5 Years to 100K a year income

12 Replies

Hey BP family,

I wanted to share my current plan to acquire enough real estate in the next 5 years to have a 100K salary after taxes, I am currently 21 years old and I love real estate and the power it has to make you a millionaire. I am self-employed making approx 35k a year and I have a great lender, I currently house hack a duplex, with 35k a year income and 400 a month in child support income, I can have up to $1426.16 a month in debt and be within the 43% DTI limit, the duplex I live in, the mortgage is in my husbands name with his income, and he can only have 1 mortgage with his income. My lender will also add 75% of any rental income I am getting to my DTI. I also have over 100K in savings to invest

2016 - Buy 2 duplexes for 80K each, putting down 32K for both, rents for 1300 a month each, cashflow of $800 a month on both

2017 - Buy 4 duplexes for 80K each, putting down 16K each, rents for 1300 a month each, cashflow of $1600 a month on all 4

2018 - Buy 6 Duplexes for 80K each, putting down 16K each, rents for 1300 a month each, cashflow of $2400 a month on all 6

My goal is 12 duplexes right now. I understand after 10 mortgages, I have to get a commercial loan, so I will pay cash for the remaining 2. After I get all 12, I will use the snowball method to pay off the mortgages and live debt free with over 100K a year in income after they are paid off, let me know your thoughts, all opinions welcome. Thank you!

I completely respect your ambition. However, I would probably also maybe think about renovations that may need to be done prior to renting. I also do not know your husbands finances but for him to only be able to get 1 mortgage and you are making 35,000.00 a year I am not sure how this plan works out in 5 years. I can see it definitely working, but just not in 5 years. Also, when you mention 400.00 a month income, are you talking about yourself? I guess I am just quite confused. Also, is $80,000 for a duplex the normal selling price there or is that just a number you do not want to go over. If I can do what you said in 5 years I think I may make some trips to Wisconsin and connect with you.

@Samantha Klein well, it's a plan and it's not impossible generally speaking, but like General Schwarzkopf used to say: no battle plan survices contact with the enemey.

A few things will look different in reality: your acquisition cost seems very low, I'd budget maybe 120k. Even then only in top downtown locations you will be able to get $1300 in rent. typically its more like $800-900. Don't forget repairs, expenses and vacancies.

My advise: dont analyse this to death, go buy number one, see how you like landlording, learn from it and adjust your plan accordingly.  

Samantha, 

  You may be going a little fast.  If you have 100K to invest you will use up 64K on down payments in year 1.  Leaving you with 36K + 9K in year 1 profits, which seems high but ok. That gives you 45K for year 2 which by your math requires 64K of down payments.  That leaves you 19K short.  That's 2/3 of your salary.  That's going to make financing tougher than you think.

You are also planning on buying 12 duplexes at the 80K price point that are move-in ready, extrememly cash flow positive from day 1, in 3 years in Monroe.  

This is probably closer to a 15 year plan.  2 in year 1, 1 in year 2, 1 in year 4, and yearly after that.  Not as ambitious but probably more realistic. 

Originally posted by @Kevin Kurt :

Samantha, 

  You may be going a little fast.  If you have 100K to invest you will use up 64K on down payments in year 1.  Leaving you with 36K + 9K in year 1 profits, which seems high but ok. That gives you 45K for year 2 which by your math requires 64K of down payments.  That leaves you 19K short.  That's 2/3 of your salary.  That's going to make financing tougher than you think.

You are also planning on buying 12 duplexes at the 80K price point that are move-in ready, extrememly cash flow positive from day 1, in 3 years in Monroe.  

This is probably closer to a 15 year plan.  2 in year 1, 1 in year 2, 1 in year 4, and yearly after that.  Not as ambitious but probably more realistic. 

Thank you for the advise. I can save most of the 35k I make a year because I only pay utilities, my tenant pays my mortgage and a little more. I could go to a nearby town called Brodhead and buy duplexes there for 60k, put 10 into them and have 70k all in if need be, I will do my first deal, see where that takes me, I appreciate it, I think this is a good plan and I know I can acquire most if not all of these properties in the next 3-5 years. My lender said as long as I have a signed lease, they will use 0.75% of that and put that on my monthly income thus lowering my DTI and keeps me qualifying for more mortgages.

I enjoy doing this kind of analysis from time to time.  Here's what I do in Excel:

Year 1:

  • Total savings from "real jobs" for my wife and me + Current passive income from rentals = Total to invest in more rentals
  • Total to invest X CASH ON CASH % GOAL = additional passive income created

Year 2 (and so on until you reach goal income)

  • Total savings from "real jobs" for my wife and me + Current passive income from rentals + additional passive income created from last year's investments = Total to invest in more rentals
  • Total to invest X CASH ON CASH % GOAL = additional passive income created

Passive income grows by investing savings and re-investing new passive income (snowball effect).

Here's the simple way to view it: the two factors you can control to reach your goal faster are the savings per year from your real job, and your cash on cash goal.  Once you do this, then you use the cash on cash goal as the final criteria to purchase property.  If it doesn't meet your cash on cash criteria, don't buy it!

Just thought I would update this, I absolutely realize 10 months ago when I wrote this, I thought it would be a feasible plan, but I was wrong, however, I have bought a duplex for 70k all cash, and have it rented at 1125 a month. I plan on pulling equity out and putting 25% down on a 4 plex or 2 in 2017, I plan on buying 4 fourplexes total by 2020 and be done, I realize now that 12 duplexes is too many properties for me, I'd rather buy a couple 4 units and have less buildings. 

I agree that quadplexes if you want small multifamily. One mortgage, one insurance bill, one maintenance bill, etc. And 2x the cash flow for the same amount of work! Best of luck with your modified plan!