Turn other people's property into yout cash flow

Innovative Strategies
6yFollow

Turn other people's property into yout cash flow

Jason Nguyen
Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes

Hey guys, so I have recently seen this investor in my hometown is doing this and I felt like this is such a great investing strategy.

What he did was:

1. Rent a Townhouse/Single Family house for $2200 from a landlord.

2. Rent out a master bedroom for $950, regular bedroom 1 for $750 and bedroom 2 for $750 (Bedroom 1 and 2 shared a bathroom) and a basement with full bathroom for $1200.

3. All the rooms are furnished and he pays for all tbe utilities which average about $300 a month.

SUMMARY:

Rent: $2200

Income: $950+$750+$750+$1200 = $3650

INCOME - RENT - UTILITIES = CASH FLOW

$3650 - $2200 - $300 = $1100

He basically make $1100 cash flow from other people's property, and he is currently managing 10+ properties like this. He agreed with the landlord to make any minor repairs on the property and of course this is a win-win deal with the landlord. He got an attorney to write a subleasing contract for him and in my hometown any property with no more than 4 unrelated people may live in the same unit without a permit.

Can you please share your opinion on this?

3Reply
50 views

Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Steve Vaughan:
Originally posted by @Jason Nguyen:

@Steve Vaughan

I understand about the 'babysitting' part but what if people treat this as their own 9-5 job and manage 10 properties like that. Isn't that a six figure income right there?

You asked for our opinions on this.  Have this as a job if you want, just don't think its without risk.  The only guarantee is your having to keep the condition up and pay $2500 a month.  Carry on.

I funded one of these in ATL  the guy went broke.. its a cluster of epic proportions putting that many people into a home.. it works for students at collages .. but as folks get older and all the issues Steve brings up.. the one I did I ended up owning.. and going out and having to deal with all these Micro tenants..  JOB and a tough one.. However I know this works in the SF Bay Area were a 3 and 2 cost 1.5 million and the techies will rent two to a room.. for a thousand each..  So it is location dependent and WHO is your tenant.. 

Podcast Guest on Show #222
JLH Capital Partners51 Review
WebsiteView Page
5Reply
See this reply in the discussion

29 Replies

Jump to latestLatest
  • Trenton Miller
    Contractor · Coachella Valley, CA · Member since 2017 · 252 posts · 176 votes
    6y

    Be careful.  In order to do this, the lease terms must allow sub-leases.  Frequently sub-leases need to be approved by the interested party as well.

    I'm not saying you can't do this, it's just that things can get messy.

    0Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Trenton Miller

    Yes. The landlord agreed for him to sublet the property in return he will make any minor repairs to the property and a 3 years lease term. No vacancy, no management, no minor repairs, etc. What a win-win deal right?

    2Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    6y

    Yup it is called Master Leasing, just watch out for a broker calling you needing a license (property management with out a license.)

    2Reply
  • Trenton Miller
    Contractor · Coachella Valley, CA · Member since 2017 · 252 posts · 176 votes
    6y
    Originally posted by @Brian Gibbons:

    Yup it is called Master Leasing, just watch out for a broker calling you needing a license (property management with out a license.)

    You put my thoughts into words precisely! 

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    6y

    If you are in virginia maryland or dc, there are lots of regulations about performing activities without a licence, like renting out a property that you do not own with out a property management license.

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y

    We have a lot of $2200 a month houses, but I don't feasibly see someone paying $950 or $750 for a bedroom. People have their own beds and stuff.  Have a storage unit and moving outfit on standby.

    I guess it will work if it works in your area, but be well-capitalized. You're on the hook for condition, $2200, and babysitting. I mean managing the move ins and outs and screening and service animals and smokers and parties and and. 

    I'd rather take a nap.  The $1100 cashflow during good months better cover the hassles and vacancy losses of others. 

    4Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Brian Gibbons

    I have a real estate license in VA. I should be okay to manage rental properties.

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    6y

    https://www.nvar.com/realtors/...

    If you’re OK you’re OK, read that link

    2Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Steve Vaughan

    Well. In my area, the average price to rent a room is $600-$750 a month, and master bedroom is $850-$950 a month. Basement is no less than $1000 a month. Well, I understand about the 'babysitting' part but what if people treat this as their own 9-5 job and manage 10 properties like that. Isn't that a six figure income right there?

    0Reply
  • Joe PrillamanPro Member
    Rental Property Investor · Carolina Beach, NC · Member since 2017 · 441 posts · 462 votes
    6y

    @Jason Nguyen, sounds like Airbnb arbitrage to me. Probably has the same weaknesses as well. Only cashflow, no equity, no tax benefits, and no appreciation. You get taxed on all the income and at the end of the day you don’t own anything. Great if you want to replace your 9-5 with another 9-5 in my opinion.

    1Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Joe Prillaman

    Thanks Joe. I owned 6 single family homes and I managed all of them. Just wanna figure out a way to increase more cash flow so I can quit my job.

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Jason Nguyen:

    @Steve Vaughan

    I understand about the 'babysitting' part but what if people treat this as their own 9-5 job and manage 10 properties like that. Isn't that a six figure income right there?

    You asked for our opinions on this.  Have this as a job if you want, just don't think its without risk.  The only guarantee is your having to keep the condition up and pay $2500 a month.  Carry on.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Steve Vaughan:
    Originally posted by @Jason Nguyen:

    @Steve Vaughan

    I understand about the 'babysitting' part but what if people treat this as their own 9-5 job and manage 10 properties like that. Isn't that a six figure income right there?

    You asked for our opinions on this.  Have this as a job if you want, just don't think its without risk.  The only guarantee is your having to keep the condition up and pay $2500 a month.  Carry on.

    I funded one of these in ATL  the guy went broke.. its a cluster of epic proportions putting that many people into a home.. it works for students at collages .. but as folks get older and all the issues Steve brings up.. the one I did I ended up owning.. and going out and having to deal with all these Micro tenants..  JOB and a tough one.. However I know this works in the SF Bay Area were a 3 and 2 cost 1.5 million and the techies will rent two to a room.. for a thousand each..  So it is location dependent and WHO is your tenant.. 

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    5Reply
  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    6y

    I've heard from a major local landlord, that this shared type of living is on the wane because of the virus.  And one bedroom and studio apartments are taking up some of the slack.  People want to be isolated.

    Another iteration that I experienced was a lady who took luxury apartments and rented them as interim corporate or relocation housing.  It was working well into the 2009 recession.  And then it didn't work.

    1Reply
  • Jon Manke
    Atlanta, GA · Member since 2020 · 3 posts · 0 votes
    6y

    @Jay Hinrichs well said. It’s another job and depends on the market you’re in.

    I’ve also heard this working in heavy construction areas where people are coming from out of town and need a place to stay. You’re subject to the economic growth in that area to maintain occupancy. Since it’s not your property, you can end the lease much quicker than selling the home.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @Jason Nguyen this is a bad idea and you’ll get crushed when something like a global pandemic hits...

    0Reply
  • Thomas Williams
    Member since 2019 · 3 posts · 0 votes
    6y

    @Brian Gibbons

    This is very good information to know. Thanks.

    0Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Caleb Heimsoth

    This is the first time I see something like this pandemic happen. But regardless what's gonna happen, people always need a place to stay.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y
    Originally posted by @Jason Nguyen:

    @Caleb Heimsoth

    This is the first time I see something like this pandemic happen. But regardless what's gonna happen, people always need a place to stay.

    Plan for a once in a lifetime event every 10 years... like a global pandemic, housing market crashing globally, the internet being invented (and then causing the dot com bust)... a group of terrorists slamming airplanes into two skyscrapers in NYC. 
    you get the idea.  Everything I listed caused a recession.

    0Reply
  • Jason Nguyen
    OP
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    6y

    @Caleb Heimsoth

    I see what you're saying.

    0Reply
  • Tim Miller
    Rental Property Investor · Laurel, MD · Member since 2016 · 378 posts · 382 votes
    6y

    @Jason Nguyen This is what Landlords are doing in College Park, MD. As for someone doing this with any of my property? Never going to happen! Our standards are too high to allow anything like this.

    0Reply
  • Brian Van Pelt
    Specialist · Owings Mills, MD · Member since 2017 · 485 posts · 415 votes
    6y

    @Brian Gibbons

    FYI, Maryland does not require a Property Management Licence. Landlords are required to have a Rental Licence and Lead Cert.

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    6y

    Yes I understand rental license in Maryland, the original poster was in Virginia

    0Reply
  • Rick Ortiz
    Rental Property Investor · Philadelphia, PA (19148) · Member since 2020 · 38 posts · 39 votes
    6y

    @Jason Nguyen

    can you make money with this...it seems based on your experience in your area it might work. HOWEVER there are pros and cons to everything. As you mentioned you own property so you know the effort it takes. Having many people under one roof has its risks. Also what type/ quality tenant wants to share a house with 3 people unless they are students. Your on the hook for repairs, rents, and are the middleman for tenant disputes.

    Can your time be better spent growing your own portfolio? Or for xtra cash you can just as easily try start a property management business and charge 5-8% of income doing less work. Your just not on the lease and thus not on the hook for damages, missed rents etc... kudos for thinking outside the box but seems like there are better ways to financial freedom in RE

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y

    I suppose if you can find a property owner OK with it. I would never let you rent one of my properties and do this. This is really nothing more than long-term AirBnb'ing my property. In fact, we explicitly prohibit anything like this in our lease and consider it grounds for immediate lease termination.

     90% of successful landlording is tenant selection. That doesn't just mean "the rent gets paid". I might rent to you but then have no control over the series of (likely) flunkies that you place in my property. Because if this was such a great gig, then why wouldn't the landlord simply rent out the place by the room himself/herself? What value does the middle man bring to the table? 

    Podcast Guest on Show #243
    Skyline Properties
    View Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free