Originally posted by @Anthony Gayden:
Originally posted by @Josiah Sia:
Howdy!
Looking into getting into REI and have been looking at different systems and vehicles to get me there. We don't have any huge goals of owning 1,000+ units or raking in millions a month. Our goal is just to replace our monthly income of roughly $10,000/month passively within the next 10 years. That's it!
Looking into ways to do this conservatively and one of the methods that really stood out to me was buying a MFH (2-4 units), paying it off, then taking the full rent + savings from our FT jobs and snowballing the same process over and over until our goals are reached.
Averaging the rents around $700/unit in our area, that would only take 15 units to be fully paid off to achieve $10,000/monthly passive income. We have a decent amount of income since we've reduced our mortgage, auto loans, and adjusted our budget to live significantly below our means. This is definitely achievable in 10 years if we buy 3 quadplexes and a triplex, or 8 duplexes, etc.
I know this isn't the normal investing kind of plan I see out there but this is how we could leverage REI to meet our specific goals to reach financial freedom.
I'd like to ask the seasoned veterans here if there is anything inherently wrong with this plan? Is there anything else I should know about before setting this as "the plan." I don't see this kind of plan talked about very often or at all. Most everyone is looking into BRRRR and other types of trade-up systems.
I have met a few people who do this sort of thing. They usually fall into a couple of categories.
1. Highly paid professionals or business owners who have very high incomes and no interest in learning about investing. They buy houses cash and enjoy the cash flow.
2. People who buy very low cost rentals (under $50,000). These properties are often in declining inner cities or extremely rural areas. The cost of the properties are so low that acquiring them with cash and not already being a millionaire is not difficult.
3. Someone who owns several rental properties and literally paid them off over a 30 year mortgage period.
You said in your post that you have a decent amount in income. How much is that? Where I live a 4 unit building costs $200,000+. If you are able to save $30,000 a year, it will take almost 7 years to buy one property.
I don't even consider it a "conservative" investing style because those who do it lose a lot of the benefits of using leverage, which means it puts your own personal money at more risk.
By decent amount of income, about $48k a year to put towards RE. I'm not extremely high paid, but I also live in a low cost of living city. This is after taxes and expenses. My wife and I have drastically reduced our loans/expenses/mortgages etc. We are living below 50% of our total income. (And still comfortable)
I put an example plan in my response to Jason about how I'm planning to work on the pay offs.
I completely see your point in the leveraging though... I'm open to adjusting the plan as needed as deals come and go. If it's a hot year for deals I'm open to purchasing more than normal. And if its a cold year, I could use that "dry period" to pay off mortgages.
