Investor · Durango, CO · Member since 2008 · 163 posts · 59 votes
I am reading the Millionaire Real Estate Investor, about acquiring a million in real estate, then increasing equity to one million, then to one million a year in cash flow. I am just curious how many here on biggerpockets have over 2 million in real estate.
I for one would never post on the internet that I had $2 million of assets of any sort. Or any other large(ish) number.
I will also argue that there is a HUGE, HUGH difference between "controlling" $2 million of assets using leverage or investors and having $2 million of equity. Income real estate is a cash on cash game. $2 million of equity will produce a very nice return. A tiny sliver of $2 million of controlled property because you're over leveraged it or have a bunch of investors who own the bulk of it doesn't produce much income at all.
OTOH, being a syndicator can produce a very nice income. Even if the property doesn't actually produce much income for your limited partners. You'll get your management fees right off the top. Now, I'll argue that's a job and not an investment, but, hey, income's income.
1-2 mm seems pretty easy to control. 10 houses in a decent area gets you there. Paying them off is a whole other hurdle and to create 1 mm in net cash flow would take quite a bit of capital to achieve. Crazy to even think about that.
Its very achievable. I have a mentor thats build up to $1.7ish mill in assets and he did it by simply playing monopoly. 4 really nice places (250K+ each and they net for about $900 each) in really nice neighborhoods and then he borrowed on their equity over time to get in on a handful of apartment complexes. Very doable but like David says, you will need capital to buy down the equity quickly enough.
In my mentors situation, he had a full time job all through out, even though he was netting $3.6k monthly, actually just $3k (he lets a property management manage everything). Even with the apartment complexes, he still works now. I hope that helps
I am not there yet, but my end goal is to own 10 SFRs free and clear all located in a good high school cluster in the northern suburbs of Atlanta.
5 homes with no debt service will yield me about $100,000 passive income and 10 homes owned free and clear will yield me $200,000 passive income. At this point, I would consider myself to be financially free when i own about $2.5 million real estate free and clear. In my area the average yield is about 8%. With $1.5M of real estate owned free and clear should net you about $120,000 of passive income.
I don't depend on social security or stocks for my retirement needs. Investing in Single Family homes will become my pension plan for me.
I've read somewhere in order to be in the top 1% of wealth in America, one needs an average income right around $380,000. In your 40s a networth of $5.8 million, in your 50s a networth of $8.4 million, and in your 60s somewhere in the 10.8 million mark.
James Park watch out for the 99%ers, hopefully they don't read this! Just kidding, of course. Great goals James, best of luck in your journey to financial freedom.
I am also planning to have 10 or so rentals. I have not determined how much to pay them down before I consider myself financially free.
I know about people being bashful. I'm a radio collector and restorer for fun, and many who own a Zenith 1000Z (currently worth $60,000) will not admit they have one. I'd throw a big party if I found one at a good price. Most people agree with me that a thief would leave the 350 pound 1930s radio and that the stupid flat screen....
Perhaps you would have more success with a poll, if this forum software has a way to put a poll in a thread/posting.
I for one would never post on the internet that I had $2 million of assets of any sort. Or any other large(ish) number.
I will also argue that there is a HUGE, HUGH difference between "controlling" $2 million of assets using leverage or investors and having $2 million of equity. Income real estate is a cash on cash game. $2 million of equity will produce a very nice return. A tiny sliver of $2 million of controlled property because you're over leveraged it or have a bunch of investors who own the bulk of it doesn't produce much income at all.
OTOH, being a syndicator can produce a very nice income. Even if the property doesn't actually produce much income for your limited partners. You'll get your management fees right off the top. Now, I'll argue that's a job and not an investment, but, hey, income's income.
I can see why someone might be hesitant to post their assets, even if we only have our last initial (well, some have full last names). I guess what I was trying to get at, was to find out the people who are ahead of me. Most of the posts on this forum seem so basic, so beginner....I am having a hard time finding information on this forum for... I guess I consider myself an intermediate investor.
Is there some way to find a higher level of investing information?
Exactly. Your returns from the property are heavily based on your fraction of the ownership. I see people posting about getting partners sometimes who have a very strange idea. They want to "buy" a property with a loan and then want partners to put in the full down payment. And they they want to retain 50% or some other silly percentage of the ownership. Why? If you proposed such an arrangement to me as a possible investor I would laugh in your face. Money is equity. You put in no cash and you have no equity.
@Carole G.a higher level of investing information"? More advanced topics get discussed every day. Things like using SDIRAs for real estate, originating and buying loans, buying multi-units, development, syndication, or raising money. Look through the list of forums (use the "See All" link above the list to the right) and see what covers the topics you're interested in. Then fire away with your questions. Always a good idea to read through the old post. That may give you some background, may answer some of your questions, and may trigger others.
@Carole G. - Lots, loads, tons even, of information here from very skilled investors. @Michael Quarles makes my eyes cross when I read his posts about marketing his business. Ditto @ Bill Gulley and a host of others including virtually all the moderators. Personally, I've been at it for 11 years and it's my full time job yet I learn something here every day.
It all depends upon who you are asking for the money.
An experienced guy like John Holman can do it himself, so will not give up equity without cash coming in the deal.
But there are a ton of people who will gladly allow you to take an equity slice if you can make them money in a way that they cannot themselves.
I am doing a syndication right now for a resort project in Belize,
I am not taking a syndication fee up front, but am taking a 20% carry on the back end and of cash flow, I am also not taking a management fee. (even though I have paid for all of the soft costs of due diligence with multiple trips to the country, securities attorneys, PPM's etc...) I am trying to align all the incentives as closely as possible as international investing is new to my sphere of contacts.
So you can structure your deals based upon your knowledge and the knowledge of the audience from who you are raising capital.
If you do not get any takers, then you know that you have to change the terms, but do not be afraid. Just remember to put your investors interests first.
$2,000,000.00 under "control" at 2% rule... $40,000.00 in monthly rent. Add 50% rule... $20,000.00 after expenses. Subtract mortgage... lets amortize for 15 years at 6% (my standard commercial deal) $16,877.00 = very crude monthly cash flow of $3123.00. Not that exciting, is it? If you have to share it with anyone, it's even less exciting... Wait - I thought the guru said I was gonna be rich?!?
Now - once you get all or part of it paid off, it's another story... but not an overnight one.
We have 17 SFR under management here in Houston, we average $400 a month in income (after taxes, insurance etc..) on those property giving us around $6800 a month passive. If I give you a 10% vacancy ($680, btw, we have not had a vacancy for longer than 2 weeks in 3 years, I guess that is Houston for you) and I turn one property every 6 month (average make ready $1500 so lets take out another $250 off the monthly cash flow for reserves), we are still clearing $5870 a month with many of those properties at 70-75% LTV mortgages or lines of credit on them.
And each of those properties do not necessarily have an ARV of 100K (some are more, some are less).
So please everyone, do your numbers for your market and please learn the best practices when it comes to property management because that is where I think money is really made and lost.
$2million is easy. But like many people have already stated people who are there aren't likely to say that they do. But does having $2mil in real estate make you good at REI? Or does having $1mil? If you have 2 houses at 500k then you've hit $1mil if you have 20 SFH at $50k you have $1mil. Whose more successful and a better investor? I wouldn't even make the determination on that basis.
While you see a lot of Introduction posts from newbies there is a ton of great information on BP, and it is sometimes best to go through the forums instead of just going through the Most Recent Tab. The real meat often gets drowned out.
$2,000,000.00 under "control" at 2% rule... $40,000.00 in monthly rent. Add 50% rule... $20,000.00 after expenses. Subtract mortgage... lets amortize for 15 years at 6% (my standard commercial deal) $16,877.00 = very crude monthly cash flow of $3123.00. Not that exciting, is it? If you have to share it with anyone, it's even less exciting... Wait - I thought the guru said I was gonna be rich?!?
Now - once you get all or part of it paid off, it's another story... but not an overnight one.
Well I doubt you can get those mortgages at 0% down, so if you had to put odwn 20% that payment would be 13501.71, giving you cash flow of about $6500/month. Your payment would also give you another $5,500-$13,434 a month in principal reduction.
Joke or not, I've been to some real estate meetings where the one question I wanted to ask the presenters was their net worth. They could tell the truth or not, but it would be a good way to gauge if they know what they are talking about.
No large complexes, however have owned small apt. building, mixed use buildings, commercial buildings, farms, timber land, land subdivisions, etc.
imho, there is a niche of say 5-20 units where its too small to have a full time manager, but if you manage yourself or have a part time manager it can work out for you.
In the past I worked for a company that did a lot of management, and I've managed lots of places myself, and it is a given that nobody will manage your properties as well as you will. You will care more about a vacancy than most managers and will go above and beyond to get places rented, like showing nights and weekends. Some managers don't work weekends. Some even in house managers close the office at 6 pm have half day on Sat and totally closed on Sun.
I currently have both apt and SFH, but I do have a preference for the SFH.
Because:
1. Tenants stay longer
2. Less appliances to repair and replace
3. Tenants cut the grass and shovel the snow for free.
4. Easier to finance
5. Easier to sell, many more buyers for SFH than complexes
6. Tenants do more maintenance
7. Sold on basis of comps not income
8. Easier to sell smaller pieces of portfolio
9. Blend in to owner occupied neighborhoods
10. Spread out properties over different neighborhoods, towns, counties etc.
Joke or not, I've been to some real estate meetings where the one question I wanted to ask the presenters was their net worth. They could tell the truth or not, but it would be a good way to gauge if they know what they are talking about.
Asking real estate promoters their net worth? Oh come on, they can make up whatever valuations they want, do you expect to get it in writing with appraisals? They also might have considerable net worth from an inheritance, well-off spouse, completely unrelated business or career, etc. It's not even particularly feasible to verify their stated deal volume or deal profits. It's a field day for who can engage in the greatest puffery.
I have over $1M and under $10M. Of course, here in Orange County, CA, having over $1M in assets means you have two houses, not really an empire! I have several relatives that have six figure MONTHLY incomes, and that is my goal, which is still pretty far away.