lock every few years to keep our rate lower. 

I feel like for my income and starting with basically nothing out of college and no backers, that I've done really well. However I look at my savings and feel like I could be doing better. I made some costly mistakes over the years and have put in a ton of hours and sweat equity but have learned so much. I've also reached a point where I fee like I can no longer work full time, manage the properties, buy rehabs and fix them up, and raise a family. 

I've looked into management companies locally and I worry they won't do as good of a job as I do on finding the right tenants, but maybe I worry too much. Also, I hate the idea of paying them $35-$40 an hour for service calls when I can hire someone for $15 full time. I'm afraid it will eat into all of my cash flow very quickly. But in order to bring on my own manager I don't feel like I own near enough property. I would also have to look over them quite a bit and if they ever quit it would put me back in a bind. The only logical solution I see at this point is to hire a property manager as I start getting a few paid off. 

For growth I've just started to look into other markets, but that really scares me not being nearby to keep an eye on things. Our local market is getting overpriced. I've looked at these turn-key companies and while they look enticing it seems almost too good to be true. 

I guess I'm looking for advice on what people do when they reach this point? My job offers a great retirement package and I started during college, so in 16 years I can retire, so I hate to quit. My goal is to have most of them paid off about the time I'm elegible for retirement. That would give me income until 59 1/2 when I could draw on my 401k When you reached this point did you turn things over to someone, buy turn keys, invest in REITs, or go into something completely different?

Sorry for the long winded introduction. I wanted to try to give as much info as I could. And I'm sure I left out some pertinent information, so feel free to ask. Thanks for taking the time to offer advice!

@Eric Schafer

Firstly, congratulations on your achievements.  Most folks these days do not even own their own home by the ripe young age of 34. To have put yourself in the position you are in shows excellent focus and diligence.

Your question is very broad ranging and touches on a lot of good topics.  My expertise is self-directed retirement plans and I'll keep it short that you should really look into whether you might benefit from exploring such a plan.  You could probably make some pretty significant plan contributions through your flipping income and/or any salary you pay yourself as a property manager (but not from passive rental income).  You would then have the ability to invest that retirement savings tax-deferred or tax free in the asset class you understand, which is real estate.

Most of our clients who have a significant number of properties either work full time managing themselves or hire some level of property management.  Keep in mind you do not necessarily need to turn the whole operation over to a property manager.  You could continue to do tenant screening and overall management, and give the property manager the role of dealing with collecting rents and dealing with maintenance, which I'm sure would free up a lot of your time.  My best recommendation on that front is to network with other real estate professionals in your area, including landlords, agents, and property managers to find the best fit for your needs.

Another consideration would be to grow your portfolio with notes instead of additional properties. You'll never get a call at midnight from a note.

I'd suggest that you kick around several ideas, get some input from BP and other local sources, and then sit down with a skilled CPA and/or fee-only financial advisor to chart a course of action.  It looks like you are hitting the threshold in your business where some long range corporate, tax, financial and estate planning would be highly beneficial.

Lastly, I'd like to add that while there is a cost of property management, time with your family is priceless.  If you and your wife start having children, find every means possible to dedicate as much of your time to your children as you can.  They will grow up really, really fast.

@Eric Schafer

Fantastic and welcome to BP. I got super excited reading your story because it's almost exactly where I want to be in 10 years. I'd love to chat with you sometime about how you made it all happen.

First off, super congrats on your business and financial position. You have many options and avenues available to you which is a great thing. Your real estate business has put you in a healthy position to deal with life's demands and adapt as needed.

Second, I'd suggest that before you focus on expansion, build and implement systems and processes to increase your business's efficiency. A system should take you almost completely out of the equation. A system should be easy to understand and scalable. You may cash flow $100k now, but what if you could cash-flow $70k with minimal work required of you? How much is your hour worth?

I tell some of my clients and my parents the same thing. Get away from the "sweat equity" and hire that out man. Your time is way more valuable now.

Best of luck to you in the future!

Thanks for the fast responses and words of encouragement guys! 

Brian-When you talk about self-directed retirement plans, what are you referring to? My knowledge is limited on all the options out there. I currently have a Roth 401k at my job and my wife and I max out or Roth IRA's each year. Are there other avenues I'm overlooking? And do they come with the same restrictions of not being able to touch them until I'm 55 or 59 1/2? I'm okay with that, but I also would like to have the option to tap some of the money in my late 40's/early 50's if we decide to travel.

I've read a little into the college savings plans for when we have children, but I've also read that there's not alot of advantage to them over other investments since they must be used for college or they get penalized.

I think you're right in that I do need to talk to a CPA. I've had trouble knowing where to begin that search, but haven't asked a lot of locals for advice either. I'll have to start exploring that. I have a feeling that most of them will tell me I'm way too exposed with real estate and need to diversify, but I've felt like it's treated me well.

Brandon- I'd be happy to chat with you sometime over the phone or email and answer any questions. I enjoy talking about it...it's one of my biggest passions! I've definitely made mistakes over the years. 

I agree with you on my time being priceless. I don't mind giving up cash flow to save time. I think my biggest hurdle is finding a manager I can trust. There aren't as many options locally as I expected that don't get bad reviews, and I want to keep my tenants happy. 

And I know I need to get away from the "sweat equity"! It's just hard to stop :) I have hired more out than I used to, but sometimes I feel like that gives me more headaches than if I just do it right the first time. After weeding through a few guys I think I have found some good help now though. But then i always feel bad when I stop in and they're working and I'm just "checking in on things"... I know I've got to let it go :)

Feel free to PM me and I'll chat or give you my number. I always enjoy seeing what others are doing. Best of luck to you!

@Eric Schafer  My jaw is agape with your accomplishments so far. Congratulations. 

Only one piece of advice from me: between your killer job and your killer real estate investment skills, you have built yourself the ability to spend time with the child(ren) you wish to raise. It's a rare gift; don't squander it. 

We had our first child last year, and the DIY stuff that was so fun and rewarding before soon became "time away from the baby."  Find the right balance. You've certainly earned the ability to!

@Eric Schafer

Your employer 401k is likely locked up in that plan until you leave the company.

Self-Directed retirement plans come in several flavors. You could move one or both of your Roth IRA's into a self directed Roth. You could also potentially establish a Solo 401k through your real estate business, which would give you the ability to make additional contributions from that source of income.

The basic premise is that the retirement plan stays the same. Things like contributions, distributions, timelines, etc. are no different in a self-directed IRA or 401k than a "standard " plan. What is different is your choice of investments. Most 401k & IRA plans are offered by brokerage houses that only transact on the public exchanges. With a self directed plan, you can invest in a whole range of other things as allowed by the tax code, including real estate, mortgages, private company stock, precious metals, etc.

In your situation, the idea of being able to potentially shelter more income from taxes (or make higher Roth contributions), and to be able to invest part of your portfolio in what you know would seem to be beneficial.  

Research the concept of a self-directed Solo 401k, as it sounds like that may fit your situation.

There is some good information here on BP on these topics, but most of it is pretty broad in nature.  The best way to learn about your specific options is to speak with a few professionals in the field... and of course corroborate that with your tax advisor.


Wow, you are killing it, congrats to you on your great progress and net worth.  Children are not only a big investment of time, but very expensive.  Totally worth it, though!

My only advice is to look at your local management companies.  We just hired one and are easing our properties over.  She is very flexible in that we can handle maintenance calls and turnover ourselves or have her team do it, on a case by case basis.  This would give you the flexibility to keep your maintenance guy, and do do as much or as little as you want each turnover.  Explore your options, maybe.


@Eric Schafer

Regarding the following:

"I guess I'm looking for advice on what people do when they reach this point? My job offers a great retirement package and I started during college, so in 16 years I can retire, so I hate to quit. My goal is to have most of them paid off about the time I'm elegible for retirement. That would give me income until 59 1/2 when I could draw on my 401k When you reached this point did you turn things over to someone, buy turn keys, invest in REITs, or go into something completely different?"

Once you reach this milestone, you may want to also consider investing your retirement funds in promissory notes or trust deeds. This way you can reduce your time spent managing real estate.

It sounds as if your current properties are all local to you. That seems to have worked to this point and you seem a bit concerned with long distance land lording. I would take less returns and stay local rather than chase higher returns but add the long distance factors. 

If your goal is to retire in 16 years from your current job and have your real estate paid off at that point then I would continue to invest until you find the point where your debt equals what you can pay off by your retirement date. At that point you live off the cash flow the rest of your life. 

But more than likely plans will change between now and 16 years from now. As successful as your real estate has been to this point you will soon get to the point where the time spent at work won't be worth the opportunity cost. I'd be very surprised if you made it 16 years with this job. 

Good luck in your future. You've killed it to this point.

Thanks again everyone for your kind words. I feel like I'm headed in the right direction. It's crazy though how after accumulating all these, I really don't feel wealthy by any means. We still see our neighbors and wonder how they can afford everything while we drive our 100k+ mile cars. I guess we're sinking alot of our income back into property at the moment. 

Brian- I will look into the self directed 401k's. I assumed since we max out our company 401k's that there were no other tax advantage options available. I have opened up a trading account through Motif this year just to purchase a broad mix of stocks outside of our retirement accounts. I'd like to have some money available pre-retirement if it becomes necessary.

Dan- Thanks for the advice. I can't wait to have children and have as much fun as you. I was never the type to want kids. I was always impartial to having them. But then my brother had his and playing with them is so much fun. I love when they come spend the weekend and we get to do all the kid things with them. 

Michelle- I'll look into the local managers more. The ones I have met don't excite me. But if I could find one that would let us do some of the bigger jobs that would probably work out. Did you have a strategy as to which ones you let them manage? My initial thought is I start them out with my most time consuming, low income ones. However that will also mean paying them more due to more service calls, etc... But I think those are the ones I would most like to not have to manage every day. My SFH rarely give me any fits. I think going forward I need to be buying more SFH as opposed to the multi families for that one reason. They don't cash flow nearly as well, but they're almost a set and forget type investment. The tenants stay much longer on average and you attract better tenants.

Mark- I don't know much about investing in notes and deeds. I'm comfortable having my retirement money in stocks so as to diversify my risk. If I were to buy notes outside of my retirement accounts, I assume you can't leverage them like you can a mortgage, correct? You're just purchasing someone's note for that guaranteed interest return?

Jeremiah- Yes, I do feel like local is the way to go, however I worry about putting all of my eggs in one basket. The economy here is good; great schools, large university, best hospitals in state, several large companies, etc... I thought going out of state might spread my risk, but that brings it's own problems. I've looked into some of these turn key companies that sell houses in say Columbus that are rented and fully managed and offering 15% CAPs, but it just seems too good to be true. And if it doesn't pan out I'm stuck with Class C properties that are hundreds of miles away that probably won't sell. 

I'm afraid you're right as far as not making it at my job. I have noticed it cuts into my ability to buy more properties more and more the past few years. It's tough to leave the benefits and retirement package though. And I don't think i make enough on the side to do it comfortably yet. I think in another 5 years I will be, but at that point I'm only 10 years from getting a full pension, so it's like do I tough it out, or walk away from the benefits and pension for more time off. I'm sure once I have children you're right, something will have to give.

Thanks again everyone!

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