Cash positive rental properties or leveraged debt ?
So I have $200K liquid in the bank (I have my own company) and I earn about $260K a year (before taxes).
By my calculations, if I buy a $250K condo in a well sought after part of the city, and pay it off COMPLETELY in 2 months, then rent out the condo (which is in a city I live near) , the cash flow I should have each month should be about ~$1600/month (after the HOA fee).
If I then buy a second condo worth $250K and use the rental income from the first & 2nd condo to pay for 2nd condo's mortgage in addition to paying down the 2nd condo within a year, I should have a ~$3400 cash flow in the next year or two when the 2nd condo is paid off and $500K in equity that I can borrow against if I want.
Do you see any downsides to this strategy ? Its aggressive and all hinges on buying the right condo in a well sought after area of the city, but once I have the $3400 a month, I can then use that to buy bigger places or commercial real estate.
I think my strategy is good because the $3400 would be passive income for life (since the condo is in a well sought after part of the city, which is easy to rent), and then I can use that passive income to not work anymore (if I chose to do so), and the rate of return on it (plus the historical appreciation of real estate (~14%)) would net me about ~20% on each condo I bought.
My end goal: I prefer having real estate that I own free and clear that generates cash monthly. Monthly cash flow would allow me to retire in 3 yrs (if I wanted to) after I have 4 properties generating ~$6800 a month. I prefer a monthly cash flow much more than increased debt with a more expensive property(s) that bring in little cash (and increased risk).
Do you think there is a better strategy as far as using the $200K in the bank (ie: buying more houses at once, commercial, apt complexes) ?
My main concern is that I am under utilizing my assets (eg: the $200K cash), and that I could be using it better. I dont own any 401K, stocks, etc. I do have a personal home worth over $600K currently.
Thoughts ?