Financially Free in just a Few Years

Real Estate Professional · Tampa, FL · Member since 2015 · 176 posts · 252 votes

Generally, my thought is you need to actually avoid cashflow if you want to build your portfolio "quickly". Investors who are looking for cash flow generally avoid making the "value add" investment necessary to increase the value of their asset which can then be sold off and reinvested to grow their portfolio.

If you want the cash flow that 200 doors gives you, you need to make a path to that asset and follow it. As an example, let's say you start with $150,000 to invest, maybe it means putting $100,000 down on a quadplex, after 18 months and another $50,000 in renovation, perhaps that property is worth $150,000 more than what you purchased it for. Perhaps you sell off that property, now you have $300,000 to 1031 into a new property. This time you're able to buy a 12 plex, etc. And on it goes until you start hitting the size properties that you want to hold on to for cash flow. It does not happen overnight. But the beauty of it all is that real estate investments do scale exponentially because of economies of scale.

In reality, "quickly" really means within a decade or so. However, there are obviously strategies that speed this up but they come with their own challenges: syndication, pe funds, etc.

The point is, you need to be disciplined. The longer you can go without taking cash out, the faster and bigger you can build that portfolio.

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

3y

Quote from @Carlos Ptriawan:

Quote from @Jill F.:

In order to determine qualifications I need definitions for both "rich" and "quick". I have wondered about some of the stories because I know how much money we started with and the kinds of properties we could/can afford to buy-- and the capital improvement requirements for these properties. In addition to renovating the interiors of our 53 units at each turn over, we are (now) doing 3-4 roofs per year and the same number of HVAC units. I know that we have unusually strong renovation skills, a strong (60+ hour per week) work ethic and a commitment to operating an ethical business. We will be at year 7 this summer. I expect to be "rich" by my standards and to have a mostly passive investment business and a 100(ish) door portfolio with nice properties and very little deferred maintenance by the end of year 12. Is that quick? Haha.

hahahaha , get rich slowly in my book is buy house in palo alto for 250k in 1993, to sell it again for 3 mil in 2023 (and lot of buy and sell in between) hahaha just kidding as lazy person that wanna rich slowly i just want to buy one unit that doesn't need HVAC and roof replacement.

there were no houses selling in Palo Alto in 93 for 250k Maybe EPA but point taken .. I sold my home in Palo Alto in 92/93 900 sq ft 3 and 1 for 500k.. but it sold recently for over 3 million.. shoulda woulda coulda and i owned another one in the same area along with a home in Milpitas I paid 90k for ..

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1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

3y

Quote from @Jill F.:

In order to determine qualifications I need definitions for both "rich" and "quick". I have wondered about some of the stories because I know how much money we started with and the kinds of properties we could/can afford to buy-- and the capital improvement requirements for these properties. In addition to renovating the interiors of our 53 units at each turn over, we are (now) doing 3-4 roofs per year and the same number of HVAC units. I know that we have unusually strong renovation skills, a strong (60+ hour per week) work ethic and a commitment to operating an ethical business. We will be at year 7 this summer. I expect to be "rich" by my standards and to have a mostly passive investment business and a 100(ish) door portfolio with nice properties and very little deferred maintenance by the end of year 12. Is that quick? Haha.

Jill exactly to scale as a mom and pop investor its anything but passive.. that's a huge disservice to folks thinking owning a ton of rentals takes little or no work.. UNLESS of course your talking about a sub set of say Class A condo's where HOA does everything exterior and tenants live as neat as you do. ( or I think you do :) ) But in the Class C B or D your just going to take a lot of wear and tear from tenants its a given. Or you hand it all off To PM And your paying placement fee's monthly fee;s up charge on any maintenance ( which of course the PM's are entitled to its a lot of work) and your return with max leverage is going to be smaller and take longer to scale.

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4 Reply

Jill F.

Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes

3y

Quote from @Jay Hinrichs:

Quote from @Jill F.:

In order to determine qualifications I need definitions for both "rich" and "quick". I have wondered about some of the stories because I know how much money we started with and the kinds of properties we could/can afford to buy-- and the capital improvement requirements for these properties. In addition to renovating the interiors of our 53 units at each turn over, we are (now) doing 3-4 roofs per year and the same number of HVAC units. I know that we have unusually strong renovation skills, a strong (60+ hour per week) work ethic and a commitment to operating an ethical business. We will be at year 7 this summer. I expect to be "rich" by my standards and to have a mostly passive investment business and a 100(ish) door portfolio with nice properties and very little deferred maintenance by the end of year 12. Is that quick? Haha.

Jill exactly to scale as a mom and pop investor its anything but passive.. that's a huge disservice to folks thinking owning a ton of rentals takes little or no work.. UNLESS of course your talking about a sub set of say Class A condo's where HOA does everything exterior and tenants live as neat as you do. ( or I think you do :) ) But in the Class C B or D your just going to take a lot of wear and tear from tenants its a given. Or you hand it all off To PM And your paying placement fee's monthly fee;s up charge on any maintenance ( which of course the PM's are entitled to its a lot of work) and your return with max leverage is going to be smaller and take longer to scale.

Hey Jay! How are you? Just to be clear we are doing massive renovations at 1st turnover and then placing qualified, mostly low maintenance tenants in the units-- but the units we purchase are mostly outfitted with 30-50 year old fixtures and finishes so everything has to be redone. We have had very good luck thus far with turnovers of renovated units. Here's a before and after kitchen from some townhouses in Cuyahoga Falls built in 1984:

2 Reply

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

3y

Quote from @Marcus Auerbach:

Quote from @V.G Jason:

If someone's dumb enough to fall for it, that's their problem. It's not like there's any results guaranteed. It also goes to show that BP probably isn't getting the attention they are seeking or views. So clickbait may help that.

The goals have changed: before Joshua Dorkin sold BP things were different. He came from a place where he wanted to make the industry better. Out of his own personal experience he kept stressing the importance of positive cash flow. The market is going back to high prices / low cash flow, but BP is now private equity owned and is still pushing the ATM dream for more clicks and growth. You have a few individuals who try to do the right thing like Dave Meyer, who I respect a lot, but the leadership seems KPI driven and you have young staff seemingly without experience of their own trying to move the needle.

I agree with this. I really liked BP and fondly look back on the time frame from 2016-2019/2020 I would receive their weekly e-mails with the links to blog posts and the popular forum threads. I really liked it.

Brandon was also great for BP: especially his beginner webinars he did around the same time frame.

I think the forums lost a lot of steam, partially because a lot of people left for the Facebook BP group and partially because BP doesn't listen to its members (we hated the fact they kept changing the forum format and they would change it back until they eventually decided to not listen to us).

I feel like BP lost its soul. There's still a handful of great forum posters but it perplexes me: why has BP pretty much abandoned marketing the blog articles and forums VIA e-mail?

I agree that R.E. is not get-rich-quick. Though it's amazing what owning a few rentals can do when they kick off passive monthly income; it definitely makes life better. That should be the message VS unrealistic get-rich-quick messages.

1 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

3y

@Marcus Auerbach

Another problem, and it's more minor, but I now see forum heavyweights - who are generally right-on 95% of the time - also giving poor advice to new investors. "Just do a flip" or, and I just do not understand the following one, "invest your life savings in a syndication to get easy 15% returns while you continue to learn." Ugh.

@Karl B.

Totally agree. RE as a source of income rather as the source.

3 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

Quote from @Jill F.:

In order to determine qualifications I need definitions for both "rich" and "quick". I have wondered about some of the stories because I know how much money we started with and the kinds of properties we could/can afford to buy-- and the capital improvement requirements for these properties. In addition to renovating the interiors of our 53 units at each turn over, we are (now) doing 3-4 roofs per year and the same number of HVAC units. I know that we have unusually strong renovation skills, a strong (60+ hour per week) work ethic and a commitment to operating an ethical business. We will be at year 7 this summer. I expect to be "rich" by my standards and to have a mostly passive investment business and a 100(ish) door portfolio with nice properties and very little deferred maintenance by the end of year 12. Is that quick? Haha.

hahahaha , get rich slowly in my book is buy house in palo alto for 250k in 1993, to sell it again for 3 mil in 2023 (and lot of buy and sell in between) hahaha just kidding as lazy person that wanna rich slowly i just want to buy one unit that doesn't need HVAC and roof replacement.

there were no houses selling in Palo Alto in 93 for 250k Maybe EPA but point taken .. I sold my home in Palo Alto in 92/93 900 sq ft 3 and 1 for 500k.. but it sold recently for over 3 million.. shoulda woulda coulda and i owned another one in the same area along with a home in Milpitas I paid 90k for ..

this one is easy flip and could easily make half mil for 5 years holding: 2430 Bryant St, Palo Alto, CA 94301

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Karl B.:

Quote from @Marcus Auerbach:

I agree that R.E. is not get-rich-quick. Though it's amazing what owning a few rentals can do when they kick off passive monthly income; it definitely makes life better. That should be the message VS unrealistic get-rich-quick messages.

I am one of those that could really prove get-rich-quick/slow via real estate is possible and already proven myself. I made myself easy net 100k few times and make a mil from 10 year investment out of 25k investment. But the key point of getting rich via RE is not to follow the guru on youtube hahaha or BP guru.....but key is to understand the macroeconomy trajectory and Fed actions lol ; maybe because due to my background in traditional portfolio investment and software architecture, I could see real estate investment is not that difficult but there should be good strategic business planning with proper risk management adjustment.

0 Reply

Lyndsay Zwirlein

Lender · Member since 2020 · 331 posts · 209 votes

3y

Quote from @Marcus Auerbach:

Apparently this is a new podcast title, and I don't think it's a good one. BP needs to stop setting unrealistic expectations. I get the fact that it is great click bait, everyone wants to dream, just a few years of "being an investor" and you never have to work again, travel the world. "From homeless to 200 units" and other inspirational stories. - Literally "GET RICH QUICK"!

I have seen portfolios of celebrated over-night-success investors and when you look under the hood it's not pretty. On paper they look very leveraged, but in reality it is worse: they carry a huge liability of deferred capex that is somehow being ignored, even by the lenders. If you have 200 doors and each one needs about $20,000 worth of roof/basement-repairs/kitchen/bathrooms/plumbing/driveway, I don't understand how you travel the world on 40k of cash flow with a $4 million dollar liability looming! What's the plan to recover?

I sincerely hope it works out for those investors, but I have two concerns.

If you have followed the topic over the last 10 years you have noticed that we are facing an increasing anti-landlord sentiment calling for more legislation. And when you look what is behind the outrage, it's usually properties in dilapidated conditions and a completely overwhelmed PM, leading to city code violations, tenant complaints and local evening news. The term slum lord comes to mind.

The second concern is that we are raising totally unrealistic expectations with young investors. It has gotten tough in this market to pick up deals, let alone equity. IMO a responsible investor needs to aim to get leverage below 75% as quickly as possible, while getting property condition to a point where you would not have a home inspector ring the alarm bell over stuff failing left and right and major components being past their normal life expectation.

And then finally the portfolio stress test: Can you sustain 30% vacancy, maybe combined with some move in incentives and still be able to replace a furnace when you have to?

I spend a lot of time helping new investors and one of the first things I try to instill in them is to think in decades, not months. When you buy a deal, think about owing it for at least 10 years, if not 30. Evaluate it from that perspective. REI is not a get rich quick thing!!

Love that you’re sharing this! Personally I’m trying to focus more on reading, listening, following those investors that have been through many cycles for this very reason. some of these “influencers” are so misleading. Thanks for posting!

1 Reply

Jeff Murphy

Member since 2022 · 9 posts · 2 votes

3y

I'm happy to read this post. I couldn't agree more. There must be so much leverage and deferred maintenance in these portfolios. Holding rental property is NOT a get-rich-quick process. STRs have likely helped many accelerate their income to keep the dream alive, but local governments are pushing back hard due to housing shortages. The scale that some achieved in a short amount of time likely paid off during years of unrealistic appreciation. We are now in a time when appreciation will look more like the inflation rate (dropping).

0 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

3y

Quote from @Jeff Murphy:

I'm happy to read this post. I couldn't agree more. There must be so much leverage and deferred maintenance in these portfolios. Holding rental property is NOT a get-rich-quick process. STRs have likely helped many accelerate their income to keep the dream alive, but local governments are pushing back hard due to housing shortages. The scale that some achieved in a short amount of time likely paid off during years of unrealistic appreciation. We are now in a time when appreciation will look more like the inflation rate (dropping).

STRs are going to face an ugly day of reckoning. Or years. A lot of these get rick quick schemes came with this STR move, and I hear stuff like STRs don't get impacted during recessions. I'm already talking to several STR buyers from mid 2021 to as late as July of 2022 that are trying to get out of their position. Of course they're trying to minimize their losses, but I am just going to wait it out. I don't see anything moving up for them, you have regulations, restrictions increasing and very likely stiffer competition nearby. It'll just take one domino to fall in any of these markets to reset the price, these guys gotta give.

1 Reply

Vlad B.

Member since 2019 · 90 posts · 56 votes

3y

Quote from @Marcus Auerbach:

Apparently this is a new podcast title, and I don't think it's a good one. BP needs to stop setting unrealistic expectations. I get the fact that it is great click bait, everyone wants to dream, just a few years of "being an investor" and you never have to work again, travel the world. "From homeless to 200 units" and other inspirational stories. - Literally "GET RICH QUICK"!

I have seen portfolios of celebrated over-night-success investors and when you look under the hood it's not pretty. On paper they look very leveraged, but in reality it is worse: they carry a huge liability of deferred capex that is somehow being ignored, even by the lenders. If you have 200 doors and each one needs about $20,000 worth of roof/basement-repairs/kitchen/bathrooms/plumbing/driveway, I don't understand how you travel the world on 40k of cash flow with a $4 million dollar liability looming! What's the plan to recover?

I sincerely hope it works out for those investors, but I have two concerns.

If you have followed the topic over the last 10 years you have noticed that we are facing an increasing anti-landlord sentiment calling for more legislation. And when you look what is behind the outrage, it's usually properties in dilapidated conditions and a completely overwhelmed PM, leading to city code violations, tenant complaints and local evening news. The term slum lord comes to mind.

The second concern is that we are raising totally unrealistic expectations with young investors. It has gotten tough in this market to pick up deals, let alone equity. IMO a responsible investor needs to aim to get leverage below 75% as quickly as possible, while getting property condition to a point where you would not have a home inspector ring the alarm bell over stuff failing left and right and major components being past their normal life expectation.

And then finally the portfolio stress test: Can you sustain 30% vacancy, maybe combined with some move in incentives and still be able to replace a furnace when you have to?

I spend a lot of time helping new investors and one of the first things I try to instill in them is to think in decades, not months. When you buy a deal, think about owing it for at least 10 years, if not 30. Evaluate it from that perspective. REI is not a get rich quick thing!!

It is nice to dream isn’t it? These swings for the fences vs. small base hit wins are a pipe dream. Here’s what is more likely than 200 units.

1) you’ll go through many plan changes and adjustments.

2) you will meet some people who you will not like.

3) deals will fall through

200 units with undisclosed net, team, and cash flow or 10 that have solid, consistent, proven Net returns. I’ll take the latter!

4 Reply

Marcus Auerbach

OP

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

3y

Quote from @Nicholas L.:

@Marcus Auerbach

Another problem, and it's more minor, but I now see forum heavyweights - who are generally right-on 95% of the time - also giving poor advice to new investors. "Just do a flip" or, and I just do not understand the following one, "invest your life savings in a syndication to get easy 15% returns while you continue to learn." Ugh.

It's not easy to tell people in 5 lines or less how they should approach real estate to become financially successful!

I know a number of local flippers and the serious ones seem to consistently net around 10-15% profit (before tax) on average. If they have a great deal, it might be over 20%, but then there is the one where they barley break even. You need to do a lot of flips to get good and that means you are running a rehab company. So you can do the math how many flips you have to do every year to make good money, pay taxes, cover your cost of living and have some left to invest!

0 Reply

Marcus Auerbach

OP

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

3y

Quote from @Matt Rekowski:

Marcus, it’s always good to see your posts on here with reminders to keep my expectations in check. Do you feel like there are still ways that people are doing very well investing and building their portfolio rapidly?

Yes, but just not the combo of rich and quick. You certainly can get rich slow! But even if you buy only one duplex and that's all you do and have it paid off by the time you retire, that extra income will make a big difference in your retirement.

1 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

3y

@Marcus Auerbach

I totally agree. I guess it's a signal of trust in the community that new investors are asking for advice from Internet Strangers on major life decisions.

But... in general, new investors should not syndicate, and should house hack. =)

I would love to see more posts that start with "I am a new investor that is successfully house hacking, and I have a question" rather than "I have no savings and bad credit - how get rich in 2.7 years?"

3 Reply

Jay ThomasPro Member

Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes

3y

That's why it's so important to have a financial plan and strategy in place when investing in Real Estate. With the right plan you'll be able to better navigate the market, identify good deals, and make sound investments. It's also important to stay up-to-date on Real Estate trends, so that you can act quickly and capitalize on any opportunities that may arise. So I agree - having a solid foundation before getting involved is vital for success. Good luck!

[email protected]832-889-5607

1 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Nicholas L.:

@Marcus Auerbach

I totally agree. I guess it's a signal of trust in the community that new investors are asking for advice from Internet Strangers on major life decisions.

Internet stranger is fine, the problem with BP is there are known conflicts of interest between the majority of investors as buyer and the majority of real estate agent as seller (which is majority here). Not everyone is like Marcus here who he tried hard to educate people and try to tell the harsh truth about REI. A lot of people is leaving BP because of the reason that Marcus cited here, some more knowledgeable investors think BP is just for newbie and doesn't give a serious advantage when the investor is at a higher level. I followed another forum too and it's way way more advanced with lot of honest and QP-level expertise.

2 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

3y

Quote from @V.G Jason:

You are probably right...but does this really affect us RE investors? Those of us holding STRs will evaluate if they start to drop financially, and we will move to LTRs or MTRs, or just sell and buy something else like an apartment building.....

This is part of the fun of REI, right? You gotta go where the $$ is....

1 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

There are two realtors' "sell" sides that I really respect here in BP. First is Marcus who from a long time ago keeps saying not to invest at the ultra-cheap property in his city, Milwaukee. Second is James Wise, with all his horror videos of what tenants (in Ohio) can do to your property.

That's the right approach to investment! that you tell investors, hey, this is the risk, still want to join the club? :) LOL
for any investment, one should disclose the risk first before mentioning any profit motive.

BP podcast and many of their books, sorry, are the opposite in my view.

2 Reply

Todd Heitner

Specialist · Huntingdon, PA · Member since 2014 · 160 posts · 59 votes

3y

That’s a great line @Steve Vaughan, “clock punch free and indigestion free are two different things”

1 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

3y

Quote from @Bruce Woodruff:

Quote from @V.G Jason:

You are probably right...but does this really affect us RE investors? Those of us holding STRs will evaluate if they start to drop financially, and we will move to LTRs or MTRs, or just sell and buy something else like an apartment building.....

This is part of the fun of REI, right? You gotta go where the $$ is....

Well there's a lot of REI that got into it on this STR train. I mean there's some threads that have come up recently about messing up on it.

0 Reply

Angela Yan

Rental Property Investor · San Francisco, CA · Member since 2017 · 207 posts · 138 votes

3y

@Marcus Auerbach. Thanks for pointing this out. When i gave advice with new investors, i stress that one is not going to be able to ride into the sunset with their first property. It will take time and patience. I think during the last 10 years, RE is a fantastic way of parking one's assets and everything more than that will just be icing on the cake.

0 Reply

Marcus Auerbach

OP

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

3y

Quote from @Nicholas L.:

@Marcus Auerbach

I totally agree. I guess it's a signal of trust in the community that new investors are asking for advice from Internet Strangers on major life decisions.

But... in general, new investors should not syndicate, and should house hack. =)

I would love to see more posts that start with "I am a new investor that is successfully house hacking, and I have a question" rather than "I have no savings and bad credit - how get rich in 2.7 years?"

Could not agree more! To my best knowledge Milwaukee has 66,000 duplxes which is more than any other city in the US. However, there are not many for sale and the reason is simply: why would you ever sell a duplex? You already know how to rent one unit, might as well rent the other. We have probably worked with well over 100 house hackers over the last few years and very few of them have bought a second one and even less have done what they set out to do: buy one every year and grow a portfolio. It works well financially, but once the initial excitement is gone, it's just too tempting to go the easy path and buy a SF.

1 Reply

Travis Hill

Investor · Multiple · Member since 2019 · 175 posts · 150 votes

3y

I was a young 25 year old in Las Vegas with six rentals. I had the hopes and aspirations of seeing those properties, and others, all paid off in my 40s and living a rich life. Then 2008 hit, third deployment, second to Afghanistan, and all those homes were on the short sale chopping block. I did the 'house hack' and had 80% LTV on them all, year plus reserves and that still wasn't enough. There have been so many people, gurus, and experts that started buying on the swing they have no idea how to live through the trough. Regardless how you are investing, those who are playing the long slow game have always been better off. Am I jealous of hearing the person that scaled to 65 units in 18 months? Of course! Limiting beliefs, imposter syndrome, and jealousy can and will rear their heads. Stay focused, run the numbers, and breathe. I believe the Jim Rohn quote of helping others get what they want. My mantra, 'your success is my happiness' as I network with people vertically higher and lower than me on my journey.

2 Reply

Financially Free in just a Few Years - aka "get rich quick"

Financially Free in just a Few Years - aka "get rich quick"

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