1,000 rental houses does this seem reasonable?

1,000 rental houses does this seem reasonable?

Real Estate Investor · OKC · Member since 2016 · 70 posts · 36 votes
Hi BPM(Big Pocket Members)! I have a thought I'd like to run by you all to see if you think it's actually doable. I have a goal of having 1,000 rental property's here in Oklahoma in the next 25 years. Here's the breakdown 1,000 rentals all bought for 120k or less after all expenses 1000 rentals renting for 1200$ per month on avg 1000 rentals each at 600-700$ monthly mortgage 1000 rentals will $2,500 or less property tax each year 1000 rentals with insurance costing 1,500 per year or less Now let's run the numbers 1000 rentals 20% down on a max of 120k = $24,000 per house or 2.4m for all Property management fee monthly $120,000 1000 houses with $700 30 year mortgage = $700,000 monthly 1000 houses with insurance costing $1,500 a year insurance = $125,000 a month 1000 houses with $2,500 property tax each year = $208,333 per month Total costs = $1,153,333 per month Total revenue = $1,200,000 per month Total cost for 1,000 property's out of pocket over 25 years = $2,400,000 Total value of 1,000 properties 120,000,000 Monthly profit after the 30 years would be though the roof at $453,333 a month. I know theses numbers are really rough but the only one that's 100% for sure is the 1,000 rent houses. Do you think this is too crazy to achieve? I'm going to build it up as I go obviously and not do this straight out the gate. It just almost seems insane that with 2.4-3m anyone can have 120m+ in properties! This is my goal let me know if you think I'm nuts! Also let me know your goals!
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Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
9y

Great plan, but you'll need more money than that.  Most likely you'll need 25% down, maybe 30% (depends on lender).  Plus, you'll have to cover closing costs--factor in another 3% or so.  It's also likely that some or all of the homes will need some type of rehab to make them rent ready.plus you'll need some cash reserves not only to satisfy your lender but to cover operating shortfalls, especially as you are initially leasing up--expenses from empty houses but little income from occupied ones.

I bought over a hundred in two year's time around a similar price point as you are proposing.  It took $5 or $6 million to do it.  To do a thousand would be closer to $50 to $60 million.

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  • Real Estate Investor · OKC · Member since 2016 · 70 posts · 36 votes
    9y
    I just realized it's 20-30m to have 120m+ still ain't bad at all! But I may have to cut that back to 250-500.
    • Rental Property Investor · Depends on where my employer sends me · Member since 2018 · 171 posts · 142 votes
      1y
      Quote from @Peter G.:
      I just realized it's 20-30m to have 120m+ still ain't bad at all! But I may have to cut that back to 250-500.

       So Peter how you coming along with the 250-500 properties?

  • Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
    9y
    I am not a mortgage expert, but I think after Fannie/Freddy 30 year mortgages are hard to find. Also, you would need a ton of capital to start. If you have that much money, there are better ways of investing.
  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    9y

    Great plan, but you'll need more money than that.  Most likely you'll need 25% down, maybe 30% (depends on lender).  Plus, you'll have to cover closing costs--factor in another 3% or so.  It's also likely that some or all of the homes will need some type of rehab to make them rent ready.plus you'll need some cash reserves not only to satisfy your lender but to cover operating shortfalls, especially as you are initially leasing up--expenses from empty houses but little income from occupied ones.

    I bought over a hundred in two year's time around a similar price point as you are proposing.  It took $5 or $6 million to do it.  To do a thousand would be closer to $50 to $60 million.

  • Rental Property Investor · Tulsa, OK · Member since 2012 · 291 posts · 102 votes
    9y

    Sorry to burst the bubble here, but I think Deren is correct.  There are a lot of holes in your thought process but I guess it might be nice to look at this as a dream or wish.  Below contains a few items that stuck out to me.

    Financing - Getting 1000 mortgages is impossible.  Not only are you unable to get higher than 10, as your portfolio grows, you will likely need to go with a commercial loan.  With that, you can forget about the 30 amortization schedule and your interest rate is likely going to be much higher.  That will erode your post-financing cashflow substantially.

    Maintenance - Assuming no maintenance over a 25 year period is not likely for one house, let alone 1000.  25 years is a long time and you are likely to experience several significant costs in that period.

    Insurance - That cost of $1500/yr seems high to me.  I'd cut that in half

    PM - If you really do have 1000 rentals, you will likely have your own staff of PM and maintenance, so 10% of rents is probably very high

    Taxes - $2,500 for taxes (at least in Tulsa) seems high to me.  Maybe closer to $1800-$2000

    Operational issues - With that many houses, you will need departments of people and infrastructure to operate.  This will become a significant cost as you grow

    Finally, to help put this into perspective, assuming you will be looking for deals and not just buying at market price, it will be difficult to find so many properties.  Based on your model, you would need to close on 3.33 properties per month (1000 / (25x12)).

    Sorry again to throw the wrench into your idea.  

  • Specialist · Edmond, OK · Member since 2008 · 12 posts · 10 votes
    9y

    I do t know if you are in OKC or not but love to make sure you are on our buyer list since we spend over 6 figures a year marketing for off market properties.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    No way. Even with systems in place, little houses will drive you nuts. 1,000 of them?  Let us know how you like them after about 8.

    Unless you have a why larger than money, this 10x idea will put you in a rubber room!

  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y

    Maybe, start with ONE, and go from there?...

    Note: So long as EVERY buy is at ~30% discount from day one, you won't need to be $24-50M out of pocket after 25 years, because you'd be able to refinance EACH buy after 6 months to get ALL your initial deposit back! Good luck with finding a suitable Portfolio Lender who's on board. My 2c.

  • Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
    9y
    I work with many investors who own hundreds if not thousands of homes. Very achievable, and I think one of the best ways to grow is to buy in bulk. Most investors I work with enter new markets by buying in large quantities. You could easily raise the equity for portfolios with a 25 yr am bank loan. I'm currently underwriting a portfolio of over 100 in OKC to be sold in bulk.
  • Rhett TullisBusiness Member
    Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
    9y

    I would caution you on your estimate for rents.  You will not find many homes in okc for 120k that rent for 1200 per month.  Most homes that are renting for 1200 per month here in okc are 150k to 170k houses.  5 or 6 years ago this was more doable but now it is tough but who knows maybe it will change in a few years.  You would need to get into properties that are sold under market and need some work and this would take more time and funds.  Overall though if you are at 1200 per month for rent in okc you are at the top 1/3 of the market for rental prices.  not the ideal place to be.  

  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Buying SFHs in that volume in financially illogical. Way too mush money and work to justify the effort. SFH investors are generally small time due to the poor economics of SFHs.

    Large numbers are in the realm of apartment investors where it all comes down to scale of economy. 100 tenants one roof, not 100 tenants 100 roofs. Maintenance costs do not make it financially viable.

    Start small with multi units and sell everything to invest in apartments when you have the numbers and finances.

    Leave the SFHs for the little guys.

  • Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    9y

    A friendly reminder one can only borrow 1 mortgage per FHA loan, and

    4 dwellings$815,650
  • Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    My question would be why? To what end? Just so you can be big man on campus and say you own 1,000 rentals? Because Grant Cardone told you to 10x it? So you can water ski behind your 100 ft yacht? Do you really need $600,000/mo to live a fulfilling life?

    I'm betting that you can meet any sensible financial independence goal with considerably less hassle, less risk, and far fewer units, especially if they are higher quality units. So why take the extra risk and hassle to get to 1,000 if the marginal benefit to you basically goes away (and then goes negative) after, say, 50 units ... and that is still way more than you should realistically need if you pick the right units at the right terms.

    You are free to set any goal you like, but this one just seems silly to me personally ...

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Brian Burke  one big variable owning that many homes in Tornado and convective activity central is not if but when 300 of your houses get hit with a massive hail storm.. and you have to pay your deductible to replace all those roofs  LOL and if you have that kind of portfolio you usually go for high deductible like 5k... that right there could wipe you out.

    @Peter G.  back in 2011 I set out to buy 5000 houses.. I made it to 350... it was the happiest day in my entire life when on Oct 31 2013.. I sold them all ... LOL...

    I do have clients I fund though that own 200 to 300 of them.. all in their local market.. and its what they do   its all they do... but they run it like a business of course.. Lots of work.

    I like the idea for most folks we are looking to invest to get to 10 to 50 doors which ever way they can either sfr or small multi or a nice 50 unit garden apartment.. etc etc.

    its the rental business and all that comes with it.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Brian Burke  @Peter G. exit from hundreds or more SFR's can be a real chore as well if your not in a uber hot market were retail sales are the norm..

    much easier to sell one 500 unit apartment complex.. then 500 homes scattered around town.

    I see this often with folks that own a bunch of SFR's they want to sell it like its a apartment.

    but lets say the 200 homes are worth 100k a door that's 20 million.. a 20 mil buyer would much rather look at one asset in one place or maybe two or three other than 100's of homes.. 

    I think this is dawning on the hedge funds that bought thousands of homes.. exit is not for what you think you should get for them.. I think the discount to actually move them to a investment group will be quite large..

    Brians inventory in CA can and will go retail so he can have a organized sale campaign to maximize.

    I am going through this right now personally with the last 11 rentals ( new construction I bought for Go zone in MS) 

    what we forget even though the homes were bought brand new 10 years ago.. they have now been in service for 10 years... so they need a retail rehab.. usually 5 to 10k to get them up to what your competition is selling homes for ( especially in this area).

    then of course its near impossible to sell a home with a renter in it.. so you need to boot the renter now you have no cash flow.. you sink 5 to 10 k into the home you have negative cash flow say 1k per month for 6 months  add on sales commish and closing costs of another 6 to 7k and there you go. you need 20 to 25k in CASH to exit.. and if your in a market were the properties have not really appreciated.. then your just giving back your positive cash flow you made for 10 years..

  • Flipper · Los Angeles, CA · Member since 2016 · 6 posts · 4 votes
    9y

    @Peter G. Based on your numbers, 2.4 million would buy you 100 down payments. You would need 24 million for a 1,000.

  • Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Jay Hinrichs  raises some good points.  I know a few companies that own more than 500 single family properties.  They all have more than 20 full time people.  All of them do everything in house.

    Most of the people I know who start with that idea end up trying to do owner finance deals instead of rentals.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed  with dodd frankenstien that really curtailed the seller carry back primary residence.. at least if you want to be compliant.. I know its still goes on in the minority communites and others who are not aware of the current laws.

  • Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Jay Hinrichs    They have absolutely reduced them for primary residences.  That might change with the new administration.  Until then many people in Texas are still buying investment properties with owner financing. 

  • Irvine, CA · Member since 2016 · 545 posts · 614 votes
    9y

    @Peter G. Why are you so set on the large number of SFR units in your portfolio? When the get rich in Real Estate Guru's talk about people having large number of SFR units in a portfolio, I don't think they really anticipate many if any of the followers to actually do it, that's mostly hype for the sales pitch, If they did it would mean they didn't truly understand the next level in RE investing.

    I would rethink your plan and conduct some analysis on obtaining Institutional grade Multi-family properties. AS @Callum K. and @Brian Burke and @Jay Hinrichs have all noted, once your SFR portfolio reaches a certain number of units and dollar amount in value it becomes less advantages and more riskier for you exponentially every time you add a property to your portfolio.

    If you're serious about growing a portfolio of that size do it in dollar value on the Institutional Multi-family side NOT volume of SFR's.

    The larger you become in RE investing the further away from the beginners strategy you should be using especially past the 10 million mark.      

  • Rick SteinPro Member
    Investor · Austin, TX · Member since 2014 · 248 posts · 181 votes
    9y

    I must agree with Jay. Why 1,000 homes? Where did you get that number? What does it represent for You.? prestige? As a previous respondent said, " you will be in a rubber room" . How much income do you need to be happy? As for mortgages, you will never get that many bank loans. I would try for seller financing with low down payments and great terms. Alternatively, private money or partners work well as well. I don't want to rehash what everyone else has said. Just be careful what you wish for, you may just get it.

  • Rental Property Investor · Dallas, TX · Member since 2015 · 503 posts · 504 votes
    9y

    I agree with the other responses. 1,000 houses is insane. Start with one. See how it goes. If you're not a quitter, then buy another. When you get to your maximum of ten mortgages, make the jump to multifamily. Either keep the ten houses for the cash flow or sell them for a down payment on an apartment complex. If 1,000 doors is still your goal, aim for five or ten 100 to 200 unit complexes. 

  • Brian BurkePro Member
    Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
    9y

    @Jay Hinrichs is right.  The 100 or so that I bought are in the San Francisco Bay Area and Sacramento and everywhere in between...and they were bought in 2011-2013 when prices were about half of what they are today.

    Which brings us back to the "why" of the question.  The reason I did it was because I predicted that prices would double in five years so I could take the ride all the way up and then sell each house retail, one at a time. It was a trade.  An arbitrage play. And very likely not repeatable.   And I wouldn't do it today.  But that was my "why", back then.

    I don't know what would be a good "why" to buy 1,000 houses now...but then again I'm not the one proposing to do so--and everyone's motivations are different.  

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Rick Stein  only way I would embark on something like that again is with 100% equity NO debt .

  • Rick SteinPro Member
    Investor · Austin, TX · Member since 2014 · 248 posts · 181 votes
    9y

    own each property free and clear? Pay cash for all of them or am I. Is understanding you?

  • Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
    9y

    You know I started out with a similar mindset. I didn't have 1,000 SFR's, but I thought 100 was realistic. I got to 13 and shifted over to MFR's. I didn't do it because it was hard. If I wanted, I could have kept going and done as many as I wanted. I have a pretty good system in place to where time was minimal, but at 1,000, you'd definitely have people working for you just to manage. At some point, you'd have your own PM company. Also, tons of things change over time (almost every factor), so more than likely time and changes would derail you. I set my goals one year at a time. I do have somewhat looser goals for 3 and 5 years, but I never go beyond that because I leave myself open to adapt to the changing landscape.

    I went to MFR's because MFR's are too easy (once you have the right experience). A 12-unit apartment takes about the same amount as 1 or 2 SFR's. I also moved into a BRRRR strategy because the profit is much larger. So your goals are fine, but you must always adjust goals along the way to fit your true motivator. Mine is cash flow. I'd just rather do 10, 20, 30 (and down the road larger) unit purchases because you can have 1,000 units much quicker that way.

    I think you should do 10, then 50, then 100, then after 100 if you are still gung ho about it, go for 1,000.  Why not?  I just think once you have the kind of cash coming in that 100 (or less) would bring you, you just start to see how it easy it is to buy larger and make even more money.

    Good luck!

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