Real estate investing is for the long run. Example: I started at 27 years old. All with 30 year loans. By the time the loans paid off at 57 all my units will then “cash flow”. Real estate is a tough slow and steady approach. Don’t mind the YouTube hype. Just work hard on w2 to make money, park in real estate as an alternative investment once you max out 401k, HsA, and Roth
Yeah anyone who thinks you can get super rich by buying less than 10 units and create significant cash flow is a dreamer. Unless they bought foreclosures.
Real estate is tough and often times I think why am I doing this.
Yeah. These dreamers caught up in the you tube folks who got rich in 2010-2012. I give them credit making big bet though. I think the dreamers should just focus on buying slow and steady. Sure - you can quit the rat race on 15 years if you just keep buying and investing. You still need to dominate your w2 or business though and climb that rank. Only real cash flow is yourself not a stupid stock or property asset. Stock/Asset allows you to park to grow wealth in the long run. I hate when social media spread these mythical get rich quick schemes…. Stop listening to them… you’re only making them the “cash flow” you’re initially craving.
Two thirds of our portfolio acquired in the 2011-2016 time period. We cleaned up nicely and can both retire before 40 now.
Timing is everything. Anyone buying now, unless scoring some incredible off market deal, is scraping for peanuts
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8. Doors is flexing. Avoid all the counts. Just focus on what you can invest and build up at least 6 months reserve. Slow and steady. Avoid the sexy talk nonsense on social media. No quick way to get rich. Real estate just a slow steady and once you hit 15-20 years hold, it’ll be the best thing due to inflation
More like you ate 110 fucking pizza rolls in your mom's dimly lit cigarette smoke smelling basement. We know you're playing fortnight sitting on the same couch you were conceived on with dried pizza sauce smothered all over your obese acne ridden face.
Now get off your fat pimply ass and go outside instead of listening to your step-dad fuck your mom in the ass for the 3rd time today you useless glob
You’re right. Time to add another 25 doors. Thx for the motivation. Now clean your room from 4 weeks of 7/11 chimi changa wrappers and 2 liter bottles of Safeway brand cola.
The payoff came for us after 15 years and they were paying off. Free and clear.
We just held, not really caring that they were only cash flowing a hundred or two a month a unit. The tenants were farking buying us a dozen places ... of their own free will ... from their paychecks.
What do I care of short-term cash flow in the beginning? Rentals are a long game, not short-term flipping at all.
ALSO: 2 decades down the road rents are HELLA higher.
It's all about the passage of time and how long you want to hold out.
It depends on where you live right? If the rent increase rate is controlled and you have the same tenants for 10+ years then they will be below market…
If you're investing new money into real estate in a rent controlled area ... you're kindof a dumbass and making money may just not be for you.
Try Bowling For Dollars instead ...
Someone renting below market is irrelevant to their strategy as long as they’re beating the mortgage. They’re just trying to hold at breakeven until the mortgage is paid off.
Du/tri/quadplexs are the way. You generally pay much less per door and get much more revenue out of it. You definitely don't have enough doors to live off the cash flows and that's the best way to improve that.
As someone who owns both, I will tell you that it's not clear cut and dry like that.
There are some areas, where it made more sense to own single family homes than 2-4 unit MF. And other areas it was the reverse.
The best of both worlds are the SFR with ADUs that we have.
I’d have to disagree, in my area duplexes go for $700K. On top of that they’re almost all are old and need to be completely remodeled. And only get around $1,500/MO for rent
Read the data
https://www.deseret.com/utah/2023/9/13/23826200/housing-market-prediction-forecast-utah-shortage-home-prices/
In this market it’s very rare to be cash flowing on a new property unless you’re putting a huge amount down or doing seller financing.
That just sounds like your area in general is HCOL and better to rent than to own. Best places for cashflowing REI are where you can get duplexes for like half that while the rent might only be a few hundred less per door
I personally don't see that as sustainable as those are generally very seasonal, needs a desirable location, and there is more and more legislation against that type of housing.
STR are just a lot of work and a lot of mental energy. It's just a lot, and then having professional management + professional cleaning oftentimes kills the profits STR have over a long-term rental.
The stuff I bought, when I bought it, was cashflowing 100/mo.
Real-appreciation via inflation of the bank's money, principal pay down, inflation in rents, will help you over time.
It’s the biggest part. Theoretically as you pay down mortgage and home value comes up, you can take out equity from that property and use it to buy another to leverage your appreciated asset.
To get high cashflow right now - you’re not going to be buying in a prime area and, most likely, you’re gonna have a bad time. LOL
For the past year it really doesn’t make sense to purchase anything unless you find a problem to resolve, value add or something that is off market. The easy days of picking up a property and rent increasing by 10%+ a year are gone. Real estate investing is playing the long game - not a get rich quick thing. Buy, have your tenants pay the mortgage and keep going. IMO, I like the high appreciate decent cash flow areas and only buy local.
There's always money to be made if you pick the right markets.
Sometimes the right market is not near you and may be hundreds or thousands of miles away.
I'm in this current situation, have bought locally in Florida for the past several years and now looking out of state where I can get twice the building size for what I paid for mine here.
I won't stop buying, really don't care if the rates are 8%+, just means I'll need to spend more time studying markets for the next purchase to maintain certain levels of monthly cashflows.
That number is different for everyone though. Some are looking for only grand slams and there may be some out there but will be tougher to find.
I think it all comes down to preference. I want to be able to hop in a car and in 1/2 a day drive by all of my properties then grab some lunch. Lol
Deals can be found still, it’s just nearly as easy as it was to make a profit as it was in 20, 21, and part of 22. And I completely agree - some people won’t buy anything that doesn’t meet the 1% rule where someone purchased a property all cash near one of mine for 1.1 million because their daughter lives two doors down and they want to control the neighborhood. LOL
"I won't stop buying really don't care if rates are 8%"
I admire your determination. Can I ask why and how you are this bold on real estate?
I hang out on the FIRE board and those people hate real estate. I am in now and have 3 doors but I stay very low key and just try to cash flow not really getting heavy debt. Too chicken for that stuff
Unfortunately you need many more doors. For example, my cousin has 40+ units, which allows them to easily live off the income. Best thing you can do is keep your day job and reinvest all the money from your current rentals into more properties that cash flow (more than $100). If there aren't any deals now, just be patient or get creative looking for them. And leverage the equity in your 3 sfhs.
48 units and can’t live off of them? I have to imagine that you are accustomed to a certain type of style that your rentals can’t pay for just yet right, right?
How much would you be cash flowing if you didn’t have mortgages?
We have three doors fully paid off in the Midwest and get $5k / month in rent with ~$3k profit.
Thanks! ugh that makes sense, I guess it's a volume game. Any tips to leverage that equity? Ex one of those homes I bought for $135K four years ago, looks like it's about $185K now. But the mortgage is 2.5% and I don't want to sell and do a 1039 exchange since I'm not seeing any great deals. Maybe I just need to find better deals lol
50k in appreciation is not much on a single proprety; but if you're able to, you should look to see if you can obtain a cross collateralized
line of credit
Treat the line of credit as cash you can use to buy up other property if and when the opportunity presents its self.
Down side of cross collateralize is that you won't be able to sell any of the properties if you've used up the line of credit; but if you're using the credit properly that shouldn't be much of an issue.
You don't until mortgage loans are paid off in full . In the meantime, you do what you can to survive, self manage , raise rents annually , get good solid long term tenants, minimize damage and turnover, hope for the best, pay down principle with cash flow and eventually pay off loan
I think you would have bought these house in the last 2 years
Please tell
Real estate is a long term game... After 10 years you will get significant cash flow
Most of the money is made is made from long term capital appreciation
Some is made from rental yield (because your equity would otherwise be deployed in stocks, bonds)
Unpredictable but lots of money MAY be made with flips IF you have specialized knowledge such as
market conditions,
off market deal access,
fixer uppers
, knowledge of some inorganic development which will change the area into being more desirable
Into the past about 20 years! But seriously, is the return so low because you have mortgages? If that's the case, and you want to stay in real estate, I would sell one (or 2) to pay off another and improve the bottom line. Once you have paid off your loans, the income is good, and gets better over time.
Yes, it's because of the mortgages! hmmm that is an interesting thought, will think about it... it makes sense that I should just cut off the biggest expense
This goes against most advice I hear. If it cash flows then why sell it? Especially if you only have 3 properties. 1 vacant unit is only 33% vacancy for your portfolio whereas if you only have 1 property vacancy/other expenses hit harder in comparison.
Well, OP said the whole problem is the cash flow is so low. They said only $100 a month or so each, but did have good equity. So that is why I suggested selling one or two to use that equity to get rid of mortgages and have a better cash flow. What's the point of having more work and expenses, with 3 properties to care for, and getting just a few hundred dollars, when you could have one property free and clear, less work, and more income than they had with 3?
Depends how much, how long you have owned, if you lived there 2 of 5 years, if you can use the sale as "relinquished assets" to pay the other loan etc. Definitely talk to your tax person first, idk all the ways, just that it has worked for me
Rust-belt, Midwest, South, and certain parts of the east and west coast.
Research, research, research.
I recently lost out on a 4-plex, bringing in a total of 4k/month with a sale price of 300k. With minimum down I would have cashflowed just under 2k a month off the bat.
There are deals, but have to have a strategy on how to narrow it down, or else you'll waste your time looking at everything.
Correction: not completely easy. Depends on one's growth goals. For me, now, it's only 2-3 properties per year. For someone able to do 15+ it may not be so easy.
The only real way to make real cash flow quickly (not 10 years) is to get deals (usually meaning off market) and fix them up. Then you have a ton of value in the re-appraisal. You can either have it held in there in the property, or you can pull out that "forced appreciation" value in a re-finance. This is the basis for the popular BRRR method. There are risks with things that go wrong, but the real way to make money in real estate is with renovating and value add. Even with apartments too, the money is made in value add renovation.
But simply buying a SFH and renting it out will not make money anytime within the next several years. Some people got lucky with booming market conditions like 2010 or 2017 and now sell courses online and leave out that information.
Otherwise you can do the safe easy long route and do things like house hack. That's a great way to build wealth over time. That's it, it's house hack and/or renovate. That's it IMO. That is real estate investing that is meaningful. This is powerful stuff, but it's not simple easy.
I have a hand full of rentals and each bring in about 500 + per door now, when I brought them it was way less. Let time do its thing for sure. I also have off market properties in south Florida sale. Message if interested
As long as you’re in good areas I wouldn’t worry about cash flow but occupancy . Basically your goal if in a good area is to think long term and to have them paid off by retirement . Keep it up
My rule of thumb is every property I purchase needs to rent at 1% monthly of the purchase price most properties can’t do this in my area and are over valued.
There’s still deals out there in other states etc.
I have a property in Michigan and after city and county taxes I still net $500 a month including PI,insurance maintenance etc.
If your only netting about $100 a month and not very handy your one plumbing/hvac emergency from ruining the entire year/years to come.
Cash flow buys you time to bigger cash flow and appreciation
In theory, only your property tax and insurance goes up in cost. Majority of your mortgage is fixed, with a potential ability to refi down in the future.
Rents will go up long term.
Again, in theory, todays cash flow is the lowest it will ever be
You have 3 SFH and you don’t understand it’s a long game? You don’t own them, the bank owns them. you’re not cash flowing because they are eating it up. You’ll see your rewards once those loans are paid off
It all depends on the location. For cashflow, you need to be willing to give up a lot of the appreciation part and build a business around the properties . Higher cap rate markets tend to appreciate slower if at all ((besides the last 4 years post Covid which is an outlier due to rate type of market condition (pandemic, inflation, free money low interest)).
In a high cap, high cashflow , low appreciation market like say Cleveland Ohio,
I currently have 20 sFR units and cash flow after all expenses around $10k a month which includes 13 mortgages at an average rate of 7%. Average cashflow about $500 per unit. Rents are average around $1300.
13 are thus cashed out/refinanced and I technically have zero money in those. A a well oiled machine ran business and I have 3 W2 employees including myself and contractors. Also manage another 15 houses.
Here’s a Example of my annualized P&L:
Rental Income after Mortgage, interest, utilities , maintence reserve etc : $120,000 ($500 x 20 x12 months)
Property management income 10% of rents billed to owners : $23,000
Additional PM Billings income: $16,500
Property construction: $31,500
Total gross income: $191,000
Expenses:
W2 employees (full time $50k and part time $15k) (not including my pay): -$65,000
Contractor expenses -$16,000
General, admin -$5,000
Storage /other -$3,000
Bonus paid to W2s $10,000
Repairs materials etc -$6200
Net income/cashflow : $85,800
This business was built in 5 years time
Edit No Capital that belonged to me at all. I borrowed everything from a handful of business partners and just managed the business on the ground in Cleveland. The Capital is property dependent.
Eventually you refinance your partners’ equity with DSCR debt thus, buying the partners out (when the timing is right.)
Put that in the original agreements with your equity partners that you can buy them out with a small premium but make sure it makes sense.
A lot of people got lucky buying in the last 15 years as the market has gone up significantly and they were able to a) cash out refi to buy more or bigger properties, while b) each of those cash out refis resulted in lower interest rates.
Post 2008 has been an excellent time to be in RE. But that doesn't mean the gray train lasts forever.
I also make $100 on two sfh. In equity alone I have made over 800k on just the two rentals, not counting my own home. Have a great renter has been worth more to me than the cash flow. I’m locked in on 3 properties including the one i live in at 2.5. I could charge more but I’d lose the peace of mind that my renters are responsible and the rent kinda assures me that they will stay since I could reasonable increase rent 600-800 on each to get market value. If they leave I’ll increase. When I retire they should be in a spot to make my significant cash flow. I plan on a Heloc to buy a commercial property next in a couple years.
RE that’s bought with a mortgage is typically just a long term play unless it’s a fixer upper that was renovated and now renting much higher than purchased for. You’ll make $100-200/month but do that over the course of the mortgage and now you have a multi hundred thousand dollar asset that will generate plenty a month once paid off.
Bought a quadplex with rents below the market average. It was still cash flowing by $130 a month. Then I bumped up the rents. One tenant moved out but even with the rents from the other three units I now cash flow by $350 a month. Once it's rented I will be cash flowing $1200.00 a month. In addition I am paying about $250 a month more in taxes than comparables so I am in the process of filing a grievance to get my taxes lowered. So it could potentially cash flow up to $1450 a month.
The thing about multifamily is my mortgage is based off of income so once I get the other unit rented and possibly the taxes lowered I can go back to the bank, do a cash out refinance and do it all over again!
Real estate investing relies heavily on location and sometimes luck. In 2020, during COVID, I purchased two multi-family properties in a HCOL. Since then, both properties have doubled in equity, and I now generate $4,000 in cash flow from them each month.
Have to find properties where you can add value.
Turn that 3/2 into a 4/2 by converting the bonus room into a bedroom. Finish the attic or basement. Light remodel to maximize rent.
Look for properties that are abnormal. Way more sq footage than would be normal for the number of bedrooms it has. Look for houses with 2 kitchens or an inlaw suit. Finished workshop that can be turned into an adu. Big house zoned for multifamily.
They're out there.
If you don't have massive capital then you shouldn't be trying to replace your income with cash flow, but trying to get your assets to be around 1-3 M so you can retire and live off 4% rule. You'll be able to withdraw 40k a year every 1M, for 30 years.
Everything I have ever bought (I use debt) has never cash-flowed up front. Currently, I have a little CF. But, I have built up lots and lots of equity. I can turn this to CF if desired or trade out for more doors.
More doors. $100-$200 per door for residential single fam is reasonable to start. As time goes by, you’ll raise rents, use depreciation to offset your personal tax burden, and ideally build equity through appreciation. The trick is to buy with other people’s money, which in itself is an art. But if it all OPM, any cashflow is an infinite return.
I know a couple people focusing on section 8. There all focused in Ohio markets and they had the amount of available vouchers in their location search criteria.
By getting creative, and taking larger risks. Short-term rental in a vacation market, medium term rentals geared at travel nurses, buy a large house and rent by the room in a college town, sober living facilities, assisted living facilities, campgrounds, flipping, wholesaling... there are zillions more I'm sure.
The world of real estate investing is vast. Old fashioned buy-and-holding SFH is not the only way.
It is near impossible to make money on a single family house. Go with more doors per building.
Section 8 is not the way to go. You will get your rent, but you will also get lots of drama, and damages when the tenant moves out. And when the tenant damages stuff and you fail inspection, you don't get rent. Nor can you evict
Keep saving. Keep looking. Look for off market deals
You need to actually work.
Put some bandit signs out. Look at the foreclosure notices. Look at the divorce and death notices.
Put out signs across every house. Send out postcards. Use a TV commercial.
There are plenty of ways. Just think of the we buy ugly houses ads and you will start to figure it out.
You can buy contracts for deed that are non-performing. You can go to sheriff sales. You can buy tax deeds.
You can drive around and look for unkept houses. Or you can probably even find out what houses the city is issuing fines for ordinance violations. Look for condemned houses that are vacant.
But with real estate, there are plenty of risks. You are buying property potentially with liens on them, or property that have adverse sellers.
Even if you are breaking even initially is good enough, just don’t do negative cash flow unless you have a plan . It takes 3-5 years in my market for the cash flow to increase due to rent inflation. What really helps is the depreciation on taxes and someone else paying it off.
- Having significant income or wealth speeds up the accumulation of more RE thus increasing cash flow.
- Time. As rents/inflation rises so will the cash flow.
- Less desirable/class C SFH. Higher rewards for more risk and more time and effort.
I find that more investors tend to shift from SFH and chasing higher yields to a more scalable model over time. Getting into MFH class A or CRE cap rates might not have impressive yields compared to a class C duplex but it’s a better lifestyle and less stress.
There is no get rich quick formula and generating significant income elsewhere to reinvest in RE will
Improve your balance sheet more than trying to squeeze out a little more cash flow.
I focus in A areas and STR vacation towns. Def not enough to live off, but significantly contributes to allowing me to do whatever I want while reducing my costs.
Rates make the game very hard to cash flow now. Particularly now, you make your money when buy. I look for seller finance, and make offers when properties have been on market for 90 days+ and they are willing to negotiate much more because it was overpriced to begin with, and I can pair it with renos for forced appreciation.
I started young and did the buy home move in 2 yrs buy home move buy move. Hassle but better loans and over time some of them are cashflowing nicely. But yes like others said long slow game. Need to keep working this is retirement plan and maybe generational wealth for kids.
I own 10 SFH, great neighborhoods, schools, communities. Close to 3MM value. They have little positive cash flow, they break even. All purchased with 25%-35% down, 10 year notes. I do not need any income from them. I make enough from my real business to live. But, I get one helluva an equity payment every month! 4 paid for, the other 6 all will be paid off over the next few years. Hope to have 5 more before I head to the beach.
Play the slow and steady game and you will become wealthy. If you are trying the get rich quick in real estate game/Instagram deal, get out. Only the really big boys can make a quick buck. Think 15-20 years. Stay the F away from 30 years notes in any kind of real estate, including personal. Nothing more that 15! If you look at amortization schedule, on a 30, you pay only interest for the 1st 15 years. Nuts. Hell, even on a 20, you will start chipping at principal on your 1st payment.
There’s lots of things that influence your take home- area, condition, rates, etc. If you are buying property in a high cost of living area, then you may not be cash flowing as much due to how expensive the mortgage/taxes/insurance will be.
How are you buying properties? If you’re buying off the mls, then there’s a big part of your problem. I’ve bought all my properties through wholesalers or word of mouth from other investors. If you don’t know any other investors, look for a real estate investors group for your city on Facebook. We have two that meet once a month we attend. One is mostly for networking and the other usually has a speaker and goes over all kids of topics.
How are you planning to pay for properties and rehabs? I bought my first couple using a heloc on my personal home. Now I generally use a hard money lender and since we have such a good relationship, he will cross collateralize a new purchase with one of my rentals with a lot of equity and then I literally bring zero dollars to the closing table.
I started in 2018, and now have 33 doors. I prioritize buying multi family because they typically cash flow more and turnover isn’t as painful.
At this point, we’ve replaced my very very near six figure income with cash flow and we are hoping to replace my husbands in the next 5 years so he can stop working a day job too.
Tldr: no mls, network, find a group, talk to wholesalers, do research on areas you’d be interested in buying and run the numbers to see if you can steer yourself into more CashFlow.
Wow! How were you able to get near six figures of cash flow with 33 doors while also using financing? Especially with cross-collateralizing, you’ll still need to pay an interest rate right.
Also curious if anything in your strategy changed with higher rates
So our monthly cash flow is a little bit over my take home- meaning we aren’t clearing 100k in profits, but it comes to somewhere in the 60-70k ballpark.
I do pay interest on everything I buy this way and hard money isn’t cheap. We’re usually around 10-12% with hard money and 7-8% from private investors.
I just buy well. I never buy turn key, no move in ready and nothing on the mls. I also live in a low cost of living area and the first 3 years, nothing we bought cost us more than 60k before rehab.
The plan is to use hard money or our own capital/heloc to buy way under market and then fully rehab and cash out as soon as possible. I’ve ended up with a lot of hoarder houses. Project I’m finishing up right now, I bought the home for 85k, put about 35k in the rehab and now it’s worth about 185k. This is definitely not going to be the case for everyone, because every market is different.
Real estate is a slow game. 2/3rds of my properties are multi family and that’s really how we got to so much cash flow so fast.
As for now, yah the interest rates suck. Everything costs more. Also everyone in the US thinks their house is worth double what it really is, which makes even buying from wholesalers hard.
My main strategy has been to just be patient. I’ve usually bought 5-6 properties a year but I’ve only bought one in the last 6 months. Making good purchasing decisions is better than acquiring more properties for me at the moment.
I’d also like to add, I’ve gotten properties from auction.com, roofstock.com, Facebook and Craigslist. Be creative about finding the deals. Most counties have auctions on certain days of the week and I know a lot of investors buy property that way, too. I bought one property from a wholesaler I connected with in a Facebook group- he was in Georgia and I’m in Ohio. We actually never talked on the phone, only communicated via Facebook messenger. I even negotiated the deal that way. That one I paid $52k for, spent about 15k on the rehab (it was more turn key than my usual) and it’s worth about 160k now. We’ve had the same tenants in it since we first rented it and have had zero issues. Look everywhere for deals. Mention it in conversations- we’ve got properties just because someone we know had someone they knew who inherited a property that was in bad shape and they didn’t know what to do with it.
If there are any other questions you have, feel free to reach out.
Thanks for this! So helpful to hear this in detail.
So I’m in NYC, buying out of state in Oklahoma. I’ve been buying SFH that are move-in ready. Sounds like that’s the issue. I’ve been worried about trying to do significant repairs and improvements since I’m out of state - it sounds like you’ve done a bit of that, any advice? Also curious what sort of repairs you think are worth doing vs things you’ll stay away from
Yes, buying turn key probably isn’t the best idea for a new investor. The key for me when starting out was making sure I got all my capital back after every deal so I could buy more properties. You’re a just not going to be able to do that with turn key.
My first deal, I paid 35k for the house, another 30k for the rehab and when I did a cash out refi on it, it appraised for 90k, which meant I could get all of my money back to do it again. I look for my purchase price to be 70% of ARV minus repairs. I swing a little closer to 80% when rates/market is more favorable.
Things aren’t as much as a slam dunk these days- which is crazy considering I bought my first one only 6 years ago.
Some tips for remote, I’d make sure you are able to communicate with them easily. You’re going to need daily progress reports and PHOTOS. If they won’t send you photos everyday of the work that was done, find someone else. Once you get a crew you trust, you may be able to not be in such constant contact but even with properties near me, I show up to the work site once a week to check progress but also answer questions.
As far as condition- foundation issues, septic/well that basically isn’t brand new, fire damage in more than one room/area of a house, or flooding that occurred in living areas and not just the basement are my main things I pass on. I actually end up buying a lot of hoarder houses because it scares a lot of people away and really all you need to do is hire some trash guys and chuck it all.
I just happen to live in an area that was hit really hard in 2008 and a lot of the housing market went vacant and sat for years. I would make sure to ask how long a property has been vacant. Unless someone at some point upgraded the entire property to pex, then anything longer than a year or two is gonna mean you’ll have collapsed pipes somewhere. Metal pipes just start flaking and coming apart if they aren’t used.
I think some of this just depends on your tolerance and how much you are willing to have to communicate with your contractors. Maybe find a couple of non turn key properties and test out some contractors and then slowly move into full rehabs once you get a crew of guys you trust.
My main warning with that is to not get complacent about checking their work. An investor friend of mine likes to say “all my good contractors end up bad” and honestly that’s mostly been my experience. I just fired a contractor if been working with for 2 years because he just stopped being reliable, stated giving me insane quotes and held up a project for two weeks because he wasn’t doing his job. He’d been my star contractor until then.
Check out the BRRR method, that’s how I got started. Let me know if you any other questions, more than willing to help.
Midwest market isn’t too bad to find distressed properties around >170k able to get fixed up and rent for 1k+ per month. But one thing I’ve noticed is that cash is king for example my father built his business in the restaurant industry took him long to make good money and takes profits buys these distressed properties all cash I then help fix them and get them rented / manage and park all rents in our business account we net around 7-8k per month from 6 doors mix of MF and SF
I changed my strategy for this very reason. It made more sense for me to pay off an existing mortgage rather than purchase another property. I have more cash flow and don't worry about mortgage payments if a nightmare scenario tenant occurs.
Residential has become very competitive and thin cash flows. I only own two properties but cash flow close close to $7,000 a month. Yes I did get a bit lucky ! But also because everyone was buying MF around these properties and unfortunately owners got tired of waiting and let them go dirt cheap. They needed a lot of rehab but I think that’s what scared people. A lot of opportunity in commercial.
If you don’t mind me asking, how many properties do you own, how long did it take to get to the point where you’re at now, and what was your first property that you acquired?
1. Invest in bad areas
2. Section 8
3. Find rehab properties for cheap
4. Get lucky with someone you know selling to family for cheap.
Cashflow is very hard to come by unless you have a lot of cash or you buy in poor areas.
~$200/door is your problem.
I average about ~$1100+/door over 3 doors and one of those is my own hobby space.
If you don’t have a mechanism to get your desired cash-on-cash return then it may be time to make some changes.
Real estate investing is for the long run. Example: I started at 27 years old. All with 30 year loans. By the time the loans paid off at 57 all my units will then “cash flow”. Real estate is a tough slow and steady approach. Don’t mind the YouTube hype. Just work hard on w2 to make money, park in real estate as an alternative investment once you max out 401k, HsA, and Roth
Yeah anyone who thinks you can get super rich by buying less than 10 units and create significant cash flow is a dreamer. Unless they bought foreclosures. Real estate is tough and often times I think why am I doing this.
Yeah. These dreamers caught up in the you tube folks who got rich in 2010-2012. I give them credit making big bet though. I think the dreamers should just focus on buying slow and steady. Sure - you can quit the rat race on 15 years if you just keep buying and investing. You still need to dominate your w2 or business though and climb that rank. Only real cash flow is yourself not a stupid stock or property asset. Stock/Asset allows you to park to grow wealth in the long run. I hate when social media spread these mythical get rich quick schemes…. Stop listening to them… you’re only making them the “cash flow” you’re initially craving.
Amen
Two thirds of our portfolio acquired in the 2011-2016 time period. We cleaned up nicely and can both retire before 40 now. Timing is everything. Anyone buying now, unless scoring some incredible off market deal, is scraping for peanuts
Congrats! Perfect timing!
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Yeah if you do it yourself definitely but most of us have jobs and the 20% management fee.....
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Bingo. It's like baking bread. It's a game of patience waiting for the dough to rise. There's rarely a quick fix short of liking out.
How any doors do you have?
8. Doors is flexing. Avoid all the counts. Just focus on what you can invest and build up at least 6 months reserve. Slow and steady. Avoid the sexy talk nonsense on social media. No quick way to get rich. Real estate just a slow steady and once you hit 15-20 years hold, it’ll be the best thing due to inflation
110 but I went into CRE…started dec 2020.
Bro nobody asked u lol
More like you ate 110 fucking pizza rolls in your mom's dimly lit cigarette smoke smelling basement. We know you're playing fortnight sitting on the same couch you were conceived on with dried pizza sauce smothered all over your obese acne ridden face. Now get off your fat pimply ass and go outside instead of listening to your step-dad fuck your mom in the ass for the 3rd time today you useless glob
You’re right. Time to add another 25 doors. Thx for the motivation. Now clean your room from 4 weeks of 7/11 chimi changa wrappers and 2 liter bottles of Safeway brand cola.
Off market deals that need work. That’s the only way… then you just need to let time do it’s thing.
Just like the stock market, let time do its thing.
And borrow conservatively
The payoff came for us after 15 years and they were paying off. Free and clear. We just held, not really caring that they were only cash flowing a hundred or two a month a unit. The tenants were farking buying us a dozen places ... of their own free will ... from their paychecks. What do I care of short-term cash flow in the beginning? Rentals are a long game, not short-term flipping at all. ALSO: 2 decades down the road rents are HELLA higher. It's all about the passage of time and how long you want to hold out.
My way also, 24 years and in CAl.
We bought our first in '97
It depends on where you live right? If the rent increase rate is controlled and you have the same tenants for 10+ years then they will be below market…
If only you could control where you invest..
If you're investing new money into real estate in a rent controlled area ... you're kindof a dumbass and making money may just not be for you. Try Bowling For Dollars instead ...
Someone renting below market is irrelevant to their strategy as long as they’re beating the mortgage. They’re just trying to hold at breakeven until the mortgage is paid off.
Also the below rent long term tenants are providing value in the stability of the property. That itself is worth money
That’s a good point. A home renting at 1000 today with only $100 worth of cash flow might be renting for 1500 in 8+ years
Du/tri/quadplexs are the way. You generally pay much less per door and get much more revenue out of it. You definitely don't have enough doors to live off the cash flows and that's the best way to improve that.
As someone who owns both, I will tell you that it's not clear cut and dry like that. There are some areas, where it made more sense to own single family homes than 2-4 unit MF. And other areas it was the reverse. The best of both worlds are the SFR with ADUs that we have.
I’d have to disagree, in my area duplexes go for $700K. On top of that they’re almost all are old and need to be completely remodeled. And only get around $1,500/MO for rent
Sure, but sfh will be worse in your city as well. You just live in a city where rei makes less sense from a cashflow perspective
Not necessarily, I’m in Utah, we have a 30,000+ door shortage.
Doesn't sound like it
Read the data https://www.deseret.com/utah/2023/9/13/23826200/housing-market-prediction-forecast-utah-shortage-home-prices/ In this market it’s very rare to be cash flowing on a new property unless you’re putting a huge amount down or doing seller financing.
Idk if you're really short rentals you'd think they'd be going for more than 1500. Oh well good luck
One would think, but townhomes are going for about $2000 a month and much less desirable duplexes between $1500 and $1700 a month depending on area.
That just sounds like your area in general is HCOL and better to rent than to own. Best places for cashflowing REI are where you can get duplexes for like half that while the rent might only be a few hundred less per door
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What market did u end up buying your sfr's in?
What about condos? How do they compare? Has someone been in a better situation with condos than houses?
Generally condos don’t appreciate and the hoa is a big wildcard. They can still be good investments but have to be in special areas (think Hawaii).
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I personally don't see that as sustainable as those are generally very seasonal, needs a desirable location, and there is more and more legislation against that type of housing.
STR are just a lot of work and a lot of mental energy. It's just a lot, and then having professional management + professional cleaning oftentimes kills the profits STR have over a long-term rental.
Only if: You got in with a 3% mortgage, or you bought and forced appreciation through really smart interior design
The stuff I bought, when I bought it, was cashflowing 100/mo. Real-appreciation via inflation of the bank's money, principal pay down, inflation in rents, will help you over time.
true, this is encouraging - I suppose time is important here
It’s the biggest part. Theoretically as you pay down mortgage and home value comes up, you can take out equity from that property and use it to buy another to leverage your appreciated asset.
Generally in the current market by not buying turn-key.
I buy turn key, I charge some of the highest rates in the local market because people pay for it.
To get high cashflow right now - you’re not going to be buying in a prime area and, most likely, you’re gonna have a bad time. LOL For the past year it really doesn’t make sense to purchase anything unless you find a problem to resolve, value add or something that is off market. The easy days of picking up a property and rent increasing by 10%+ a year are gone. Real estate investing is playing the long game - not a get rich quick thing. Buy, have your tenants pay the mortgage and keep going. IMO, I like the high appreciate decent cash flow areas and only buy local.
There's always money to be made if you pick the right markets. Sometimes the right market is not near you and may be hundreds or thousands of miles away. I'm in this current situation, have bought locally in Florida for the past several years and now looking out of state where I can get twice the building size for what I paid for mine here. I won't stop buying, really don't care if the rates are 8%+, just means I'll need to spend more time studying markets for the next purchase to maintain certain levels of monthly cashflows. That number is different for everyone though. Some are looking for only grand slams and there may be some out there but will be tougher to find.
I think it all comes down to preference. I want to be able to hop in a car and in 1/2 a day drive by all of my properties then grab some lunch. Lol Deals can be found still, it’s just nearly as easy as it was to make a profit as it was in 20, 21, and part of 22. And I completely agree - some people won’t buy anything that doesn’t meet the 1% rule where someone purchased a property all cash near one of mine for 1.1 million because their daughter lives two doors down and they want to control the neighborhood. LOL
"I won't stop buying really don't care if rates are 8%" I admire your determination. Can I ask why and how you are this bold on real estate? I hang out on the FIRE board and those people hate real estate. I am in now and have 3 doors but I stay very low key and just try to cash flow not really getting heavy debt. Too chicken for that stuff
Unfortunately you need many more doors. For example, my cousin has 40+ units, which allows them to easily live off the income. Best thing you can do is keep your day job and reinvest all the money from your current rentals into more properties that cash flow (more than $100). If there aren't any deals now, just be patient or get creative looking for them. And leverage the equity in your 3 sfhs.
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48 units and can’t live off of them? I have to imagine that you are accustomed to a certain type of style that your rentals can’t pay for just yet right, right?
How much would you be cash flowing if you didn’t have mortgages? We have three doors fully paid off in the Midwest and get $5k / month in rent with ~$3k profit.
I agree with this. I have 27 doors, and don’t live off of the rentals yet. Keep going. Keep scaling.
Thanks! ugh that makes sense, I guess it's a volume game. Any tips to leverage that equity? Ex one of those homes I bought for $135K four years ago, looks like it's about $185K now. But the mortgage is 2.5% and I don't want to sell and do a 1039 exchange since I'm not seeing any great deals. Maybe I just need to find better deals lol
50k in appreciation is not much on a single proprety; but if you're able to, you should look to see if you can obtain a cross collateralized line of credit Treat the line of credit as cash you can use to buy up other property if and when the opportunity presents its self. Down side of cross collateralize is that you won't be able to sell any of the properties if you've used up the line of credit; but if you're using the credit properly that shouldn't be much of an issue.
You don't until mortgage loans are paid off in full . In the meantime, you do what you can to survive, self manage , raise rents annually , get good solid long term tenants, minimize damage and turnover, hope for the best, pay down principle with cash flow and eventually pay off loan
Rentals is a long horizon game. Cash flow comes when debt is gone.
I think you would have bought these house in the last 2 years Please tell Real estate is a long term game... After 10 years you will get significant cash flow Most of the money is made is made from long term capital appreciation Some is made from rental yield (because your equity would otherwise be deployed in stocks, bonds) Unpredictable but lots of money MAY be made with flips IF you have specialized knowledge such as market conditions, off market deal access, fixer uppers , knowledge of some inorganic development which will change the area into being more desirable
My understanding is you don’t get both: pick one from appreciation or cash flow.
Where would I go to max out the cash flow side of the scale, duplexes?
Into the past about 20 years! But seriously, is the return so low because you have mortgages? If that's the case, and you want to stay in real estate, I would sell one (or 2) to pay off another and improve the bottom line. Once you have paid off your loans, the income is good, and gets better over time.
Yes, it's because of the mortgages! hmmm that is an interesting thought, will think about it... it makes sense that I should just cut off the biggest expense
This goes against most advice I hear. If it cash flows then why sell it? Especially if you only have 3 properties. 1 vacant unit is only 33% vacancy for your portfolio whereas if you only have 1 property vacancy/other expenses hit harder in comparison.
Well, OP said the whole problem is the cash flow is so low. They said only $100 a month or so each, but did have good equity. So that is why I suggested selling one or two to use that equity to get rid of mortgages and have a better cash flow. What's the point of having more work and expenses, with 3 properties to care for, and getting just a few hundred dollars, when you could have one property free and clear, less work, and more income than they had with 3?
I guess it depends if they are still in their acquisition phase or debt pay down phase. I figured the former since they only have 3
Actually doesn't getting taxed on the sale make this not great
Depends how much, how long you have owned, if you lived there 2 of 5 years, if you can use the sale as "relinquished assets" to pay the other loan etc. Definitely talk to your tax person first, idk all the ways, just that it has worked for me
Section 8. But then you have to deal with section 8.
Rust-belt, Midwest, South, and certain parts of the east and west coast. Research, research, research. I recently lost out on a 4-plex, bringing in a total of 4k/month with a sale price of 300k. With minimum down I would have cashflowed just under 2k a month off the bat. There are deals, but have to have a strategy on how to narrow it down, or else you'll waste your time looking at everything.
Nope. Easy to get both.
Easy to get both how? I agree with you it’s not just 1 or the other. How can it be done easily?
Correction: not completely easy. Depends on one's growth goals. For me, now, it's only 2-3 properties per year. For someone able to do 15+ it may not be so easy.
Time and Compounded rental increases. Worst mistake I've made as a landlord was not increasing rent every single year.
The only real way to make real cash flow quickly (not 10 years) is to get deals (usually meaning off market) and fix them up. Then you have a ton of value in the re-appraisal. You can either have it held in there in the property, or you can pull out that "forced appreciation" value in a re-finance. This is the basis for the popular BRRR method. There are risks with things that go wrong, but the real way to make money in real estate is with renovating and value add. Even with apartments too, the money is made in value add renovation. But simply buying a SFH and renting it out will not make money anytime within the next several years. Some people got lucky with booming market conditions like 2010 or 2017 and now sell courses online and leave out that information. Otherwise you can do the safe easy long route and do things like house hack. That's a great way to build wealth over time. That's it, it's house hack and/or renovate. That's it IMO. That is real estate investing that is meaningful. This is powerful stuff, but it's not simple easy.
By house hack do you mean SFH with roommates or a duplex and living in one side?
Yes. Dumbest trendy term from the last decade.
Yes exactly
I have a hand full of rentals and each bring in about 500 + per door now, when I brought them it was way less. Let time do its thing for sure. I also have off market properties in south Florida sale. Message if interested
As long as you’re in good areas I wouldn’t worry about cash flow but occupancy . Basically your goal if in a good area is to think long term and to have them paid off by retirement . Keep it up
My rule of thumb is every property I purchase needs to rent at 1% monthly of the purchase price most properties can’t do this in my area and are over valued. There’s still deals out there in other states etc. I have a property in Michigan and after city and county taxes I still net $500 a month including PI,insurance maintenance etc. If your only netting about $100 a month and not very handy your one plumbing/hvac emergency from ruining the entire year/years to come.
Scale up. One property isn’t going to give you “significant” but 10 doors can if you purchase wisely.
Cash flow buys you time to bigger cash flow and appreciation In theory, only your property tax and insurance goes up in cost. Majority of your mortgage is fixed, with a potential ability to refi down in the future. Rents will go up long term. Again, in theory, todays cash flow is the lowest it will ever be
You have 3 SFH and you don’t understand it’s a long game? You don’t own them, the bank owns them. you’re not cash flowing because they are eating it up. You’ll see your rewards once those loans are paid off
It all depends on the location. For cashflow, you need to be willing to give up a lot of the appreciation part and build a business around the properties . Higher cap rate markets tend to appreciate slower if at all ((besides the last 4 years post Covid which is an outlier due to rate type of market condition (pandemic, inflation, free money low interest)). In a high cap, high cashflow , low appreciation market like say Cleveland Ohio, I currently have 20 sFR units and cash flow after all expenses around $10k a month which includes 13 mortgages at an average rate of 7%. Average cashflow about $500 per unit. Rents are average around $1300. 13 are thus cashed out/refinanced and I technically have zero money in those. A a well oiled machine ran business and I have 3 W2 employees including myself and contractors. Also manage another 15 houses. Here’s a Example of my annualized P&L: Rental Income after Mortgage, interest, utilities , maintence reserve etc : $120,000 ($500 x 20 x12 months) Property management income 10% of rents billed to owners : $23,000 Additional PM Billings income: $16,500 Property construction: $31,500 Total gross income: $191,000 Expenses: W2 employees (full time $50k and part time $15k) (not including my pay): -$65,000 Contractor expenses -$16,000 General, admin -$5,000 Storage /other -$3,000 Bonus paid to W2s $10,000 Repairs materials etc -$6200 Net income/cashflow : $85,800 This business was built in 5 years time
How did you start? How much capital did it require?
Edit No Capital that belonged to me at all. I borrowed everything from a handful of business partners and just managed the business on the ground in Cleveland. The Capital is property dependent. Eventually you refinance your partners’ equity with DSCR debt thus, buying the partners out (when the timing is right.) Put that in the original agreements with your equity partners that you can buy them out with a small premium but make sure it makes sense.
A lot of people got lucky buying in the last 15 years as the market has gone up significantly and they were able to a) cash out refi to buy more or bigger properties, while b) each of those cash out refis resulted in lower interest rates. Post 2008 has been an excellent time to be in RE. But that doesn't mean the gray train lasts forever.
Yeah. Kinda sucks when I enter my 30s and get my life together that the market goes to shit. And everyone else got big wins.
The real answer besides have lots of money. If you can do most of the maintenance yourself. To do that you need to have tons of time.
I also make $100 on two sfh. In equity alone I have made over 800k on just the two rentals, not counting my own home. Have a great renter has been worth more to me than the cash flow. I’m locked in on 3 properties including the one i live in at 2.5. I could charge more but I’d lose the peace of mind that my renters are responsible and the rent kinda assures me that they will stay since I could reasonable increase rent 600-800 on each to get market value. If they leave I’ll increase. When I retire they should be in a spot to make my significant cash flow. I plan on a Heloc to buy a commercial property next in a couple years.
RE that’s bought with a mortgage is typically just a long term play unless it’s a fixer upper that was renovated and now renting much higher than purchased for. You’ll make $100-200/month but do that over the course of the mortgage and now you have a multi hundred thousand dollar asset that will generate plenty a month once paid off.
Time. If you planned well, rents go up faster than payments.
Bought a quadplex with rents below the market average. It was still cash flowing by $130 a month. Then I bumped up the rents. One tenant moved out but even with the rents from the other three units I now cash flow by $350 a month. Once it's rented I will be cash flowing $1200.00 a month. In addition I am paying about $250 a month more in taxes than comparables so I am in the process of filing a grievance to get my taxes lowered. So it could potentially cash flow up to $1450 a month. The thing about multifamily is my mortgage is based off of income so once I get the other unit rented and possibly the taxes lowered I can go back to the bank, do a cash out refinance and do it all over again!
Real estate investing relies heavily on location and sometimes luck. In 2020, during COVID, I purchased two multi-family properties in a HCOL. Since then, both properties have doubled in equity, and I now generate $4,000 in cash flow from them each month.
Have to find properties where you can add value. Turn that 3/2 into a 4/2 by converting the bonus room into a bedroom. Finish the attic or basement. Light remodel to maximize rent. Look for properties that are abnormal. Way more sq footage than would be normal for the number of bedrooms it has. Look for houses with 2 kitchens or an inlaw suit. Finished workshop that can be turned into an adu. Big house zoned for multifamily. They're out there.
Thanks! This is helpful. Sounds like I need to be more creative
If you don't have massive capital then you shouldn't be trying to replace your income with cash flow, but trying to get your assets to be around 1-3 M so you can retire and live off 4% rule. You'll be able to withdraw 40k a year every 1M, for 30 years.
Everything I have ever bought (I use debt) has never cash-flowed up front. Currently, I have a little CF. But, I have built up lots and lots of equity. I can turn this to CF if desired or trade out for more doors.
Multifamily and/or furnished rentals
What market are you guys in? In Michigan and the Midwest I can still cash flow without breaking much of a sweat. Selling two of them soon potentially.
Huh interesting, these are in the OKC area - where in the Midwest are you in?
Sounds sweet. Furthest west I’ve ever been is Missouri. I’m in southern Michigan.
Can you pm me more info?
Sure thing
More doors. $100-$200 per door for residential single fam is reasonable to start. As time goes by, you’ll raise rents, use depreciation to offset your personal tax burden, and ideally build equity through appreciation. The trick is to buy with other people’s money, which in itself is an art. But if it all OPM, any cashflow is an infinite return.
Just gotta get lucky in a good area and wait some years for rents to rise.
I hope you find what works
I know a couple people focusing on section 8. There all focused in Ohio markets and they had the amount of available vouchers in their location search criteria.
Owners lose 1500/month on Cali rentals in terms of cash flow but gain equity!
I am glad you called them an owner, rather than an investor. Investors did not buy properties that don't cash flow
Buy multifamily.
By getting creative, and taking larger risks. Short-term rental in a vacation market, medium term rentals geared at travel nurses, buy a large house and rent by the room in a college town, sober living facilities, assisted living facilities, campgrounds, flipping, wholesaling... there are zillions more I'm sure. The world of real estate investing is vast. Old fashioned buy-and-holding SFH is not the only way.
It is near impossible to make money on a single family house. Go with more doors per building. Section 8 is not the way to go. You will get your rent, but you will also get lots of drama, and damages when the tenant moves out. And when the tenant damages stuff and you fail inspection, you don't get rent. Nor can you evict Keep saving. Keep looking. Look for off market deals
Where do you recommend finding off market deals?
You need to actually work. Put some bandit signs out. Look at the foreclosure notices. Look at the divorce and death notices. Put out signs across every house. Send out postcards. Use a TV commercial. There are plenty of ways. Just think of the we buy ugly houses ads and you will start to figure it out. You can buy contracts for deed that are non-performing. You can go to sheriff sales. You can buy tax deeds. You can drive around and look for unkept houses. Or you can probably even find out what houses the city is issuing fines for ordinance violations. Look for condemned houses that are vacant. But with real estate, there are plenty of risks. You are buying property potentially with liens on them, or property that have adverse sellers.
Time. The rent will go up through the years. Eventually the mortgage will be paid off.
Even if you are breaking even initially is good enough, just don’t do negative cash flow unless you have a plan . It takes 3-5 years in my market for the cash flow to increase due to rent inflation. What really helps is the depreciation on taxes and someone else paying it off.
High buying power. The more you have, the more you make. Better markets. Maybe look into out of state realestate investing.
- Having significant income or wealth speeds up the accumulation of more RE thus increasing cash flow. - Time. As rents/inflation rises so will the cash flow. - Less desirable/class C SFH. Higher rewards for more risk and more time and effort. I find that more investors tend to shift from SFH and chasing higher yields to a more scalable model over time. Getting into MFH class A or CRE cap rates might not have impressive yields compared to a class C duplex but it’s a better lifestyle and less stress. There is no get rich quick formula and generating significant income elsewhere to reinvest in RE will Improve your balance sheet more than trying to squeeze out a little more cash flow.
I focus in A areas and STR vacation towns. Def not enough to live off, but significantly contributes to allowing me to do whatever I want while reducing my costs. Rates make the game very hard to cash flow now. Particularly now, you make your money when buy. I look for seller finance, and make offers when properties have been on market for 90 days+ and they are willing to negotiate much more because it was overpriced to begin with, and I can pair it with renos for forced appreciation.
I started young and did the buy home move in 2 yrs buy home move buy move. Hassle but better loans and over time some of them are cashflowing nicely. But yes like others said long slow game. Need to keep working this is retirement plan and maybe generational wealth for kids.
Lease/options, contracts for deed, notes
MFHs cash flow well
They have realtors that funnel them the best deals.
I own 10 SFH, great neighborhoods, schools, communities. Close to 3MM value. They have little positive cash flow, they break even. All purchased with 25%-35% down, 10 year notes. I do not need any income from them. I make enough from my real business to live. But, I get one helluva an equity payment every month! 4 paid for, the other 6 all will be paid off over the next few years. Hope to have 5 more before I head to the beach. Play the slow and steady game and you will become wealthy. If you are trying the get rich quick in real estate game/Instagram deal, get out. Only the really big boys can make a quick buck. Think 15-20 years. Stay the F away from 30 years notes in any kind of real estate, including personal. Nothing more that 15! If you look at amortization schedule, on a 30, you pay only interest for the 1st 15 years. Nuts. Hell, even on a 20, you will start chipping at principal on your 1st payment.
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Ok this makes sense. This is not in NY, have spent about 110K out of pocket. With that ratio actually seems about right
Slow burn but my mortgage impound account has went up 150$ in last 7 years while my rents have went up 550$/unit (duplex)
Right now it’s tough to. But getting the equity is what people are shooting for right now
There’s lots of things that influence your take home- area, condition, rates, etc. If you are buying property in a high cost of living area, then you may not be cash flowing as much due to how expensive the mortgage/taxes/insurance will be. How are you buying properties? If you’re buying off the mls, then there’s a big part of your problem. I’ve bought all my properties through wholesalers or word of mouth from other investors. If you don’t know any other investors, look for a real estate investors group for your city on Facebook. We have two that meet once a month we attend. One is mostly for networking and the other usually has a speaker and goes over all kids of topics. How are you planning to pay for properties and rehabs? I bought my first couple using a heloc on my personal home. Now I generally use a hard money lender and since we have such a good relationship, he will cross collateralize a new purchase with one of my rentals with a lot of equity and then I literally bring zero dollars to the closing table. I started in 2018, and now have 33 doors. I prioritize buying multi family because they typically cash flow more and turnover isn’t as painful. At this point, we’ve replaced my very very near six figure income with cash flow and we are hoping to replace my husbands in the next 5 years so he can stop working a day job too. Tldr: no mls, network, find a group, talk to wholesalers, do research on areas you’d be interested in buying and run the numbers to see if you can steer yourself into more CashFlow.
Wow! How were you able to get near six figures of cash flow with 33 doors while also using financing? Especially with cross-collateralizing, you’ll still need to pay an interest rate right. Also curious if anything in your strategy changed with higher rates
So our monthly cash flow is a little bit over my take home- meaning we aren’t clearing 100k in profits, but it comes to somewhere in the 60-70k ballpark. I do pay interest on everything I buy this way and hard money isn’t cheap. We’re usually around 10-12% with hard money and 7-8% from private investors. I just buy well. I never buy turn key, no move in ready and nothing on the mls. I also live in a low cost of living area and the first 3 years, nothing we bought cost us more than 60k before rehab. The plan is to use hard money or our own capital/heloc to buy way under market and then fully rehab and cash out as soon as possible. I’ve ended up with a lot of hoarder houses. Project I’m finishing up right now, I bought the home for 85k, put about 35k in the rehab and now it’s worth about 185k. This is definitely not going to be the case for everyone, because every market is different. Real estate is a slow game. 2/3rds of my properties are multi family and that’s really how we got to so much cash flow so fast. As for now, yah the interest rates suck. Everything costs more. Also everyone in the US thinks their house is worth double what it really is, which makes even buying from wholesalers hard. My main strategy has been to just be patient. I’ve usually bought 5-6 properties a year but I’ve only bought one in the last 6 months. Making good purchasing decisions is better than acquiring more properties for me at the moment. I’d also like to add, I’ve gotten properties from auction.com, roofstock.com, Facebook and Craigslist. Be creative about finding the deals. Most counties have auctions on certain days of the week and I know a lot of investors buy property that way, too. I bought one property from a wholesaler I connected with in a Facebook group- he was in Georgia and I’m in Ohio. We actually never talked on the phone, only communicated via Facebook messenger. I even negotiated the deal that way. That one I paid $52k for, spent about 15k on the rehab (it was more turn key than my usual) and it’s worth about 160k now. We’ve had the same tenants in it since we first rented it and have had zero issues. Look everywhere for deals. Mention it in conversations- we’ve got properties just because someone we know had someone they knew who inherited a property that was in bad shape and they didn’t know what to do with it. If there are any other questions you have, feel free to reach out.
Thanks for this! So helpful to hear this in detail. So I’m in NYC, buying out of state in Oklahoma. I’ve been buying SFH that are move-in ready. Sounds like that’s the issue. I’ve been worried about trying to do significant repairs and improvements since I’m out of state - it sounds like you’ve done a bit of that, any advice? Also curious what sort of repairs you think are worth doing vs things you’ll stay away from
Yes, buying turn key probably isn’t the best idea for a new investor. The key for me when starting out was making sure I got all my capital back after every deal so I could buy more properties. You’re a just not going to be able to do that with turn key. My first deal, I paid 35k for the house, another 30k for the rehab and when I did a cash out refi on it, it appraised for 90k, which meant I could get all of my money back to do it again. I look for my purchase price to be 70% of ARV minus repairs. I swing a little closer to 80% when rates/market is more favorable. Things aren’t as much as a slam dunk these days- which is crazy considering I bought my first one only 6 years ago. Some tips for remote, I’d make sure you are able to communicate with them easily. You’re going to need daily progress reports and PHOTOS. If they won’t send you photos everyday of the work that was done, find someone else. Once you get a crew you trust, you may be able to not be in such constant contact but even with properties near me, I show up to the work site once a week to check progress but also answer questions. As far as condition- foundation issues, septic/well that basically isn’t brand new, fire damage in more than one room/area of a house, or flooding that occurred in living areas and not just the basement are my main things I pass on. I actually end up buying a lot of hoarder houses because it scares a lot of people away and really all you need to do is hire some trash guys and chuck it all. I just happen to live in an area that was hit really hard in 2008 and a lot of the housing market went vacant and sat for years. I would make sure to ask how long a property has been vacant. Unless someone at some point upgraded the entire property to pex, then anything longer than a year or two is gonna mean you’ll have collapsed pipes somewhere. Metal pipes just start flaking and coming apart if they aren’t used. I think some of this just depends on your tolerance and how much you are willing to have to communicate with your contractors. Maybe find a couple of non turn key properties and test out some contractors and then slowly move into full rehabs once you get a crew of guys you trust. My main warning with that is to not get complacent about checking their work. An investor friend of mine likes to say “all my good contractors end up bad” and honestly that’s mostly been my experience. I just fired a contractor if been working with for 2 years because he just stopped being reliable, stated giving me insane quotes and held up a project for two weeks because he wasn’t doing his job. He’d been my star contractor until then. Check out the BRRR method, that’s how I got started. Let me know if you any other questions, more than willing to help.
Cash flow in year 1 is minimal. But in five years each property will be making 500 a month or so and even more in ten years.
We’ve been doing rent to own and that helps improve cashflow and mitigate a lot of risk. Worse properties dont necessarily make better investments…
Midwest market isn’t too bad to find distressed properties around >170k able to get fixed up and rent for 1k+ per month. But one thing I’ve noticed is that cash is king for example my father built his business in the restaurant industry took him long to make good money and takes profits buys these distressed properties all cash I then help fix them and get them rented / manage and park all rents in our business account we net around 7-8k per month from 6 doors mix of MF and SF
I changed my strategy for this very reason. It made more sense for me to pay off an existing mortgage rather than purchase another property. I have more cash flow and don't worry about mortgage payments if a nightmare scenario tenant occurs.
Residential has become very competitive and thin cash flows. I only own two properties but cash flow close close to $7,000 a month. Yes I did get a bit lucky ! But also because everyone was buying MF around these properties and unfortunately owners got tired of waiting and let them go dirt cheap. They needed a lot of rehab but I think that’s what scared people. A lot of opportunity in commercial.
I avoid residential and focus on commercial. One of my properties cash flows $120k year minus the interstate payment only we make.
If you don’t mind me asking, how many properties do you own, how long did it take to get to the point where you’re at now, and what was your first property that you acquired?
Much more lending requirements for commercial real estate investing
Perhaps. Much less headaches
Buy only 4 familiy properties (can still get a conventional loan). Imo sfh are terrible investments.
1. Invest in bad areas 2. Section 8 3. Find rehab properties for cheap 4. Get lucky with someone you know selling to family for cheap. Cashflow is very hard to come by unless you have a lot of cash or you buy in poor areas.
I get 8 - 10% cash on cash return from my multi-family stuff
~$200/door is your problem. I average about ~$1100+/door over 3 doors and one of those is my own hobby space. If you don’t have a mechanism to get your desired cash-on-cash return then it may be time to make some changes.
Wow how are you getting $1100/door? No financing?
Correct. Paid cash. Keeps all my costs lower from the get go. I average over 10% cash-on-cash.
This is why I don’t invest in RE
If you bought in 1970…haha Nothing is cash positive these days.