If you wanted to achieve $2,000 a month in passive in 7 years, how would you go about it?

Question

Account Closed · Answer

7 years is a long time.

Luck is when preparation meets opportunity.

So yes, your goals are possible. If you don't have money or credit, I would suggest becoming an ally with someone who does.

Overcome resistance with persistance.

Account Closed · Answer

Capital is capital.

You can use your own money (which takes longer) or leverage (I suggest educating yourself and being sharp) or a combination of the two.

Account Closed · Answer

Rough estimate:

1 door = $100 per month

Sounds like you need 20 doors.

Increase your skillset so that you can acquire, buy, hold, and manage.

Best regards

Chukwudi Motanya · Answer

Thanks for the reply everyone! My goal is to close my 1st house by Novemeber so its just starting to hit me what I would need to keep doing to reach my goal. If I can get to $2000 a month ( with @aaron junck I could see $4,000 being a more realistic goal) then I can cover my expenses.

No consumer debt on me, student loans but I'm a young banker and I'm really into numbers and makes more sense to get passive income CoC returns in the double digits rather than aggressively pay of single digit debt.

Jeff S. · Answer

@Chukwudi Motanya the idea is to buy a property and improve it and pull the equity out so you are in the house for little or nothing and do it again. Some areas will allow this quickly while others may not. Over time you should be able to get your investment out (and some) so you are operating entirely on the banks money. The return on cash is infinite.

Lynn Dee Murrow · Answer

my advice is to start with your current living standard. Have a plan to pay off consumer debt. Once consumer debt is paid off ( use a process like Dave Ramsey's debt snowball) use the same approach to invest. Protect you credit score it will make you money if you keep it high.

All the money that previously went to pay off debt each month now goes into the investment account. You are always looking for property and you learn to evaluate deals quickly and accurately. When you find a distressed seller or property you can afford using a hard money to conventional refinance strategy (reduces cash out of pocket and increases cash on cash return) buy it. Have your team together and plan out the entire project before close. Stay on a tight timeline to get the rehab done and the property rented within 30 days then begin refinance. All income from each property goes into your investment account until you can buy #2. Keep doing this until you have the $2k you need to live on plus reserves for repairs and maintenance (about 10%).

I created $2,000 in cash flow with 4 houses but depending on where you are investing you can realistically expect to clear between $250-400/ house right now. My cash out of pocket was very low because my all in was less then 70%of ARV. In some markets your cash out of pocket will be higher now, but hold out for the right deals and you will be successful. Be sure to be looking between Halloween and New Years. Less competition, sellers more flexible because they want to close by year end and January is a good rental month.

Learn the business, don't look for short cuts, be a good landlord and rehab your properties well so maintenance does not eat up your cash flow, screen tenants well, enforce your lease and personal boundaries with your tenants.

Aaron Junck · Answer

@Chukwudi Motanya your lucky to be starting so young. IMO if you need $2000 a month to live on at the young age of 23 I would recommend building enough passive income of twice what you need in todays value. So in 7 years, I personally would feel more comfortable with $4000 a month in todays money(not adjusted for inflation). The reason for this is you will need to account for expenses that you currently dont have... ie any benefits your employer contributes (health insurance). Also life happens.. you may get married and have kids and the whole 9 yards and if you live below your means your good to go but its always nice to have that cushion. Just my 2 cents.

Keep rolling over your profits from each property if your going to do flips and that will help you build up wealth and try to buy under retail is a huge wealth builder.

I have always liked to write down your end goal and then work backwards.

As far as having 20 properties keep in mind your going to have to get creative with financing as banks are harder to deal with the more properties have.

Educate your self on here as much as you can so you have many tools in your toolbox and can do as many profitable deals as you can. I think your plan in 7 years is very possible . Go get em!

Matthew Paul · Answer

Buy a house for yourself , get some roommates , after you get settled , start looking for a second house , rent the first , live in the second , get roommates  bank money , drive used cars , bank money .And so on . I started like that at 23 , by 33 I had  3 houses in good neighborhoods. by 43 I  was married with kids , bought another house that makes 4 , Basically a house every 10 years , just bought 2 this year , both in great neighborhoods , both total rehabs , both are subdividable , both are 2 unit properties .   All but 1 were found word of mouth .

Clay Manship · Answer

Hey Chudi-

I'm 23 too. I am about to close on my first deal this month, and plan on having 20 properties cash flowing within two years. Won't be easy, but with the education provided here and a good mentor/support community, it is more than entirely possible.

Get educated. I spent my entire collegiate career working internships and aligning myself with mentors to prepare my. I have spent 6 weeks at my "first job" and am just now taking the leap. Excited to learn about your progress throughout the journey. Best of luck!

C

J Scott · Answer

Actually, no...this isn't $160K worth of raised capital.  This would be $160K worth of your own capital.  Cash-on-cash return measures the return on your personal cash contribution, not the total amount invested (as you'll have debt service costs).

For example, iuf you put in $10K of your own capital and raised $150K worth of other capital, and wanted to generate $2000/month, you'd need a cash-on-cash return of 240%, which is practically impossible.

So, you're going to actually need $160K of your own capital if you want to generate $2000/month at 15% cash-on-cash.

There are lots of different ways you can grow to $160K in 7 years.  For example, if you start with $10K right now and can add $10K each year, and are able to generate a compounded 15% annual return on everything invested, you should be right around $160K in 7 seven years.