Today’s post is simply meant to be food for thought for those who (like me) enjoy real estate investing, but aren’t passionate enough about it to spend all your working hours focused on growing or maintaining a large real estate business because your zeal and purpose lie in other things. You respect real estate as a wealth building strategy, you’re willing to learn enough to keep yourself out of trouble (smart move), and you’re willing to hustle for a few years to get a great head start particularly during these years of decline when prices are more affordable than they’ve been in a long time.
My hubby & I have subscribed to what I call the “get rich slower with maximum cash flow and minimal grief” plan for real estate investing. It’s not super slow, but it’s definitely not “get rich quick” either! Our focus is to increase our current rental portfolio to a total of 10 single family homes by the end of 2011 and pay the 10 homes off entirely by the time we hit the age of 40. Our sweet spot for rentals is in neighborhoods with 3 bedroom/2 bathroom homes from $60-$90K with rental rates between $1200-$1,600.
We’re leveraging private funds to acquire our properties and doing flips to generate the cash to pay the properties off within 7 years rather than the traditional 15-30 years. Our positive net cashflow at the time of acquisition ranges from $400-600/month so the cashflow is solid from the start and only gets sweeter.
Once the properties are paid off at the age of 40, we’ll have zero debt and a residual cashflow that provides between $90-110K annually for our family without dealing with a large portfolio of units or investing in apartment buildings. Now before you begin to argue with me, I’m by no means saying that having a much larger portfolio and investing in apartments isn’t a terrific idea….it’s just not our path.
If you’re just getting started now and you have cash reserves in place, you can focus on acquiring a handful of properties over the next 12-18 months. What’s great is that you don’t have to buy up every deal you see, and instead you can cherry pick and focus on the few really solid ones that will yield a strong positive net cashflow from day one. You’ll want to get a few purchased right away because you don’t want to put yourself in a position where one vacancy or one major repair issue eats up an entire year’s worth of income. Been there, done that.
Landlording certainly has its challenges, but it is also rewarding. One of the things I absolutely love about real estate investing is that you can grow slowly and methodically or quickly (yet strategically) and still be successful.
Take your pick, but I encourage you to begin with your end goal in mind. There’s nothing wrong with getting “rich” (whatever that means to you financially speaking) just a little bit slower than others in this real estate investing game.
Photo: Rachel Ricci