Best steps to take towards financial freedom in my situation?

Question

Hey everyone, I’m very new to Biggerpockets, but love that there is such a huge network of experienced/aspiring investors.

A little bit of background, I’m an accountant, and I have 1 rental property. I have $100,000 liquid that I want to invest in Air b n b and get as close to my “financial freedom” number of $4500 cash flow. I live in a small town population around 20,000.

My question is if you were to recommend a market or path that I should take to get as close to my goal as possible wht would you do? Buy the biggest nicest property? Or a couple of properties? I want to take advantage of the secondary home loan, and look in markets like Naples Florida, Austin Texas, or even Brandon Mo.

In your opinion, is that $100k going to get me close to that goal? If not, how much more capital would I need?

John Underwood · Answer

I get my best returns from acquiring houses via tax lien sales. I then turn these mortgage free properties into long term rentals. Most are these are bringing in $1000 in rent.

Bob Wilson · Answer

@Jonathan Turner

Referring to both Jonathan.

I personally like purchasing, for obvious reasons, however, it's also the main reason we've grown slow over 5 years. Takes about 100k (55-65k DP + 35k furniture/labor) investment to get one unit up, when purchasing.

I'm new to arbitrage, but have 4 units like this now, as of 3 months ago. Colleague of mine who owns a rental company, has about 2,000 rental properties in Chgo, and earlier this year, he explained to me how he got SCREWED with the moratorium, and wanted to now diversify with our company. 20% rentals to us (over time), because we have more stable and consistent income (not to mention skin in the game), vs getting screwed by his tenants. He's watched us for 5-6 years though, so he has an inside view to the "system" we have in place.

So we tested the "arbitrage" concept, grabbed a couple of his units, put up the same 35k we were doing anyway, and went to work! My partner was all about it, he told me we should never buy again, lol. Owners take care of the major repairs, we get 3 year leases (stability), and still get $6,500-$7,500/monthly. Expenses are about $2,600-3,200 monthly, so we walk away with $3k-3,500 profits, per unit.

A couple investors approached us, and asked if they could put up the 35k (furniture/labor) for monthly returns, so we structured a deal where we split the profits. They furnish it, we run it, and we split profits. $1,500-$1,900 to each side.

Why would we do that (earn way more when we invest by ourselves)?

Simply because we grow our brand/market share twice as fast, that's it. Our goal now is to go national in 2023, so expanding the brand and dominance locally is step 1 to that path. Partnering with investors not only helps grow now, but establishes the trust and relationship over next 18 months, which is important because these same investors are who we are partnering with when we go national, they get first dibs on expanding to other states under their leadership/vision.

So its a long term play for us.

Scott K. · Answer

Am I missing something here? You're promising a 35K investment with $20k return each year? and it's SAFER than airbnb?

How is no one challenging you on this? Show some numbers or details.

Joshua Strickland · Answer

Based on a 20% cash on cash return that $100k would net you about $20K per year. If you search hard and run it like a true business you can net more than that and be well on your way.

Jonathan Turner · Answer

@Bob Wilson

I would like to know more about how 35k can earn me that type of cash flow. Are you talking about arbitraging the properties or owning them?

Bob Wilson · Answer

View the video on my homepage first, which will save both of us much time in the back and forth, then respond with specific questions.

I’ll answer them. www.leaseFHS.com

If you are challenging for the sake of “challenging”, save my time. I’m busy enough.

If you are challenging because you want to join the party, then yes, I have no problem sharing the numbers, we can jump on a zoom call to talk business.

In short, yes, it’s safer then AIRBNB, and the numbers are what I posted.

Wale Lawal · Answer

I think the places you are looking to invest in are great. I would also add Houston, TX, Dallas, TX, and Tampa, Fl.

Ryan Genson · Answer

Awesome! Sounds like I know where my vacations will be😎 I did message you however, if you’d like to connect!

Stetson Miller · Answer

@Ryan Genson I actually did miss where you initially said you're looking to do STR's. However, there are a few more rules even when trying to use that strategy. You're correct in that you are still required to occupy the property part time, and you do need to be prepared to show proof of this. However, the specific day requirement is at least 14 days, or 10% of the number of days that the property is rented, whichever is greater. Because of this, if you wanted to operate at a full 90% capacity, you would have to live in the property at least 37 days a year, again with proof of that to provide if necessary.

Another thing to note is that you are not able to have a property manager manage the STR for you, it all has to be done by you, which can be a pretty big task.

Ryan Genson · Answer

it was my understanding you just had to occupy the home once or twice a year and could rent it out the rest. Is that not correct?

Best steps to take towards financial freedom in my situation?

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