Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
Last week we hit our investment goal of $35k a month gross rental income. We bought our first investment property in August 2011 and the vast majority of our growth has happened in the past 10 months. We (my husband and I) now own 21 buildings and 59 units in Chicago and Milwaukee.
Life is still crazy, especially since we just got back from Mexico and are leaving for a two week trip to Europe this week… but I foresee a more steady and manageable pace moving forward.
It hasn’t been all sunshine and rainbows. We have had our fair share of problems. Some buildings were an easy takeover where the tenants stayed, paid rent, and didn’t cause problems. Some we had tenants leave in the middle of the night or leave the place trashed. Some properties were profitable from day one and some won’t be profitable for at least a year. The good thing is because we have scale it all balances out and we are not putting our own money into them every month.
BP has been such a huge part of my success. I gained the confidence I needed to go into this full time and have met some amazing friends who have helped me so much along the way.
I am looking forward to this much needed vacation and returning in June fully recharged and ready to go!
@Derek Carroll- About half our portfolio is in Chicago with traditional residential financing. We were able to cash out on some of our appreciation to buy the rest with 80% LTV commercial loans. We borrowed $100k from my brother to push us past the goal line and now we will be pulling more equity out of Chicago to pay him back.
@Steve Perkins- It has been beyond my wildest dreams, I honestly barely recognize myself and didn't know I had it in me to do all this.
I'm sure you are using BP's guidelines about cash flow and you are careful about not pulling too much cash out on your appreciation. As with my business partner ventures, my own rental properties are never leveraged too the max even if the current net rental income can cover the new loan. One never knows what may occur to cause net rental income to suddenly drop for a while. So many "investors" do not consider that scenario as they were pulling cash out of all the built up equity. In almost 30 years of ups and downs of real estate I have not had any forced loss of real estate because all the loans were easily covered by even dropping rental income. Rental income does not always go up each year. Keep you wildest dreams from turning into nightmares.
We have 3 conventional loans.... I did not notice a hit, but the first 3 were bought basically one a year so my score only increased over time. The rest are under our LLC so do not show up on our personal credit
Congrats and thanks for sharing! If my math is right, you've got 80 doors with an average rent of less than $450/mo? Curious if you are seeing better/easier tenant pools in Milwaukee v. Chicago? I'm in CA so those are some low rents. In my areas low rents come with low rent issues. I'm no stranger to low rent issues, but I define low rent as under $1000/mo. :)
I might have missed it, but how many of units have PM?
Again, congrats for setting and meeting those goals. Europe waits for you!
We have 59 doors total. But 4 units are not currently rented out (2 we live in and 2 are under construction) Chicago is about $1300 a unit and tenants are much easier to deal with (I manage these). Milwaukee is about $600 a unit (about $650 a unit when I get done with increases) and it has it's set of challenges. Those properties are run by my full time in house PM.
It is not easy, and we do have challenges for sure. But having an in house PM makes a world of difference. especially since we bought 13 properties from 10 sellers in 5 months, it takes time to transition people over to our way of doing things.
Sorry about the bad math! I added your buildings and unit numbers together.
I suspected your Chicago rentals were in a different "class". When you say in-house PM, do you mean they are living in one of the units? Or are exclusively working for you?
Exclusively working for me, well kinda... he has been my sole PM since last year but we were not big enough to cover his salary yet. He is/was a teacher and his last day is Friday and then we will be his sole employer. I think that has drastically changed how we do business as I have much more control of things.
Exclusively working for me, well kinda... he has been my sole PM since last year but we were not big enough to cover his salary yet. He is/was a teacher and his last day is Friday and then we will be his sole employer. I think that has drastically changed how we do business as I have much more control of things.
That's exciting. Congrats on having a PM on your team!
- About half our portfolio is in Chicago with traditional residential financing. We were able to cash out on some of our appreciation to buy the rest with 80% LTV commercial loans. We borrowed $100k from my brother to push us past the goal line and now we will be pulling more equity out of Chicago to pay him back.
Brie, question for you about pulling equity out of rental properties. My lender is telling me that I cannot pull out any equity out of my rental properties since I have more than 4 fannie loans. For example I have property FMV of around 220K -240K with mortgage balance of 111K. I should be able to get equity out to buy more houses but so far I've been told I cannot do that. Any suggestions? (find a new lender?)
Congratulations! Obviously it is time for some new goals! What is your net on that $35K after reserves? Sorry if you have already answered this.
It is still a little early to tell for sure. Our Chicago properties which we have had for awhile run at about 25% expenses but these are newly rehabbed properties in A/B areas. Milwaukee has had a lot of start up costs getting buildings and units up to our standards. I estimate we will be running at 55% expenses but according to the seller's schedule E's that were provided to us when we bought they were running at about 40% expenses. If we use the 55% we should be netting around $10k a month.
The properties we bought last July are already ramped up and operating at about 40% - All but one of the December properties are ramped up and at about 40% and we are still working on getting the ones from March and May up and running.