Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
While travelling with my good friend who is a fellow real estate investor, and giving him a hard time for investing in what I considered mediocre returns in his local market, he really one-upped me. He gave me the 40/40 challenge We are challenging each other, in partnership or on our own, to get to $40k per month in passive income via real estate, within the next 40 months.
I accept his challenge! We both see opportunities to get 25% cash-on-cash returns year 1, and 50% cash-on-cash returns year 2, investing in properties we can convert from long-term to vacation rentals. Earning 25-50% compounding and utilizing lots of leverage, I think I can get to $40k per month in the next 3-4 years.
Writing this post will help me focus on the goal. As will our mutual friend, who is going to document our progress every week via email to the two of us. I know I can do this, or come close!
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
Well that is an amazing goal. I like the idea you focus on cash flow not a number of properties. If you can get there with fewer but more profitable deals that is better. To many people focus on a number of units, and wind up having an incentive to do more bad deals instead of fewer good deals.
Flipper/Rehabber · Myrtle Beach, SC · Member since 2014 · 95 posts · 35 votes
10y
@John D. Love the goal! And I think it is possible. Im in! I am unfamiliar with the vacation rental side of things but think the same principals of utilizing leverage and buying right will yield the COC returns you are looking for. My plan is to build up the syndication side of our team while constantly rolling over any of my acquisition fees and any profits I receive back into the deal OR purchasing smaller deals that I am in 100% control of on the side. B/t the two I don't feel as if the 40/40 challenge is impossible...
@Alex FranksAwesome to hear about your progress! Would love to get together sometime and chat about the syndication side of things...
Good luck Alex! I think 5 years and $30k per month is more realistic for me, but I'll call the 40/40 a stretch goal. I am thinking about a syndicate or raising some outside capital in some fashion as well, since I am pretty confident I can generate 20%+ COCR in short order, I think it makes sense to consider using other peoples money to help throw some fuel on the fire.
John that's a big part of making this work. Is OPM to add more projects ,that pay folks solid returns with out the hassle of them owning rentals.
Property Manager · Minneapolis, MN · Member since 2014 · 380 posts · 167 votes
10y
Great goal! I am going to come up with a similar one now :-). I think once you put it on paper and really commit things happen. Good luck and keep us posted!
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
10y
I wrote two offers today, one for $950k and one for $850k. Both properties should gross $200k+ in annual rents as vacation rentals, $100k+ in NOI, and $50k+ after debt service. 20-40% cash-on-cash returns, depending on which of the financing options the sellers choose. I'm typically presenting a few different offers on each place (cash, seller-carry 1st mortgage, smaller seller-carry 2nd mortgage) so I won't know the COCR until the pick an option.
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
10y
Offer accepted on the $950k place! We close by end of month. This huge 4700SF house on 2 acres with pool, stocked pond, and what will soon be tiny private 3-hole golf course will generate an easy $200k in vacation rents. I think close to $300k gross rents may be possible year two or three, after some small modifications and after our reputation builds a bit. With a seller-financed second mortgage I'm out of pocket $140k, including points fees closing modifications furniture I'll be in a little under $200k. Year 1 cashflow around $50k range, year 2 around $80k with some definite upside potential if we can get weddings, retreats, and the like excited about the place.
Still working on the $850k deal, I think I'll have that under contract tomorrow or Monday.