It’s a long game, at least for me. I’ve bought properties that had a little cash flow( it certainly was easier when rates were lower). Over years rents increased more than expenses, properties appreciated and equity was built. When I say years I’m talking 15-20 years to see significant income and wealth growth
I’ve been trying to decide between buying an investment property in south Philly or delco. I lived in both areas so am familiar with them but there is a huge jump in price going from delco to south Philly. I just think back on how my parents bought their townhome in south Philly for $49k in the late 80s, sold it for $100k in the late 90s and now anything that isn’t a shell goes for $250k or more.
I’m curious, reading the landlord sub is enough to make me never invest in another rental property again. Why so many nightmare stories on there? Do you think it’s a wildly inacurrate picture?
I’ve honestly never looked at the landlord sub. I would expect it’s full of complaints but that’s probably just biased, just like restaurants reviews. People with a bad experience post and people with a good experience don’t generally think to post. Personally, I’ve been a landlord for 20 years and it’s been almost all positive. I will disagree that it’s passive income, you need to put work in.
I am working on saving for my first property but as a risk analyst I over analyze everything. What if A B or C goes wrong? But it’s people like you that remind me about the posting about good/bad experience ratio and the passive income part.
We need this shared more.
I like to analyze numbers, but in real estate, your best bet is to start small. Ask yourself if you can live with the worst case scenario. If the answer is yes, then take a chance. Get started. If you fail at managing a cheap house, learn your lessons. Figure out what you did wrong, then try again. People spend $80,000 or more for college tuition but aren’t willing to risk losing any money on a real estate education by buying a rental house. Hopefully, you will be successful though.
If you’re an analyst you could certainly put a cost and likelihood to each risk factor. Banks have already done this to some extent by mandating 6 months of expenses for the investment available as liquid assets. You’d also want to understand the long term operational costs and average them into your monthly expenses. A good home inspection should give you a reasonable life expectancy for the big ticket items like roofs, furnace, etc
Yeah you should worry about if you don’t invest but I think ignoring A B and C is terrible advice. The furnace might blow, the tenant might leave and it could take you
3 months to fill the unit, you may have to evict, etc. If ignoring ABC you cash flow $100 a door guess what happens when any tiny thing happens? Negative income, you’re paying out of pocket for your income producing property. That’s now how it’s supposed to work. If you’re making $100 a door per month and you have a 1 mo vacancy on a $1000/mo unit that wipes out 10 months of income. As a risk analyst they should be figuring out how often stuff like this might happen. If one of those factors is a once every 20 years item it really becomes a non-issue.
I’m the same way. You just have to be prepared for the worst. Can you cover an ac Unit replacement or a roof? How old/how likely are the big things to fail? Things will go wrong and cost you money at some point.
Hey Risk Analyst :-)
Factor in Opportunity Cost. Sure it’s sexy to say you own property, passive income, etc. but would the same $$$,$$$ put in an index fund give a similar or better return?
I’m on the fence too. Attracted by the leverage opportunities.
People don't talk about the normal day as a normal Landlord, which is answer a few texts, send an email, build $65.78 in equity, and earn $31.72 in cashflow. Pretty boring and uninteresting when stuff is going right.
I don't tell the story of that day, I'm gonna tell you about when I got a call from an elderly tenant literally when my friends were singing Happy Birthday to me saying his furnace was out and it was 31 degrees outside. I let it go to voicemail, but as soon as I had a minute I was on the phone with my HVAC guy to get him up and running before resuming my Birthday festivities.
As a DIY landlord, I've had as many as 14 doors that I manage myself. I've been thru just about every nightmare tenant scenario - including a tenant who was dealing meth, had 22 dogs, and did nearly $100k in damage to my property. I've had trees fall on houses, upstairs showers flood living rooms, and tenants literally leave the country mid-lease and pile their belongings on the front lawn.
Even with all of that, I'm still in the game, and it's given me a life that I love. I get to spend as much time as I want with my kids, and I've had some awesome tenants, who have truly become friends.
Don't get to travel nearly as often as we used to, now that we have two small kiddos in the mix. When we do travel, I rely on my network of trusted contractors to handle emergencies.
First thing I show any new tenant is how to shut off water to the house, in the event of an active leak... and the location of the fire extinguisher (of course).
Because it's full of newer or first time landlords that made rookie mistakes and are paying dearly for them. The number 1 mistake landlords make is improper screening of tenants. When you've got a vacant property and someone has $3,000 cash in hand ready to rent, it's hard to pass that up. The rookies grab the money and assume everything will be sunshine. In reality, they may have picked up someone that has been evicted several times, has maxed out their Credit, is lying about their income, etc etc. Evicting a tenant is a months long process, all while not getting paid and having angry deadbeat tenants sabatoging your property.
Another mistake is buying a property and half-assing the repairs. If the plumbing is looking bad, fix it BEFORE it breaks. That way you don't get a 2am phone call for a repair that's going to cost triple the amount.
Not screening, not being proactive... You can get away neglecting it for a while, but if you don't do your homework, it will eventually bite you in the ass.
It’s an echo chamber. No one there is posting of their fully rented out triplex that has had the same renters for 6 years and are super low maintenance.
That landlord is just relaxing doing what he wants having other people pay his note while he makes a nice 1k per month in pure profit. In fact that landlord is probably on reddit right now while hanging out with his Newfies, Kilo and Remus say hi btw.
It really makes you take a hard look at people and builds a much more discerning judgement of trustworthiness (credit-worthiness and will-they-mess-up-your-house-ness).
I’ve had some nightmares and a lot of great ones, you’ll get better as you get experience (hint: credit scores, eviction history and criminal background are standard for a reason, trust them)
I get the exact opposite impression from that sub lol. Yes there are horror stories but the lucrative side far outweighs the occasional bad tenant. And those guys are wealthy af. There are ways to avoid bad tenants. The good definitely balances out the bad!
Yes, I work full time. Real estate is my side hustle. I enjoy it. Another way to build wealth and supplement my retirement income. Also something to pass down to my kids at some point
And there are those who charge $$$$$$ to newbies about real estate investments. That's how they make money. These folks will try to sell you the "secrets" of no -work - passive incomes if you go to their seminars.
From a 50k salary I control 2mil right now got 50% equity, cash paid to me each month after PITI 2000 minus the expenses capex etc peace= 500. No property manager. But I also leverage the fuck out of everything. First property bought with 3k out of pocket 600k. Next one was a A class property downtown proper in one of most expensive cities middle of Covid 20% down. Most recent was a 2% rule next to a navy base, moved into it and hate my life, rehabbed it from a duplex to a triplex, new absolutely nothing about construction before. Next one is an FHA assumable hopefully, currently in the works to get a 2.25% mortgage in heart of another world class city. Class A property.
Lots of stress, no cash flow really. But at the same time for a total of 1000 hours invested and probably 130k cash total I’ve made on paper a million in the last 4 years. And from the lessons learned, wheeling and dealing, crunching numbers, talking to people, taking a mindset of there are no bad properties just bad deals, and doing win/wins. I’ve given myself a solid foundation to do very well in the coming years. I’m now looking to liquidate somewhat and move my investments into multifamily value add. So far everything is anything but easy. But it’s mainly because I can’t touch the unrealized gains until I choose to convert from building wealth to building cash flow. Which will be in the next two years as we’re coming to a very pivotal point for commercial in my opinion.
Most people would say I’m over leveraged and I agree. But I can tell most people I made my first million in a few years on a median salary, single while they’re broke because they’d rather go drink and watch cable television in their brand new car.
Overall a lot of positives in your situation, by like you said you're leveraged to the tits. Other thing is you have all your eggs in the real estate basket.
I think it was Andrew Carnegie who said "put all your eggs in one basket and watch it like hell"! I have been in real estate and construction 45 years, and it's all I know. I wouldn't dare put money in the stock market, or anything else I don't know the first about.
I also have 50k cash in hand and 100k in mutual funds, roths and equity lines. Emergency funds are there at this point. 6 months reserves all times to get into the next property. Ive kept my job and continue to get raises. Even if I need to eat a couple hundred dollars for a year to keep all my places rented, it’s all manageable. I do my best to control the leverage by being insanely anal about where I can keep my property rent at compared to market when it’s time for renew and have so far 99% occupancy over the course of 4 years. Longest any have gone was 2 weeks as vacant.
Now is the time to de-leverage a bit to get yourself on a firmer foundation. You have basically nothing to lose when you started out, so going all in on the risk was a smart move. But now that you're about to become financially independent it would be a shame if you were to lose everything. If you sell one of the properties and park the equity in an index fund you'll have plenty of cash to ride out whatever problems come up.
You haven't made a million by your own words.
It's on paper; you seem highly leveraged,as stated, and one bad streak away from losing it.
Seems weird you talk shit from a highly precarious position.
Thank you for repeating everything I just said.
Weird is only used by people that don’t understand something or someone, or someone that goes against the grain of norms in society.
Doesn’t change anything tho. I took calculated risk with relatively nothing to lose at certain points and own my first million. Could it go to 500k tomorrow sure. Will I double down and buy more real state if that happens, I’m waiting for it. In the mean time I’ll continue my plan of buying one nice property a year.
Who is going to give you the money when the paper value of those properties plummet? Especially as you said at a 2.5% rate? I know people with tens of millions in much more liquid assets looking at rates twice that for sub 500K mortgages.
Actually it's not weird at all. Most self-made millionaires in RE go against the flow and don't listen to the common wisdom. In 2009 when everybody was crying about the real estate debacle in the US I was buying properties for 45 and $0.50 on the dollar. Between 2009 and 2012 my net worth went from about 400,000 to 1.7 mill.
You do realize that the Great Depression happened because too many people were investing on the margin. We barely avoided it in 2008 and now you’re basically daring the housing market to crash by advocating more margin investment. People are blaming boomers for the housing shortage yet more boomers than ever are experiencing homelessness. Nobody knows what is happening until it’s too late.
This is exactly correct. It is better for you to invest a large amount like 1 mill into an index dividend fund rather than buy a property with 1 mil out right cash. If you got like 200K for the down payment (20%) then it's good for someone else to build your wealth to 1 million by paying off your mortgage over a long time. Obviously, the cost of a unit/home is different for each market, but these numbers are just used as an easy example.
It's not actually all that great for wealth either.
The last few years have been pretty weird, of course, but on average you're probably better off long term with a diverse equities portfolio than you are a few properties.
5 ways:
1. Equity capture (buying at a discount and rehab)
2. Appreciation (buying in appreciating markets >3% year over year)
3. Rental income (increasing >3% year over year)
4. Mortgage pay down (borrowing with today's dollars then paying off with future dollars)
5. Tax write-offs (offsetting income from all sources with depreciation)
It is a long game but with refinancing to pull equity for more it can snowball over time. It does require another source of income to cover living expenses until you build your capital stack.
Three things… property appreciation, rental income (which can either buy you equity in your property, or if you own it outright, give you a straight income), and tax offsets from certain expenditures on your property.
Options carry high beta and risk premium, and are not comparable to simple leverage or margin. Brokers offer nowhere near the same degree of leverage on trading accounts. Depending on income and credit rating, banks will lend people a million dollars on $100k using the property as collateral. That’s 1000%. You’re lucky to get 100% with even huge brokers like Interactive Brokers.
Leverage remains vastly superior in real estate. The risk profiles are just completely different. That said, I expect ratios to get squeezed in the coming years as defaults happen in commercial and rages remain elevated.
I own a $3mm vacation home that grosses $165k per year. It is fully paid off. It is only occupied 15 weeks per year. Those 15 weeks go for roughly 12k per week. It’s fully booked a year in advance.
It was built in 2017, so little to no maintenance.
That would be more akin to trading. Buy low, sell high. Many stocks have tripled in price over the same three years. It’s playing the markets and comes with risk.
Rental income is a long term cash flow business and appreciation is not really factored.
My guess is this house is somewhere in California close to the beach or in a desirable tourist area. We don’t know the full story but it has likely appreciated north of 50% since it was built in 2017, but has probably appreciated more than 50%. If it’s only booked 15 weeks my guess is this house is probably in a ski town or near a ski resort (maybe Lake Tahoe?)
It depends on what kind of deals you can find, what kind of cash flow your units will give, and most importantly... what kind of lifestyle you want to live off of that.
I've read stories of people who own only a couple properties, but they're all duplex/triplex/MFH and they cashflow a few thousand a month after expenses. Then there are others that own dozens of properties with barely any cashflow from each. Then you have the whales making 5 to 6 figures a month from hundreds of properties.
It comes down to your pain tolerance for work and how much you want to live off of.
I have 13 properties (all owned free and clear), all located in solid areas, and they bring in around 20-21K a month in rent. I don't have to work, but I still have a 9-5. If my 9-5 ends, I'll likely do nothing. Even my primary is paid in full.
You are naive. Most investors like me care about cash flow and over time raise rent to maximize. For instance bought a 4 unit 7 years ago for 250. Expenses with mortgage are 2800 a month. Rent at time was 3400 a month. So cash flows ok. I knew if I renovated I could raise rents. Today all 4 units are turn key and modern and gross 7500 a month. Expenses are up to 3000 a month and I put 60k into rehab with me doing most of the work.
I have lots more properties but same formula. Get them to cash flow renovate as tenants leave and raise rents. On 100 doors I net about 500k a year. Key is not to buy one or 2 family units. Cash flow is tight and one tenant not paying creates issues for income. Stick to 4 or more units.
I purchased my first property about 4 years ago with 46k cash I had been saving. It has 2 small houses on it in Springfield IL. One rented for $500 and the other $600. Once you have that income saving for the next house goes faster. I sold my house and moved Into a condo. Took the 100k I had in equity and bought 2 homes in mobile AL. Both for 50k and rented for $900 a month. A few months later I purchased another property in Springfield for 26k that needed about 5k of work. It's rented for $850. I've been able to add 2 more properties since then. I just sold my condo and only put 5% down on my new house and will use the equity money from my condo to purchase my 8th rental property. All cash. Combined income of about $7200 a month. 10% management fees, insurance, taxes, and upkeep take a big chunk but I have a full time job and keep my personal expenses low. I'm not sure I'm doing it right but it's working for me. Not having a mortgage prevents me from buying anything nice but I also never feel stressed when something needs work or sits empty for a month or 2 between tenants.
I’m new and only have a few doors but I make $1,000 per month profit on each of them. Then I re-invest into another home. I can definitely see how it can quickly become a full time income where I can quit my job.
Long term only! I may dabble in STR one day but it seems like definitely more work while right now it’s 98% passive.
I house hack so I live in the home first and get primary home mortgages. I only buy in really good school districts in desirable areas so the rentability is very high. After this third home though we are done moving and going to start buying straight investment properties. The only part I hate are the taxes but I appeal them all no matter what and sometimes they go down.
My brother got out of prison 8 years ago and bought his first storage facility with a friend in his early 20’s who worked at an accounting firm. They now own over 150 facilities in 30+ states and are one of the 20 largest operators in the US and he is worth over 100MM. They have raised over 200MM in equity and done nothing but make money for them and their investors. Don’t get me wrong, he works his tail off and is an amazing operator but it is possible and in my experience there is no better way to become wealthy than real estate but it’s a lot of hard work and you have to be good.
Real estate investing is more than being a landlord. There are 1000 ways to make money. Some of the ways I’ve been able to do this full time is by lending on gap funding, loan sponsorship, transactional funding for double closings, connector fees for making impactful introductions. Network is everything. Cashflow is only a small piece of it.
If you have 6 doors and 3 mortgages and the rent is 9000 and your mortgages are 3900 you have 5100 to live off of personally before misc maintenance and repair costs .
Assuming you put 20% down...that combined mortgage payment would be about $675k worth of property. Where are you finding three 2-familiy houses for $225k a piece?
Honestly asking. Where I live that's unheard of.
Yes and no. I've gotten a for closure without much competition. County foreclosuree can be competitive due to upset bids and extending the timeline. At least where I am
Not at all. If you want property RIGHT as it gets foreclosed, then yes, it's competitive, but not all, or even most get bought at that point. I got pre-approval for a loan and put money down for the $120k I bought it for. Banks tend to have a list of properties they have foreclosured on, but if you are working with an agent, then they'll have an easy list for you. There's other ways to access foreclosure properties, it's just not often taken fully advantage of
Off market properties with reno/rehab potential. I have friends that routinely pick up properties in LCOL/MCOL areas for >50% cheaper than open market prices by buying in all cash (asset-backed loan/credit line from a credit union) and closing fast. Make sure you know the area well, and aim to get properties in good school districts. Build a business on the side of your day job to build up the cash to be able to do this.
Mom/dad/aunt/uncle/grandma/grandpa etc going to a nursing home is a great opportunity if you can swoop in quickly. Oftentimes next of kin has zero interest in the property, and if you can offer X% above what the property previously sold for, then they'll take the money and run rather than having to go through listing and showing the property, and having to deal with how long closing on a bank mortgage takes. Pre-foreclosure (before bank takes possession) can also work well for scoring underpriced deals.
Network with older, more experienced investors, and gain access to their network. Some brokers who have lived in an area 40+ years have deep connections and access to these kinds of deals, and if you build a reputation for closing quick in cash, you'll become a person they'll float these deals past. These guys tend to like sharing knowledge and experience with hungry, motivated newcomers.
u/melikestoread does this model very well, read through some of his posts/comments. (May have to use a Reddit archive tool, I think he's suspended again).
It's so easy where I live that I will have to assume it's relative to the market you're in..? I'm a realtor, but majority of my clients are investors and based off the closing docs I see, they each pull in $100k-$300k a year. Some are full-time, and some are part-time. My most consistent client buys HOA and tax foreclosures. In Texas, an HOA can take your home even if it's totally paid off otherwise. I usually see a 3-4 year delinquency by the time it goes to auction. People lose their homes over $15,000 disputes, thinking they can fight the HOA. Turn around and flip the house for market value, and you've got a profit of $200k+. No need to work the rest of the year if you live below your means. Of course, if you're a big money investor, you're making $100k a month, which means you have to park that money somewhere if you don't want to get screwed in taxes. So you then invest some of the proceeds in income-producing properties that you can purchase for below market value. That way, you can refinance and get a cash payout while someone else pays your mortgage. If you're good with numbers or have a sharp CPA, you'll use that cash-out as a salary. 2-3 auction houses a year and a couple of commercial or multi-family units, and you've got a salary of about $300k a year. This is what I see with my clients who have $500k or more starting out. For people who don't have large sums of money starting out, flipping houses bought at auction is the best way to go. I've flipped houses in the past and net between $60k-$100k. Not enough for me to quit my day job, but I have lots of bills.
This story doesn’t add up. If you see your clients making an easy $200k per property flip, why don’t you cut the clients out and do it yourself? Start a fund and be the the most successful asset manager in the country?
"If being self-employed is so lucrative & easy, why doesn't everyone do it???" LOL 1. You've got to have a bit of capital and time, ready at any moment. Going to auction isn't for the weak. Most people go with at least 10 properties in mind that can be flipped quickly, and they'll be competing with at least 30 other people bidding for the same properties. Bidding starts at the amount of taxes owed or whatever the lien amount is on the property. If you win the bid, you have to pay whatever that is immediately on-site. It could go well over what one expected. 2. You have to be ready for unforseen issues. The house may need a new roof, new windows, etc, and that usually must be paid immediately for a flip house. 3. It's time-consuming to flip houses and manage rentals. Landlords deal with a host of issues, and flippers must have to the time to be able to check on their rehab minimum 3 days a week. 4. It's a lot of tedious, detailed WORK. My investor clients don't have to hire an agent, but they do because they DO NOT need another task added to their list when managing these jobs. Eventually, I would like to do this full-time. When I have $200k saved and at least $1,000,000 in assets, I'll take that leap. I'm almost there! I have kids, a dog, a home, and major bills. It's too risky for me. My clients are pretty well-off already. However, I have a couple of clients who are young and single, and they've quit their corporate jobs after 2 or 3 flips. The OP asked about the ease of doing this, and IT IS EASY. Whether or not you qualify is another story. To the original poster: make sure you've got a safety net and get a mentor to help you with the numbers and comps.
There are REITs giving dividends. There is rental income. And there's price appreciation in the long run.
The ability to have cashflow that is enough to live off for the rest of your life depends much on how consistent your rentals are occupied. It's possible to have enough cashflow with just a few properties if your location is good and the price is affordable.
I find REITs to be bad investments, they are RE without the leverage, without the creative deal finding (which is what gives you the huge profit potential), and most importantly none of the tax advantages. The tax advantages of RE are enormous. In the end you just end up with a mediocre paper asset.
Hello,
I own about 20 properties and also manage another 15. We also buy properties, rehab, refinance, and add to our portfolio.
Prior to 2021, we would buy properties, and sell them. But now it makes more sense to hold as rentals and wait for market rates to come down since way less buyers.
So I operate across these 3 businesses:
Current Rental portfolio (recurring revenue)
Property management (recurring revenue)
Buying and rehabbing properties, adding to above portfolio , with anticipation of possibly selling when market gets better.
I employ 2 persons and also have multiple contractors.
The properties I own all have mortgages besides 4. Total of 16 mortgages.
They bring me in an average of $500 a month cashflow after all expenses are paid , mortgage , taxes , 5% Capex etc (but not my labor aka property management , see below).
Net $10,000
The property management makes us about $1200 profit from just the recurring fees plus about $1800 in billable labor.
Net $3000
(The $26 an hour maintenance manager plus $12.50/hr part time helper average about $4000 a month combined)
Net -$4,000
That’s a net of $9,000 a month my business makes me in free cash flow. Plus the equity on paper additions from every single property we do and add. When we refinance we are typically 100% returning cash to ourselves. Atleast that’s how it’s been for us luckily.
Hope that’s makes sense… god bless
You buy multi family in cash then do a cash out refi. With paying cash you can get better deals. The idea is buy duplex or triplex units so that 1 door pays the bills and the other door is profit. You buy one for say 175k you cash out refi to get 70%+ back then spend that again on another multi family unit. Next thing you know you got 5 properties all making 1-2k in profit a month plus the long term equity built from holding the property
It depends on the strategy you employ, how much income you make, or access to financing plus risk appetite. In my case I had time and a decent income. I purchased all my properties as primary. I go and purchased another property when my current property reaches $500 in NOI. I used money I saved from my regular job. I never cash out refinanced because I preferred cashflow, and managed risk over equity. It’s been seven years now. Real estate is a side income which helps me offset my expenses. I had multiple roommates for five years. I don’t need to do that now because the cashflow replaced the need for the roommates. That’s a win in my books!
Well you need money, time, and a bit of luck.
If you had properties before or during early Covid all you had to do was refinance those bad boys and that would give you a pretty big increase in income.
If I had 5 of my houses for example rented out I would be grossing around 60k a year. Everyone’s situation is different as every market location is different.
The more you buy into it the more in returns you get. As long as you know what you’re doing of course
You tend to not make much income at the start, you have to build your portfolio. You want to pour as much capital in as you can, acquire as much property as possible, then when everything goes up (rents, property value, etc), you start getting more and more potential for income. In the end you can roll it all into an apartment building or other large investment and have enough cash flow to live on for life.
Given the massive run up and property prices and the high interest rates I doubt if you can really get to free cash flow in anything less than 10 years nowadays. But a few years back if you were in the right place the right time and dealt with the right pieces of property you could get there pretty quick.
If you buy your property right, you can cash flow on day one.
Capital appreciation is something that is nice, but not to be relied on. The same thing with depreciation.
If you buy properties correctly, you cash flow right away.
I am so confused about all these people responding that real estate doesn't cashflow well.
For me that's the entire point, and the appreciation is just a bonus. All of my properties cashflow well and you absolutely don't need 1000 doors to replace an income.
You can achieve freedom with a few small apartment buildings or one mid-sized building, but this involves some significant funds to get into it, or you need to be creative or resourceful. I had an opportunity to buy a 30-unit seller financed a few months ago but it was vacant and required about 500K in renovations to make it an exceptional property. I passed on it as, while it was a great investment, I'm staying away from financing and holding new properties right now and merely flipping, and he wanted to lock me into 5 years of financing when I wanted to be out of in 9 months to a year or so. If I was interested in rolling the dice on a rental building though it would have cashflowed about 15-16K/month once stabiiize and I could have been into it for not a penny out of pocket.
Our primary model right now is residential flips. If rates would come down I'd do more multifamily flips but it's tough to find buyers for fully updated buildings at 7-9% rates right now, especially with fear of rents stalling. I've got residential flips down to almost a science and it's easy pickings now. Just buy, rinse, repeat. It takes a lot of trial and error though! It definitely wasn't always this easy. I over-did a lot of homes and felt like I had to build additions, redo entire layouts, gut down to the studs, and frankly that's all great if you're going to live there forever but the next buyer doesn't care nearly as much! They just want a nice home with nice materials done right, so they don't have to try and find a contractor to come and not rip them off.
I mean for me it’s very much a side job — I break even and will eventually be able to cash out eventually (I am in the Bay Area, so that’s really all I can hope for)
It just depends on your strategy and start up costs.
I have Property A that had a lot of start up costs, HCOL market, and my monthly expenses are 3000 ish and it rents for 4700/month (currently has a two year tenant)
Property B had low start up costs, LCOL market, costs me $950/month to operate, and rents for 1500-1600/month. I’ll be looking for a new tenant at the end of the month.
In the end, I really just need them to cover their own expenses. I make too much from my W2 job that I need more write offs than income. Like someone else mentioned, the real wealth I’m shooting for is buy and hold/equity.
Don't buy negligible cash flow properties and it becomes much easier.
Even if we assumed a negligible income of $100/mo, 1000 doors would be $100,000/mo that's way more than respectable. It seems minor when starting out. But it's about scale if you are trying to go full time. Most people don't get there, and they just build a nice nest egg to retire on through equity.
It’s the long game for us. We have two doors, both out of state, low rate mortgages with 3 and and 8 years left to pay off. We have an oh shit 10K emergency expense in one and a 6k and growing expense account for the other.
Once we are paid off on both with 10K in each for unexpected calamities, we will get a nice little monthly nut to have choice to go semi retirement at our good paying day jobs, spend time with our kids, at the. least take some nice long vacations on the regular with me starting that at 58 and my wife at 51.
Some flip homes, some flip contracts of homes, some get rental income with cash flow. So as a REI, there are many ways to earn money. Most of the big profits starts at signing.
Remember that there are multiple avenues of real estate investing. If you're a flipper, you're generating income on each flip. If you're a wholesaler, you're generating income on each property you assign to an investor. If you're a hard money or private lender you're generating income each month from the interest you charge borrowers.
Buy and hold rental investing is but one of myriad forms of RE investing. And while it may not generate the type of monthly income to finance your lifestyle now, as others have said that particular strategy is a good one for building major long term wealth.
It’s no secret they bought 10-20 years ago. Worked very hard restaurants hard labor, stocking shelves lot at night doing whatever you have to do to make money, then paying down a mortgage. It’s called hard work and time. It looks easy many years later.
Rents have gone up dramatically in the last 10 years, not to mention 20 or 30. So people that invested 10 years ago with minimal cash flow at the time might be enjoying ridiculous cash flow now. My sister owns about eight doors. Three are a couple of houses her and her partner bought about 15 years ago, and the rest she has picked up in the last 8 years or so. She brings in about 3,000 a month and lives for free. She lives simply. Might think about picking up another property or two, But she doesn't really have the income. But she has mortgages on all of them but get paid and then she gets about 3,000 a month extra, mostly from rising rent, although she bought most of them at a time when the market was in a bit of a slump.
You’re about 3-4 years late to be asking this question. I bought a rental property in 2019 and my second in 2020. Refinanced both to 3% rates during the low interest period. Both mortgages are 1100 and I rent out each house for $2500 a month. The key was buying before the crazy price increases and locking in a low rate. With current rates you really can’t find any single family homes that will cash flow.
I bought my first property in November 2018 for 2MM cash from an investor and signed the tenant to a 10+ year lease. To get him to sign a new lease I did a 750k build out and he put up 100K. 3 weeks after buying property with the new lease in hand for 30k/month NNN I financed 2.75MM so we had no cash left in the deal. Now my tenant is paying 32.5/month, NOI is 390k/year and my monthly payment is just under 16k/month so my friend and I own 50/50 and we each get 100k/year of distributions. We have since bought several more properties and I have become very wealthy and have several hundred thousand a year of tax efficient income.
Realtor, investor, and former property manager here. My clients that pull in high monthly income all invest mainly in MFH, mostly duplex through 20 units. I had a PM client pulling in $75k a month when I left the business, and it was all smaller MFH, about 150 doors. He started buying in the 80s and didn't stop. Another investor/contractor owned about 30 doors and pulled in about $20k monthly.
Twenty doors here. Self-managed. We bring in around $80,000 annually in cash flow on around $360,000 gross. My wife works a full-time W2 while I manage our portfolio, including renovations and day-to-day maintenance. I'll likely step back into a full or part-time job within the next year if we're unable to find a deal by year's end.
Yeah, a little shy of $2.4M. The properties were originally purchased with a private lender who required virtually nothing down. We're taking a hit on cash flow for huge cash-on-cash returns. We've spent very little of our own money piecing the portfolio together over the years.
It creates the cashflow overtime as your mortgage is paid off. It takes decades unless you’re putting in actual work such as adding units or additions which can allow you to get there in just a few yrs, but for that you need huge capital. For the everyday person, you can buy a few investment properties through savings and skill, and 25-30yrs later, or earlier, when it’s all paid off, you retire! Along the way as mortgage goes down and rents go up you may also have cashflow.
You have to own it with little to no debt. If you have a mortgage, then the mortgage + taxes + repairs make it impossible to have any significant cash flow. In fact, sadly, I’ve seen extreme situations where just taxes + repairs make it impossible to make money.
Even if your cash flow and negative who cares because that person is paying off a leveraged loan
If your house appreciated $0 and you're making zero net profit off the rent they are still paying off your mortgage so in the end you have a leveraged loan of $500,000 that they're paying off
Depends on when you bought and the rents. I have a duplex that is on track to cash flow about $1000/mth this year. If I had 12 duplexes, I could quit my job. lol. I don't have 12. If you've got STRs making 4x or 5x that or a MTR making 3x or 4x, you need fewer.
Some people have 1000 doors. Some people get lucky and make a bundle on fewer doors. Maintenance is expensive, so whatever you think you are making, you aren't making it because, eventually, you will be paying to fix things.
Time. Time is the piece you're missing. The first few years of owning a rental, you'll be break even on it monthly. Perhaps even in the red some months. But my experience is that 10-15 years later, you'll be swimming in money from it. AND it may have appreciated significantly in value as well.
What are you talking about? You buy a unit with a mortgage of X and you rent it for more than that dollar amount? Then after a few years the house/apartment/duplex etc is paid off and you didn’t pay any of the mortgage. If you can’t figure out how to get a mortgage that’s lower than the reasonable rent you can charge, then you can do things like live in it for 2 years first, renovate the house to increase the value then you can charge more rent as well as refinance, or just save up more to put more money down - lowering your mortgage. It’s not easy money and it’s not simply “charge rent, get rich”
Cash flow is king. My rentals are paid off, so they pay all my bills, leave me with me with money to spare, offset my taxes, and give me something quite valuable to leave to my son when I kick off. Flipping is good for a one-time payout. I'd rather have the long term payout.
The answer is cash flow. If it doesn't seem like there is any way to make actual money with cash flow, then the problem is whatever criteria you are using to look at properties for investment.
I'm going to generalize a good bit here, but its to keep the points I'm trying to make simple:
income from a single property isn't going to sustain anyone (unless its a crazy property), but in the long run, its the appreciation on that property combined with the paying down of the presumed debt on the property.
For residential properties, this is really the only way to make money, unless you have multi-family apartment buildings/duplexes, where the rental per unit can make up for the debt/expenses on the property. Owning more properties makes up the difference in the long run.
Commercial property is a tad different but the premise is the same. Commercial is different in that the goal is to own a property where the tenant's rent pays enough that you have positive cash flow from the get go.
a current caveat - the rates going on right now make it difficult for anyone to start real estate investing without significant cash on hand. They also make many people currently 'in the game' slow down or stop looking for transactions because rates just aren't good enough to maximize leverage vs return on investment. And most savvy real estate investors will use plenty of leverage to maximize their returns.
I work on the commercial RE side of things, and all of the guys I work with got started with houses and eventually moved on to commercial. they all say that commercial is the way to go, but it takes more money to get started and continue on.
For me, it doesn't really.
I have 1 rental property that I have had for 6 years. 2 years ago is when I started making a *profit* after expenses and taxes of roughly $10k a year. I don't have it to "make me money" I can feel month to month or year to year — it's when I decide to sell it or use it as leverage for something else that it will make a financial difference i can actually feel.
I made 20k a year with three rentals. You can definitely make great cash flow. FYI, these were great properties in very poor areas. I held on to them for about 10 years and the sold them for about 100k profit, total.
If you want income in real estate you have to either wholesale or be an agent, which you then need to save most of your money from and buy your own deals you come across from time to time to then start cash flowing and building equity. I’m still on step 1 but this year has been good so I’ll be buying a duplex hopefully by the end of the year. I’ll be house hacking by living in one unit and renting the other
The past 13 years I flipped about 16-18 properties for myself (and another 90 for investors for a steady income). I went from 100K NW to 2M. Sure appreciation played a lot into it and the constant full time work I put into it but 1,9M saved is not bad...or in different words, I have never ever thought it is possible for me while living a great life with lots of travel, a wife, and kids. Now, I could just rent 3 properties with zero mortgage and net a nice sum but I plan to keep going for another 5-10 more years and retire around 57. Let's hope it works out but if not, I am FI as of now.
Those who live off the monthly costs usually get interst only mortgage which keeps repayment down to a minimum & this way, they live off the rental income...
The way the pay off the mortgage debt is by selling or re-financing toward the end of the term, they keep the difference between the cost and the new value or if they're smart, they re-finance again, taking out xx amount which they don't pay tax on because its a refinance...
From my limited research, I think purchasing small multi-unit buildings is your best bet. Or, if your incredibly handy, fix and flipping a distressed property.
Renting a single family home out seems very risky. I recently replaced an A/C unit on my house. Cost 12k. If I was renting it out, I would probably be in the red for the next 2 years. And I'd better hope nothing else goes wrong in the meantime.
I’ve been living off my rentals for about 14 years (been investing for 20). I can say 100% it’s possible.
I have 24 rentals. I know people have all these fancy charts and rules and lingo. Plain and simple know your market. My main rule for my single family properties is minimum $500/ month cash flow. Out of 24 properties 21 meet that rule. Two I’ve purchased this year only $300 each. The market is tough and $600 extra a month is better than nothing. However, I have a couple properties that cash flow $900-$1000/ month.
Buy a fixer and fix it. If you use hard money that’s fine. Just refi with a “regular bank” once fixed and rented. Understand rents in your area. Understand how much renovations will cost. This will give you your “top purchase price “. If you can’t get the property for that than move to the next deal.
This has worked for me. It’s not the only way.
I also, flip houses and for properties that don’t meet my criteria I have assigned to other investors that are a bit more loose with their numbers.
Rentals are a long game. For most it’s a retirement account. To an extent it is. I have about 5-9 years left on almost all of my mortgages. Once they are paid off my income will triple.
It’s slow at first. I use my business to fund my real estate investments. It would take a lot more cash flow to replace the income I make at my business the past couple years. But this is a down year and my rentals are making this year way less stressful. I own 3 commercial buildings that my business and now other business’s lease (50/50 with my business partner). 2 are more like houses (lease for about 6k per mnth each) and one is 22,000 sq ft (total leases are about 25k per month). Got one vrbo/Airbnb on the beach (11k) per month. 2 single family homes about 2k per month each. In the middle of rehabbing 2 more that could rent for 2k per month each. Started first one in 2012.
Buy something, renovate etc to build equity, then own 8% cap 60% LTV, borrowing @ 4%. Manage it yourself, get rental appreciation at above inflation rate, worked pretty good until rates were jacked up.
The biggest thing you're missing is the money made is in the purchase, not the sale. Many investors spend countless hours sourcing and finding deals. Typically, those "deals" are not on the MLS. When you hone your skills to purchase a property at a discount, the cash flow comes with it.
Real estate offers several avenues to make money, and understanding these can help you determine the best strategy for your investment goals. Here are some key ways investors find profitability in real estate:
* Rental Income: This is like the bread and butter of real estate investing. You buy a property, rent it out to tenants, and collect monthly rent checks. The key here is to ensure your rental income covers your expenses and leaves you with a positive cash flow.
* Appreciation: Over time, real estate properties tend to increase in value due to various factors like market demand, development in the area, or inflation. You can profit from this appreciation by selling the property at a higher price than what you paid for it.
* Flipping Properties: Flipping houses involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This can be a lucrative strategy if you have a good eye for properties with potential and can manage renovations efficiently.
* Real Estate Investment Trusts (REITs): If you're looking for a more hands-off approach to real estate investing, REITs can be a great option. REITs are companies that own and manage income-producing real estate. By investing in REITs, you can earn a share of the income produced by the properties in the REIT's portfolio.
* Short-Term Rentals: With the rise of platforms like Airbnb and VRBO, short-term rentals have become increasingly popular. Renting out a property on a short-term basis can often generate higher rental income than a traditional long-term lease, especially in tourist-heavy areas.
* Commercial Real Estate: Investing in commercial properties like office buildings, retail spaces, or industrial complexes can be lucrative due to higher rental yields and longer lease terms compared to residential properties.
* Real Estate Development: Developing properties, such as building new homes or commercial buildings, can be highly profitable but also carries higher risks and requires significant capital and expertise.
* Tax Benefits: Real estate investing comes with several tax advantages, such as depreciation deductions, mortgage interest deductions, and the ability to defer taxes through 1031 exchanges. These tax benefits can help increase your overall profitability.
Each of these strategies has its own set of considerations and risks, so it's essential to do your research and understand the market before diving in. By carefully evaluating your options and understanding your goals, you can choose the right real estate investment strategy to help you achieve financial success.
Property Development is the best way or else renovating and reselling properties. But you need a cash flow business to get into this game, a small capital is not enough
It’s a long game, at least for me. I’ve bought properties that had a little cash flow( it certainly was easier when rates were lower). Over years rents increased more than expenses, properties appreciated and equity was built. When I say years I’m talking 15-20 years to see significant income and wealth growth
If you bought as little as 5 years ago you're cash flow positive
I’ve bought more recently than that and been positive from day one. You need to be selective
I bought all of mine 2016-2020 and they’re all positive. Midwest
bought 2021, NJ, cash flowing great and wouldn't buy otherwise. People aren't picky enough, which is fine for me tbh
Park city also.
Where did you buy ?
Philly suburbs
I buy in the city, same
I’ve been trying to decide between buying an investment property in south Philly or delco. I lived in both areas so am familiar with them but there is a huge jump in price going from delco to south Philly. I just think back on how my parents bought their townhome in south Philly for $49k in the late 80s, sold it for $100k in the late 90s and now anything that isn’t a shell goes for $250k or more.
This^ bought a property for 132.5k March 2020 was renting it for $1200 a month. Now its worth over 250k and renting it for $1950 a month.
I’m curious, reading the landlord sub is enough to make me never invest in another rental property again. Why so many nightmare stories on there? Do you think it’s a wildly inacurrate picture?
I’ve honestly never looked at the landlord sub. I would expect it’s full of complaints but that’s probably just biased, just like restaurants reviews. People with a bad experience post and people with a good experience don’t generally think to post. Personally, I’ve been a landlord for 20 years and it’s been almost all positive. I will disagree that it’s passive income, you need to put work in.
I am working on saving for my first property but as a risk analyst I over analyze everything. What if A B or C goes wrong? But it’s people like you that remind me about the posting about good/bad experience ratio and the passive income part. We need this shared more.
I like to analyze numbers, but in real estate, your best bet is to start small. Ask yourself if you can live with the worst case scenario. If the answer is yes, then take a chance. Get started. If you fail at managing a cheap house, learn your lessons. Figure out what you did wrong, then try again. People spend $80,000 or more for college tuition but aren’t willing to risk losing any money on a real estate education by buying a rental house. Hopefully, you will be successful though.
If you’re an analyst you could certainly put a cost and likelihood to each risk factor. Banks have already done this to some extent by mandating 6 months of expenses for the investment available as liquid assets. You’d also want to understand the long term operational costs and average them into your monthly expenses. A good home inspection should give you a reasonable life expectancy for the big ticket items like roofs, furnace, etc
Dont worry about A B or C. Worry about what if you dont invest?
Yeah you should worry about if you don’t invest but I think ignoring A B and C is terrible advice. The furnace might blow, the tenant might leave and it could take you 3 months to fill the unit, you may have to evict, etc. If ignoring ABC you cash flow $100 a door guess what happens when any tiny thing happens? Negative income, you’re paying out of pocket for your income producing property. That’s now how it’s supposed to work. If you’re making $100 a door per month and you have a 1 mo vacancy on a $1000/mo unit that wipes out 10 months of income. As a risk analyst they should be figuring out how often stuff like this might happen. If one of those factors is a once every 20 years item it really becomes a non-issue.
I’m the same way. You just have to be prepared for the worst. Can you cover an ac Unit replacement or a roof? How old/how likely are the big things to fail? Things will go wrong and cost you money at some point.
Hey Risk Analyst :-) Factor in Opportunity Cost. Sure it’s sexy to say you own property, passive income, etc. but would the same $$$,$$$ put in an index fund give a similar or better return? I’m on the fence too. Attracted by the leverage opportunities.
People don't talk about the normal day as a normal Landlord, which is answer a few texts, send an email, build $65.78 in equity, and earn $31.72 in cashflow. Pretty boring and uninteresting when stuff is going right. I don't tell the story of that day, I'm gonna tell you about when I got a call from an elderly tenant literally when my friends were singing Happy Birthday to me saying his furnace was out and it was 31 degrees outside. I let it go to voicemail, but as soon as I had a minute I was on the phone with my HVAC guy to get him up and running before resuming my Birthday festivities.
As a DIY landlord, I've had as many as 14 doors that I manage myself. I've been thru just about every nightmare tenant scenario - including a tenant who was dealing meth, had 22 dogs, and did nearly $100k in damage to my property. I've had trees fall on houses, upstairs showers flood living rooms, and tenants literally leave the country mid-lease and pile their belongings on the front lawn. Even with all of that, I'm still in the game, and it's given me a life that I love. I get to spend as much time as I want with my kids, and I've had some awesome tenants, who have truly become friends.
How you spend so much time away with nightmare tenants? Can’t be traveling with a flooding living room
Don't get to travel nearly as often as we used to, now that we have two small kiddos in the mix. When we do travel, I rely on my network of trusted contractors to handle emergencies. First thing I show any new tenant is how to shut off water to the house, in the event of an active leak... and the location of the fire extinguisher (of course).
Because it's full of newer or first time landlords that made rookie mistakes and are paying dearly for them. The number 1 mistake landlords make is improper screening of tenants. When you've got a vacant property and someone has $3,000 cash in hand ready to rent, it's hard to pass that up. The rookies grab the money and assume everything will be sunshine. In reality, they may have picked up someone that has been evicted several times, has maxed out their Credit, is lying about their income, etc etc. Evicting a tenant is a months long process, all while not getting paid and having angry deadbeat tenants sabatoging your property. Another mistake is buying a property and half-assing the repairs. If the plumbing is looking bad, fix it BEFORE it breaks. That way you don't get a 2am phone call for a repair that's going to cost triple the amount. Not screening, not being proactive... You can get away neglecting it for a while, but if you don't do your homework, it will eventually bite you in the ass.
This is the way...
It’s an echo chamber. No one there is posting of their fully rented out triplex that has had the same renters for 6 years and are super low maintenance. That landlord is just relaxing doing what he wants having other people pay his note while he makes a nice 1k per month in pure profit. In fact that landlord is probably on reddit right now while hanging out with his Newfies, Kilo and Remus say hi btw.
Hi that's me.. Lol
It is accurate, but more doors helps spread the risk out.
It really makes you take a hard look at people and builds a much more discerning judgement of trustworthiness (credit-worthiness and will-they-mess-up-your-house-ness). I’ve had some nightmares and a lot of great ones, you’ll get better as you get experience (hint: credit scores, eviction history and criminal background are standard for a reason, trust them)
I'd imagine the large portion of landlords that have averagely fine tenants don't write about their average experiences on reddit
Yep but helps to own in states that are more on the side of property owner most horror stories I read on there are NYC, NJ and CA
>Do you think it’s a wildly inaccurate picture? Yes. People don't post all their routine success stories.
I get the exact opposite impression from that sub lol. Yes there are horror stories but the lucrative side far outweighs the occasional bad tenant. And those guys are wealthy af. There are ways to avoid bad tenants. The good definitely balances out the bad!
Most good landlords point to tenant screening as crucial
Yes and a hardcore process of screening at that. And lots and lots of insurance lol
So what have you done as ur main money maker?
A regular job probably
Yes, I work full time. Real estate is my side hustle. I enjoy it. Another way to build wealth and supplement my retirement income. Also something to pass down to my kids at some point
Thanks!
Real estate is bad if you’re looking for income. It’s great if you’re looking for long term “wealth.”
And there are those who charge $$$$$$ to newbies about real estate investments. That's how they make money. These folks will try to sell you the "secrets" of no -work - passive incomes if you go to their seminars.
From a 50k salary I control 2mil right now got 50% equity, cash paid to me each month after PITI 2000 minus the expenses capex etc peace= 500. No property manager. But I also leverage the fuck out of everything. First property bought with 3k out of pocket 600k. Next one was a A class property downtown proper in one of most expensive cities middle of Covid 20% down. Most recent was a 2% rule next to a navy base, moved into it and hate my life, rehabbed it from a duplex to a triplex, new absolutely nothing about construction before. Next one is an FHA assumable hopefully, currently in the works to get a 2.25% mortgage in heart of another world class city. Class A property. Lots of stress, no cash flow really. But at the same time for a total of 1000 hours invested and probably 130k cash total I’ve made on paper a million in the last 4 years. And from the lessons learned, wheeling and dealing, crunching numbers, talking to people, taking a mindset of there are no bad properties just bad deals, and doing win/wins. I’ve given myself a solid foundation to do very well in the coming years. I’m now looking to liquidate somewhat and move my investments into multifamily value add. So far everything is anything but easy. But it’s mainly because I can’t touch the unrealized gains until I choose to convert from building wealth to building cash flow. Which will be in the next two years as we’re coming to a very pivotal point for commercial in my opinion. Most people would say I’m over leveraged and I agree. But I can tell most people I made my first million in a few years on a median salary, single while they’re broke because they’d rather go drink and watch cable television in their brand new car.
How you in the works for a 2.25% mortgage?
Every few years rate goes down by a lot, then you buy down the interest rate even more when you get a new mortgage. Costs around $15-17k per %.
Overall a lot of positives in your situation, by like you said you're leveraged to the tits. Other thing is you have all your eggs in the real estate basket.
I think it was Andrew Carnegie who said "put all your eggs in one basket and watch it like hell"! I have been in real estate and construction 45 years, and it's all I know. I wouldn't dare put money in the stock market, or anything else I don't know the first about.
I agree with the sentiment, but to be honest you don’t need to know shit about the stock market to invest in an S&P index fund. It’s an easy game.
I also have 50k cash in hand and 100k in mutual funds, roths and equity lines. Emergency funds are there at this point. 6 months reserves all times to get into the next property. Ive kept my job and continue to get raises. Even if I need to eat a couple hundred dollars for a year to keep all my places rented, it’s all manageable. I do my best to control the leverage by being insanely anal about where I can keep my property rent at compared to market when it’s time for renew and have so far 99% occupancy over the course of 4 years. Longest any have gone was 2 weeks as vacant.
Now is the time to de-leverage a bit to get yourself on a firmer foundation. You have basically nothing to lose when you started out, so going all in on the risk was a smart move. But now that you're about to become financially independent it would be a shame if you were to lose everything. If you sell one of the properties and park the equity in an index fund you'll have plenty of cash to ride out whatever problems come up.
I did the same between 2005 and 2009. 50% LTV. Had $2.5m in equity on my real estate. Lost it all to the banks. I’ll never leverage like that again.
Could something like this be replicated with current interest rates though?
You haven't made a million by your own words. It's on paper; you seem highly leveraged,as stated, and one bad streak away from losing it. Seems weird you talk shit from a highly precarious position.
Thank you for repeating everything I just said. Weird is only used by people that don’t understand something or someone, or someone that goes against the grain of norms in society. Doesn’t change anything tho. I took calculated risk with relatively nothing to lose at certain points and own my first million. Could it go to 500k tomorrow sure. Will I double down and buy more real state if that happens, I’m waiting for it. In the mean time I’ll continue my plan of buying one nice property a year.
There’s men in the arena taking the hits and rolling with it then there’s everyone else sitting on the sidelines telling them what not to do.
Who is going to give you the money when the paper value of those properties plummet? Especially as you said at a 2.5% rate? I know people with tens of millions in much more liquid assets looking at rates twice that for sub 500K mortgages.
Actually it's not weird at all. Most self-made millionaires in RE go against the flow and don't listen to the common wisdom. In 2009 when everybody was crying about the real estate debacle in the US I was buying properties for 45 and $0.50 on the dollar. Between 2009 and 2012 my net worth went from about 400,000 to 1.7 mill.
over-leveraged and real estate is heading into a downturn …. what could possibly go wrong
Speak for yourself. Some of us actually make great income through LT. & ST rentals.
all u need is 2 mil netting 8% cash on cash to not need a 9-5. wym its bad for income. That can be done with a few townhouses or a small multi-fam
Takes income to get there unless you’re in the nepo business. You don’t just go from $40k/yr to 2m in equity overnight lol
how long will your plan to 2 mil take?
My plan to 2m already passed a couple years back, think most recent PFS was around $6m not counting the businesses.
2 mil in equity. Takes a while to get there unless you have a rich uncle that kicked the bucket
Yeah it’s not overnight but 10+ years is possible. Real estate is get rich slowly always has been.
do you have an uncle like that? prob not.. but im sure you got time
2 mil in index funds will do the same and zero work or maintenance.
2 mil in index funds has no tax benefits, and there is no debt pay down or leveraged appreciation on top
Plenty of people use leverage with stock
How long will it take a person making $50,000 a year to save $2 million to put into index funds? With leverage, real estate can get you there faster.
You do realize that the Great Depression happened because too many people were investing on the margin. We barely avoided it in 2008 and now you’re basically daring the housing market to crash by advocating more margin investment. People are blaming boomers for the housing shortage yet more boomers than ever are experiencing homelessness. Nobody knows what is happening until it’s too late.
Debt is 8%+ now. You are assuming $2m free and clear. Most of us not in that position.
If you have 2 million dollars sure…
This is exactly correct. It is better for you to invest a large amount like 1 mill into an index dividend fund rather than buy a property with 1 mil out right cash. If you got like 200K for the down payment (20%) then it's good for someone else to build your wealth to 1 million by paying off your mortgage over a long time. Obviously, the cost of a unit/home is different for each market, but these numbers are just used as an easy example.
It's not actually all that great for wealth either. The last few years have been pretty weird, of course, but on average you're probably better off long term with a diverse equities portfolio than you are a few properties.
5 ways: 1. Equity capture (buying at a discount and rehab) 2. Appreciation (buying in appreciating markets >3% year over year) 3. Rental income (increasing >3% year over year) 4. Mortgage pay down (borrowing with today's dollars then paying off with future dollars) 5. Tax write-offs (offsetting income from all sources with depreciation) It is a long game but with refinancing to pull equity for more it can snowball over time. It does require another source of income to cover living expenses until you build your capital stack.
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Tell me more about this book?
https://store.biggerpockets.com/products/small-and-mighty-real-estate-investor
Three things… property appreciation, rental income (which can either buy you equity in your property, or if you own it outright, give you a straight income), and tax offsets from certain expenditures on your property.
You forgot one of the most important things stock's can't compete with - leverage.
Stocks can be leveraged to ridiculously high levels with margin accounts and/or options.
Options carry high beta and risk premium, and are not comparable to simple leverage or margin. Brokers offer nowhere near the same degree of leverage on trading accounts. Depending on income and credit rating, banks will lend people a million dollars on $100k using the property as collateral. That’s 1000%. You’re lucky to get 100% with even huge brokers like Interactive Brokers. Leverage remains vastly superior in real estate. The risk profiles are just completely different. That said, I expect ratios to get squeezed in the coming years as defaults happen in commercial and rages remain elevated.
But you're getting significantly better interest and terms from Real Estate than you would for margin trading.
You can leverage stocks. There’s just a higher learning curve and higher risk. But higher reward.
I own a $3mm vacation home that grosses $165k per year. It is fully paid off. It is only occupied 15 weeks per year. Those 15 weeks go for roughly 12k per week. It’s fully booked a year in advance. It was built in 2017, so little to no maintenance.
You’re only making 5.5% ROI on the gross so your net must be lower like 4%. You can get a better return on a bond and do zero work.
This does not factor in appreciation of the asset, though.
That would be more akin to trading. Buy low, sell high. Many stocks have tripled in price over the same three years. It’s playing the markets and comes with risk. Rental income is a long term cash flow business and appreciation is not really factored.
My guess is this house is somewhere in California close to the beach or in a desirable tourist area. We don’t know the full story but it has likely appreciated north of 50% since it was built in 2017, but has probably appreciated more than 50%. If it’s only booked 15 weeks my guess is this house is probably in a ski town or near a ski resort (maybe Lake Tahoe?)
Is that including appreciation? Did he put $3 million into the property?
No, I bought it for $1.95. An adjacent cookie cutter just sold for $3M a month ago.
Nice! That changes the ROI numbers to something more reasonable and worth it
It has appreciated by over 50% since the purchase in 2019. I bought it for $1.95 - an adjacent cooker cutter house just sold for $3M a month ago.
Additionally, it’s part of a diversified portfolio. I have plenty of money in treasuries right now.
Did you build/buy it with cash or was there any financing?
How is it fully booked and you only rent 15 weeks a year?
looks like fully booked at 15 weeks/year is $165K...might be all he wants to rent it, or that's season...
“Fully booked” to me means Memorial day through Labor day
Fully booked means Memorial day through Labor day
It depends on what kind of deals you can find, what kind of cash flow your units will give, and most importantly... what kind of lifestyle you want to live off of that. I've read stories of people who own only a couple properties, but they're all duplex/triplex/MFH and they cashflow a few thousand a month after expenses. Then there are others that own dozens of properties with barely any cashflow from each. Then you have the whales making 5 to 6 figures a month from hundreds of properties. It comes down to your pain tolerance for work and how much you want to live off of.
You buy houses 10 or 20 years ago before they got super expensive, and rent them at currently high prices.
I have 13 properties (all owned free and clear), all located in solid areas, and they bring in around 20-21K a month in rent. I don't have to work, but I still have a 9-5. If my 9-5 ends, I'll likely do nothing. Even my primary is paid in full.
How long did it take you to acquire them and what was your main strategy?
Started buying in 2018. I wanted townhouses and condos in high demand areas, but also areas that brought in year to year equity growth.
How did you research the YOY equity of the areas?
They are all in my city, so I personally knew the areas and had my agent run the numbers. The equity has skyrocketed on all of them
You are naive. Most investors like me care about cash flow and over time raise rent to maximize. For instance bought a 4 unit 7 years ago for 250. Expenses with mortgage are 2800 a month. Rent at time was 3400 a month. So cash flows ok. I knew if I renovated I could raise rents. Today all 4 units are turn key and modern and gross 7500 a month. Expenses are up to 3000 a month and I put 60k into rehab with me doing most of the work. I have lots more properties but same formula. Get them to cash flow renovate as tenants leave and raise rents. On 100 doors I net about 500k a year. Key is not to buy one or 2 family units. Cash flow is tight and one tenant not paying creates issues for income. Stick to 4 or more units.
I purchased my first property about 4 years ago with 46k cash I had been saving. It has 2 small houses on it in Springfield IL. One rented for $500 and the other $600. Once you have that income saving for the next house goes faster. I sold my house and moved Into a condo. Took the 100k I had in equity and bought 2 homes in mobile AL. Both for 50k and rented for $900 a month. A few months later I purchased another property in Springfield for 26k that needed about 5k of work. It's rented for $850. I've been able to add 2 more properties since then. I just sold my condo and only put 5% down on my new house and will use the equity money from my condo to purchase my 8th rental property. All cash. Combined income of about $7200 a month. 10% management fees, insurance, taxes, and upkeep take a big chunk but I have a full time job and keep my personal expenses low. I'm not sure I'm doing it right but it's working for me. Not having a mortgage prevents me from buying anything nice but I also never feel stressed when something needs work or sits empty for a month or 2 between tenants.
I’m new and only have a few doors but I make $1,000 per month profit on each of them. Then I re-invest into another home. I can definitely see how it can quickly become a full time income where I can quit my job.
What kind of properties do you buy and do you have a mortgage on them? Specific location you like? Are these long term rentals or Airbnb? Thanks.
Long term only! I may dabble in STR one day but it seems like definitely more work while right now it’s 98% passive. I house hack so I live in the home first and get primary home mortgages. I only buy in really good school districts in desirable areas so the rentability is very high. After this third home though we are done moving and going to start buying straight investment properties. The only part I hate are the taxes but I appeal them all no matter what and sometimes they go down.
My brother got out of prison 8 years ago and bought his first storage facility with a friend in his early 20’s who worked at an accounting firm. They now own over 150 facilities in 30+ states and are one of the 20 largest operators in the US and he is worth over 100MM. They have raised over 200MM in equity and done nothing but make money for them and their investors. Don’t get me wrong, he works his tail off and is an amazing operator but it is possible and in my experience there is no better way to become wealthy than real estate but it’s a lot of hard work and you have to be good.
Real estate investing is more than being a landlord. There are 1000 ways to make money. Some of the ways I’ve been able to do this full time is by lending on gap funding, loan sponsorship, transactional funding for double closings, connector fees for making impactful introductions. Network is everything. Cashflow is only a small piece of it.
If you have 6 doors and 3 mortgages and the rent is 9000 and your mortgages are 3900 you have 5100 to live off of personally before misc maintenance and repair costs .
Assuming you put 20% down...that combined mortgage payment would be about $675k worth of property. Where are you finding three 2-familiy houses for $225k a piece? Honestly asking. Where I live that's unheard of.
Foreclosures. It's a great way to get property at a discount no matter where you are. I got a property worth $300k for $120k in Maine.
pardon my ignorance. But isnt the foreclosure market extremely competitive and you need all cash up front usually?
Yes and no. I've gotten a for closure without much competition. County foreclosuree can be competitive due to upset bids and extending the timeline. At least where I am
Not at all. If you want property RIGHT as it gets foreclosed, then yes, it's competitive, but not all, or even most get bought at that point. I got pre-approval for a loan and put money down for the $120k I bought it for. Banks tend to have a list of properties they have foreclosured on, but if you are working with an agent, then they'll have an easy list for you. There's other ways to access foreclosure properties, it's just not often taken fully advantage of
What is the other way to access foreclosure properties?
Off market properties with reno/rehab potential. I have friends that routinely pick up properties in LCOL/MCOL areas for >50% cheaper than open market prices by buying in all cash (asset-backed loan/credit line from a credit union) and closing fast. Make sure you know the area well, and aim to get properties in good school districts. Build a business on the side of your day job to build up the cash to be able to do this. Mom/dad/aunt/uncle/grandma/grandpa etc going to a nursing home is a great opportunity if you can swoop in quickly. Oftentimes next of kin has zero interest in the property, and if you can offer X% above what the property previously sold for, then they'll take the money and run rather than having to go through listing and showing the property, and having to deal with how long closing on a bank mortgage takes. Pre-foreclosure (before bank takes possession) can also work well for scoring underpriced deals. Network with older, more experienced investors, and gain access to their network. Some brokers who have lived in an area 40+ years have deep connections and access to these kinds of deals, and if you build a reputation for closing quick in cash, you'll become a person they'll float these deals past. These guys tend to like sharing knowledge and experience with hungry, motivated newcomers. u/melikestoread does this model very well, read through some of his posts/comments. (May have to use a Reddit archive tool, I think he's suspended again).
It's so easy where I live that I will have to assume it's relative to the market you're in..? I'm a realtor, but majority of my clients are investors and based off the closing docs I see, they each pull in $100k-$300k a year. Some are full-time, and some are part-time. My most consistent client buys HOA and tax foreclosures. In Texas, an HOA can take your home even if it's totally paid off otherwise. I usually see a 3-4 year delinquency by the time it goes to auction. People lose their homes over $15,000 disputes, thinking they can fight the HOA. Turn around and flip the house for market value, and you've got a profit of $200k+. No need to work the rest of the year if you live below your means. Of course, if you're a big money investor, you're making $100k a month, which means you have to park that money somewhere if you don't want to get screwed in taxes. So you then invest some of the proceeds in income-producing properties that you can purchase for below market value. That way, you can refinance and get a cash payout while someone else pays your mortgage. If you're good with numbers or have a sharp CPA, you'll use that cash-out as a salary. 2-3 auction houses a year and a couple of commercial or multi-family units, and you've got a salary of about $300k a year. This is what I see with my clients who have $500k or more starting out. For people who don't have large sums of money starting out, flipping houses bought at auction is the best way to go. I've flipped houses in the past and net between $60k-$100k. Not enough for me to quit my day job, but I have lots of bills.
Thank you. I was going to say you make income with a diversified portfolio. You explained it though.
Where are you located?
Texas
Thanks
This story doesn’t add up. If you see your clients making an easy $200k per property flip, why don’t you cut the clients out and do it yourself? Start a fund and be the the most successful asset manager in the country?
"If being self-employed is so lucrative & easy, why doesn't everyone do it???" LOL 1. You've got to have a bit of capital and time, ready at any moment. Going to auction isn't for the weak. Most people go with at least 10 properties in mind that can be flipped quickly, and they'll be competing with at least 30 other people bidding for the same properties. Bidding starts at the amount of taxes owed or whatever the lien amount is on the property. If you win the bid, you have to pay whatever that is immediately on-site. It could go well over what one expected. 2. You have to be ready for unforseen issues. The house may need a new roof, new windows, etc, and that usually must be paid immediately for a flip house. 3. It's time-consuming to flip houses and manage rentals. Landlords deal with a host of issues, and flippers must have to the time to be able to check on their rehab minimum 3 days a week. 4. It's a lot of tedious, detailed WORK. My investor clients don't have to hire an agent, but they do because they DO NOT need another task added to their list when managing these jobs. Eventually, I would like to do this full-time. When I have $200k saved and at least $1,000,000 in assets, I'll take that leap. I'm almost there! I have kids, a dog, a home, and major bills. It's too risky for me. My clients are pretty well-off already. However, I have a couple of clients who are young and single, and they've quit their corporate jobs after 2 or 3 flips. The OP asked about the ease of doing this, and IT IS EASY. Whether or not you qualify is another story. To the original poster: make sure you've got a safety net and get a mentor to help you with the numbers and comps.
There are REITs giving dividends. There is rental income. And there's price appreciation in the long run. The ability to have cashflow that is enough to live off for the rest of your life depends much on how consistent your rentals are occupied. It's possible to have enough cashflow with just a few properties if your location is good and the price is affordable.
I find REITs to be bad investments, they are RE without the leverage, without the creative deal finding (which is what gives you the huge profit potential), and most importantly none of the tax advantages. The tax advantages of RE are enormous. In the end you just end up with a mediocre paper asset.
Thanks!
Hello, I own about 20 properties and also manage another 15. We also buy properties, rehab, refinance, and add to our portfolio. Prior to 2021, we would buy properties, and sell them. But now it makes more sense to hold as rentals and wait for market rates to come down since way less buyers. So I operate across these 3 businesses: Current Rental portfolio (recurring revenue) Property management (recurring revenue) Buying and rehabbing properties, adding to above portfolio , with anticipation of possibly selling when market gets better. I employ 2 persons and also have multiple contractors. The properties I own all have mortgages besides 4. Total of 16 mortgages. They bring me in an average of $500 a month cashflow after all expenses are paid , mortgage , taxes , 5% Capex etc (but not my labor aka property management , see below). Net $10,000 The property management makes us about $1200 profit from just the recurring fees plus about $1800 in billable labor. Net $3000 (The $26 an hour maintenance manager plus $12.50/hr part time helper average about $4000 a month combined) Net -$4,000 That’s a net of $9,000 a month my business makes me in free cash flow. Plus the equity on paper additions from every single property we do and add. When we refinance we are typically 100% returning cash to ourselves. Atleast that’s how it’s been for us luckily. Hope that’s makes sense… god bless
You buy multi family in cash then do a cash out refi. With paying cash you can get better deals. The idea is buy duplex or triplex units so that 1 door pays the bills and the other door is profit. You buy one for say 175k you cash out refi to get 70%+ back then spend that again on another multi family unit. Next thing you know you got 5 properties all making 1-2k in profit a month plus the long term equity built from holding the property
It depends on the strategy you employ, how much income you make, or access to financing plus risk appetite. In my case I had time and a decent income. I purchased all my properties as primary. I go and purchased another property when my current property reaches $500 in NOI. I used money I saved from my regular job. I never cash out refinanced because I preferred cashflow, and managed risk over equity. It’s been seven years now. Real estate is a side income which helps me offset my expenses. I had multiple roommates for five years. I don’t need to do that now because the cashflow replaced the need for the roommates. That’s a win in my books!
Well you need money, time, and a bit of luck. If you had properties before or during early Covid all you had to do was refinance those bad boys and that would give you a pretty big increase in income. If I had 5 of my houses for example rented out I would be grossing around 60k a year. Everyone’s situation is different as every market location is different. The more you buy into it the more in returns you get. As long as you know what you’re doing of course
You tend to not make much income at the start, you have to build your portfolio. You want to pour as much capital in as you can, acquire as much property as possible, then when everything goes up (rents, property value, etc), you start getting more and more potential for income. In the end you can roll it all into an apartment building or other large investment and have enough cash flow to live on for life.
Given the massive run up and property prices and the high interest rates I doubt if you can really get to free cash flow in anything less than 10 years nowadays. But a few years back if you were in the right place the right time and dealt with the right pieces of property you could get there pretty quick.
If you buy your property right, you can cash flow on day one. Capital appreciation is something that is nice, but not to be relied on. The same thing with depreciation. If you buy properties correctly, you cash flow right away.
I am so confused about all these people responding that real estate doesn't cashflow well. For me that's the entire point, and the appreciation is just a bonus. All of my properties cashflow well and you absolutely don't need 1000 doors to replace an income.
Real estate investing is done best if you have solid job that you have lots of left over money after all bills are paid.
It helps when they bought properties back in a time when properties produced cash flow. That day appears to have come and gone
You can achieve freedom with a few small apartment buildings or one mid-sized building, but this involves some significant funds to get into it, or you need to be creative or resourceful. I had an opportunity to buy a 30-unit seller financed a few months ago but it was vacant and required about 500K in renovations to make it an exceptional property. I passed on it as, while it was a great investment, I'm staying away from financing and holding new properties right now and merely flipping, and he wanted to lock me into 5 years of financing when I wanted to be out of in 9 months to a year or so. If I was interested in rolling the dice on a rental building though it would have cashflowed about 15-16K/month once stabiiize and I could have been into it for not a penny out of pocket. Our primary model right now is residential flips. If rates would come down I'd do more multifamily flips but it's tough to find buyers for fully updated buildings at 7-9% rates right now, especially with fear of rents stalling. I've got residential flips down to almost a science and it's easy pickings now. Just buy, rinse, repeat. It takes a lot of trial and error though! It definitely wasn't always this easy. I over-did a lot of homes and felt like I had to build additions, redo entire layouts, gut down to the studs, and frankly that's all great if you're going to live there forever but the next buyer doesn't care nearly as much! They just want a nice home with nice materials done right, so they don't have to try and find a contractor to come and not rip them off.
Thanks!
You use appreciation + cash flow + equity pay-down to get enough units where you can live off just the cash flow
What’s equity pay-down?
I mean for me it’s very much a side job — I break even and will eventually be able to cash out eventually (I am in the Bay Area, so that’s really all I can hope for)
It just depends on your strategy and start up costs. I have Property A that had a lot of start up costs, HCOL market, and my monthly expenses are 3000 ish and it rents for 4700/month (currently has a two year tenant) Property B had low start up costs, LCOL market, costs me $950/month to operate, and rents for 1500-1600/month. I’ll be looking for a new tenant at the end of the month. In the end, I really just need them to cover their own expenses. I make too much from my W2 job that I need more write offs than income. Like someone else mentioned, the real wealth I’m shooting for is buy and hold/equity.
Don't buy negligible cash flow properties and it becomes much easier. Even if we assumed a negligible income of $100/mo, 1000 doors would be $100,000/mo that's way more than respectable. It seems minor when starting out. But it's about scale if you are trying to go full time. Most people don't get there, and they just build a nice nest egg to retire on through equity.
Mainly renting out the properties. After paying the mortgage, rest is profit
It’s the long game for us. We have two doors, both out of state, low rate mortgages with 3 and and 8 years left to pay off. We have an oh shit 10K emergency expense in one and a 6k and growing expense account for the other. Once we are paid off on both with 10K in each for unexpected calamities, we will get a nice little monthly nut to have choice to go semi retirement at our good paying day jobs, spend time with our kids, at the. least take some nice long vacations on the regular with me starting that at 58 and my wife at 51.
Some flip homes, some flip contracts of homes, some get rental income with cash flow. So as a REI, there are many ways to earn money. Most of the big profits starts at signing.
Remember that there are multiple avenues of real estate investing. If you're a flipper, you're generating income on each flip. If you're a wholesaler, you're generating income on each property you assign to an investor. If you're a hard money or private lender you're generating income each month from the interest you charge borrowers. Buy and hold rental investing is but one of myriad forms of RE investing. And while it may not generate the type of monthly income to finance your lifestyle now, as others have said that particular strategy is a good one for building major long term wealth.
It’s no secret they bought 10-20 years ago. Worked very hard restaurants hard labor, stocking shelves lot at night doing whatever you have to do to make money, then paying down a mortgage. It’s called hard work and time. It looks easy many years later.
Gotta pay down the mortgage first. Usually takes a while
Rents have gone up dramatically in the last 10 years, not to mention 20 or 30. So people that invested 10 years ago with minimal cash flow at the time might be enjoying ridiculous cash flow now. My sister owns about eight doors. Three are a couple of houses her and her partner bought about 15 years ago, and the rest she has picked up in the last 8 years or so. She brings in about 3,000 a month and lives for free. She lives simply. Might think about picking up another property or two, But she doesn't really have the income. But she has mortgages on all of them but get paid and then she gets about 3,000 a month extra, mostly from rising rent, although she bought most of them at a time when the market was in a bit of a slump.
You’re about 3-4 years late to be asking this question. I bought a rental property in 2019 and my second in 2020. Refinanced both to 3% rates during the low interest period. Both mortgages are 1100 and I rent out each house for $2500 a month. The key was buying before the crazy price increases and locking in a low rate. With current rates you really can’t find any single family homes that will cash flow.
I'm lucky, bought 2 multi families 3 years, cashflow 4k, property manager, and 450k equity.
I know this was while ago but in 2010 I was buying houses for 30-35k that rented for 800/month. Paid for themselves in 4 years basically.
I bought my first property in November 2018 for 2MM cash from an investor and signed the tenant to a 10+ year lease. To get him to sign a new lease I did a 750k build out and he put up 100K. 3 weeks after buying property with the new lease in hand for 30k/month NNN I financed 2.75MM so we had no cash left in the deal. Now my tenant is paying 32.5/month, NOI is 390k/year and my monthly payment is just under 16k/month so my friend and I own 50/50 and we each get 100k/year of distributions. We have since bought several more properties and I have become very wealthy and have several hundred thousand a year of tax efficient income.
Realtor, investor, and former property manager here. My clients that pull in high monthly income all invest mainly in MFH, mostly duplex through 20 units. I had a PM client pulling in $75k a month when I left the business, and it was all smaller MFH, about 150 doors. He started buying in the 80s and didn't stop. Another investor/contractor owned about 30 doors and pulled in about $20k monthly.
You go back in time and buy pre 2000 and post 2008.
Twenty doors here. Self-managed. We bring in around $80,000 annually in cash flow on around $360,000 gross. My wife works a full-time W2 while I manage our portfolio, including renovations and day-to-day maintenance. I'll likely step back into a full or part-time job within the next year if we're unable to find a deal by year's end.
Whats the asset value of the 20 doors.
Market value is ~$3M
You must be servicing some significant debt there at that cash flow amount.
Yeah, a little shy of $2.4M. The properties were originally purchased with a private lender who required virtually nothing down. We're taking a hit on cash flow for huge cash-on-cash returns. We've spent very little of our own money piecing the portfolio together over the years.
It creates the cashflow overtime as your mortgage is paid off. It takes decades unless you’re putting in actual work such as adding units or additions which can allow you to get there in just a few yrs, but for that you need huge capital. For the everyday person, you can buy a few investment properties through savings and skill, and 25-30yrs later, or earlier, when it’s all paid off, you retire! Along the way as mortgage goes down and rents go up you may also have cashflow.
You have to own it with little to no debt. If you have a mortgage, then the mortgage + taxes + repairs make it impossible to have any significant cash flow. In fact, sadly, I’ve seen extreme situations where just taxes + repairs make it impossible to make money.
Even if your cash flow and negative who cares because that person is paying off a leveraged loan If your house appreciated $0 and you're making zero net profit off the rent they are still paying off your mortgage so in the end you have a leveraged loan of $500,000 that they're paying off
Depends on when you bought and the rents. I have a duplex that is on track to cash flow about $1000/mth this year. If I had 12 duplexes, I could quit my job. lol. I don't have 12. If you've got STRs making 4x or 5x that or a MTR making 3x or 4x, you need fewer.
Some people have 1000 doors. Some people get lucky and make a bundle on fewer doors. Maintenance is expensive, so whatever you think you are making, you aren't making it because, eventually, you will be paying to fix things.
If you have 10-15 rental properties, obviously depending on rent price and type of property, you could pull $90k-$150k I’m sure
Time. Time is the piece you're missing. The first few years of owning a rental, you'll be break even on it monthly. Perhaps even in the red some months. But my experience is that 10-15 years later, you'll be swimming in money from it. AND it may have appreciated significantly in value as well.
What are you talking about? You buy a unit with a mortgage of X and you rent it for more than that dollar amount? Then after a few years the house/apartment/duplex etc is paid off and you didn’t pay any of the mortgage. If you can’t figure out how to get a mortgage that’s lower than the reasonable rent you can charge, then you can do things like live in it for 2 years first, renovate the house to increase the value then you can charge more rent as well as refinance, or just save up more to put more money down - lowering your mortgage. It’s not easy money and it’s not simply “charge rent, get rich”
I have two paid off rentals in SoCal that bring in $4k a month after bills.
Paid off rental that generate 6% return after all upkeep and taxes, and will appreciate over time.
Cash flow is king. My rentals are paid off, so they pay all my bills, leave me with me with money to spare, offset my taxes, and give me something quite valuable to leave to my son when I kick off. Flipping is good for a one-time payout. I'd rather have the long term payout.
The answer is cash flow. If it doesn't seem like there is any way to make actual money with cash flow, then the problem is whatever criteria you are using to look at properties for investment.
I'm going to generalize a good bit here, but its to keep the points I'm trying to make simple: income from a single property isn't going to sustain anyone (unless its a crazy property), but in the long run, its the appreciation on that property combined with the paying down of the presumed debt on the property. For residential properties, this is really the only way to make money, unless you have multi-family apartment buildings/duplexes, where the rental per unit can make up for the debt/expenses on the property. Owning more properties makes up the difference in the long run. Commercial property is a tad different but the premise is the same. Commercial is different in that the goal is to own a property where the tenant's rent pays enough that you have positive cash flow from the get go. a current caveat - the rates going on right now make it difficult for anyone to start real estate investing without significant cash on hand. They also make many people currently 'in the game' slow down or stop looking for transactions because rates just aren't good enough to maximize leverage vs return on investment. And most savvy real estate investors will use plenty of leverage to maximize their returns. I work on the commercial RE side of things, and all of the guys I work with got started with houses and eventually moved on to commercial. they all say that commercial is the way to go, but it takes more money to get started and continue on.
For me, it doesn't really. I have 1 rental property that I have had for 6 years. 2 years ago is when I started making a *profit* after expenses and taxes of roughly $10k a year. I don't have it to "make me money" I can feel month to month or year to year — it's when I decide to sell it or use it as leverage for something else that it will make a financial difference i can actually feel.
I made 20k a year with three rentals. You can definitely make great cash flow. FYI, these were great properties in very poor areas. I held on to them for about 10 years and the sold them for about 100k profit, total.
If you want income in real estate you have to either wholesale or be an agent, which you then need to save most of your money from and buy your own deals you come across from time to time to then start cash flowing and building equity. I’m still on step 1 but this year has been good so I’ll be buying a duplex hopefully by the end of the year. I’ll be house hacking by living in one unit and renting the other
The past 13 years I flipped about 16-18 properties for myself (and another 90 for investors for a steady income). I went from 100K NW to 2M. Sure appreciation played a lot into it and the constant full time work I put into it but 1,9M saved is not bad...or in different words, I have never ever thought it is possible for me while living a great life with lots of travel, a wife, and kids. Now, I could just rent 3 properties with zero mortgage and net a nice sum but I plan to keep going for another 5-10 more years and retire around 57. Let's hope it works out but if not, I am FI as of now.
Good margins on new build.
Those who live off the monthly costs usually get interst only mortgage which keeps repayment down to a minimum & this way, they live off the rental income... The way the pay off the mortgage debt is by selling or re-financing toward the end of the term, they keep the difference between the cost and the new value or if they're smart, they re-finance again, taking out xx amount which they don't pay tax on because its a refinance...
From my limited research, I think purchasing small multi-unit buildings is your best bet. Or, if your incredibly handy, fix and flipping a distressed property. Renting a single family home out seems very risky. I recently replaced an A/C unit on my house. Cost 12k. If I was renting it out, I would probably be in the red for the next 2 years. And I'd better hope nothing else goes wrong in the meantime.
I’ve started buying in 1998 and used cash from my savings. Bought one or two properties per year . Ended up with 38 properties. 25 years of work .
I’ve been living off my rentals for about 14 years (been investing for 20). I can say 100% it’s possible. I have 24 rentals. I know people have all these fancy charts and rules and lingo. Plain and simple know your market. My main rule for my single family properties is minimum $500/ month cash flow. Out of 24 properties 21 meet that rule. Two I’ve purchased this year only $300 each. The market is tough and $600 extra a month is better than nothing. However, I have a couple properties that cash flow $900-$1000/ month. Buy a fixer and fix it. If you use hard money that’s fine. Just refi with a “regular bank” once fixed and rented. Understand rents in your area. Understand how much renovations will cost. This will give you your “top purchase price “. If you can’t get the property for that than move to the next deal. This has worked for me. It’s not the only way. I also, flip houses and for properties that don’t meet my criteria I have assigned to other investors that are a bit more loose with their numbers. Rentals are a long game. For most it’s a retirement account. To an extent it is. I have about 5-9 years left on almost all of my mortgages. Once they are paid off my income will triple.
It’s slow at first. I use my business to fund my real estate investments. It would take a lot more cash flow to replace the income I make at my business the past couple years. But this is a down year and my rentals are making this year way less stressful. I own 3 commercial buildings that my business and now other business’s lease (50/50 with my business partner). 2 are more like houses (lease for about 6k per mnth each) and one is 22,000 sq ft (total leases are about 25k per month). Got one vrbo/Airbnb on the beach (11k) per month. 2 single family homes about 2k per month each. In the middle of rehabbing 2 more that could rent for 2k per month each. Started first one in 2012.
Buy something, renovate etc to build equity, then own 8% cap 60% LTV, borrowing @ 4%. Manage it yourself, get rental appreciation at above inflation rate, worked pretty good until rates were jacked up.
It helps me get my income back the government takes from W-2 income. When you realize why wealthy people own real estate, a light bulb goes on.
The biggest thing you're missing is the money made is in the purchase, not the sale. Many investors spend countless hours sourcing and finding deals. Typically, those "deals" are not on the MLS. When you hone your skills to purchase a property at a discount, the cash flow comes with it.
Real estate offers several avenues to make money, and understanding these can help you determine the best strategy for your investment goals. Here are some key ways investors find profitability in real estate: * Rental Income: This is like the bread and butter of real estate investing. You buy a property, rent it out to tenants, and collect monthly rent checks. The key here is to ensure your rental income covers your expenses and leaves you with a positive cash flow. * Appreciation: Over time, real estate properties tend to increase in value due to various factors like market demand, development in the area, or inflation. You can profit from this appreciation by selling the property at a higher price than what you paid for it. * Flipping Properties: Flipping houses involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This can be a lucrative strategy if you have a good eye for properties with potential and can manage renovations efficiently. * Real Estate Investment Trusts (REITs): If you're looking for a more hands-off approach to real estate investing, REITs can be a great option. REITs are companies that own and manage income-producing real estate. By investing in REITs, you can earn a share of the income produced by the properties in the REIT's portfolio. * Short-Term Rentals: With the rise of platforms like Airbnb and VRBO, short-term rentals have become increasingly popular. Renting out a property on a short-term basis can often generate higher rental income than a traditional long-term lease, especially in tourist-heavy areas. * Commercial Real Estate: Investing in commercial properties like office buildings, retail spaces, or industrial complexes can be lucrative due to higher rental yields and longer lease terms compared to residential properties. * Real Estate Development: Developing properties, such as building new homes or commercial buildings, can be highly profitable but also carries higher risks and requires significant capital and expertise. * Tax Benefits: Real estate investing comes with several tax advantages, such as depreciation deductions, mortgage interest deductions, and the ability to defer taxes through 1031 exchanges. These tax benefits can help increase your overall profitability. Each of these strategies has its own set of considerations and risks, so it's essential to do your research and understand the market before diving in. By carefully evaluating your options and understanding your goals, you can choose the right real estate investment strategy to help you achieve financial success.
Property Development is the best way or else renovating and reselling properties. But you need a cash flow business to get into this game, a small capital is not enough