Goal setting: 10k$ per month in cash flow in 10 years

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

3y

The list of what you are missing:

1 - Reality. Not that what you want to do can/can't be done, but the reality of how to do it.
2 - The difference between the process and a goal. What you stated isn't a goal.
3 - An understanding of Market Analysis so you can find the Markets where the properties are to deliver the $10k/month...eventually. Learning that you don't buy properties, you buy pieces of markets.
4 - An understanding of How Money Works, so you can turn deals properties into deals in these markets by way of different strategies you need to learn.
5 - How to design a Plan with a set Financial Goal where each step leads to the next step, and so on, and so on, until your goal is reached.
6 - Understanding that the value of your equity is maxed out when it moves and not when it stands still. Your equity is what you are paying for a property. As your equity increases in a property, so does the cost (to you) of that property.

7 - There's more, but...

5 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

3y

where I personally have seen people be able to do this is by appreciation Not cash flow.. Cash flow is a holder why your asset appreciates.

then you 1031 into a bigger property and keep rolling up that way.. without any or meaningful appreciation and capturing that appreciation to move to bigger and better .. your numbers are correct.

Other way i have seen folks do this is pay cash and have a 20 year to 30 year plan.. end up with 10 to 20 Nice quality paid for assets that will give your 10k a month goal.

Although I have to say 10k a month does not go very far unless you basically have very little to no debt as you age out and your now self employeed health insurance etc will take a big wack out of that 10k. 10 years from now 10k a month will be worth 7 to 8k maybe in todays dollars.

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11 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Anirudh Reddy:

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

What I think I would be able to achieve with the cash I have: I can buy a 120k$ SFH in Memphis with 220$ in cash flow per month. I would have to do 25% downpayment for every SFH purchase of that value = 30,000$. For the sake of analysis, I assumed I would buy the property of this value over and over 1 for every year with 30,000$ in downpayment every single time. That would give me below cash flow through my first 10 years.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

Question to the experienced folks! – What am I missing? With 30k$ in cash every year to invest, am I constrained to just 3400$ in cash flow after 10 years if I go ahead with long term rental and buying traditional SFH's without any other creative investing method involved? How can i tweak my math/investing approach to get to my goal of 10k$ per month cash flow?

in reality it never work like this.
Told to be truth after learning so many track record of any direct investment and syndication, most of the return is coming from appreciation.

just buy one house in east palo alto for 25k in 1982 and sell it 30 years later for one million buck LOL. The key is identifying future appreciation not the cash flow.

if you wanna cash flow, invest in debt funds that give conservative underwriting return between 8 to 10%, for 10k per year you need 100k investment

0 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

3y

Yep, need a larger portfolio (and to add value and/or purchase properties that will have organic appreciation).

Making $120k annual household income would put you in the top 13% of households in the country. It's very achievable...1 out of 8 households do it...just takes a lot of work!

4 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

3y

Quote from @Mike Dymski:

Yep, need a larger portfolio (and to add value and/or purchase properties that will have organic appreciation).

Making $120k annual household income would put you in the top 13% of households in the country. It's very achievable...1 out of 8 households do it...just takes a lot of work!

Mike would be interesting to know how many of those households also receive bene's from their employer's. Truly self employed when you have to pay for the things employers pay for cuts down your 10k and when you get older cuts it down quite a bit I found out :)

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5 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

3y

@Anirudh Reddy

Conservatively you need 10x your goal in cash, so if you want $100k a year you should have $1M (this is actually aggressive) - buying rentals in Memphis will not get you there as you have zero appreciation and one time a tenant destroys a place and $15k of damage there goes 5 years of cash flow

Realistically 10 years with $30k year you won’t get there unless you were a lot more active in the space such as flipping or renovating properties yourself or raising funds from others but that typically means leaving your w2

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2 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

3y

Quote from @Jay Hinrichs:

Quote from @Mike Dymski:

Yep, need a larger portfolio (and to add value and/or purchase properties that will have organic appreciation).

Making $120k annual household income would put you in the top 13% of households in the country. It's very achievable...1 out of 8 households do it...just takes a lot of work!

Mike would be interesting to know how many of those households also receive bene's from their employer's. Truly self employed when you have to pay for the things employers pay for cuts down your 10k and when you get older cuts it down quite a bit I found out :)

I would venture to guess that it's almost all of them. And the ones getting there through real estate are running companies (i.e. it's full time).

1 Reply

Eric James

Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes

3y

If you don't have a large amount of cash there's only one way I know of to scale somewhat quickly: BRRR or other value add strategy. You won't do it buying one rental a year, as you have realized.

0 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

3y

You don’t say why you aren’t adding $2748 per house you add each year.

If you’re adding for rent increases, what percent did you add? It looks low. Try 5% per year.

After 5 years, the first house you bought should have appreciated at least 20% (less than 4% per year) that means you can take that $30k out and buy a 2nd one per year. So years 6-10 you’re buying 2 per year and you have 15 houses. After 10 years you’re buying 3 per year…

But…all these numbers are just guessing, because obviously you can’t buy a house in 5 or 10 years for $130k that you buy today for $130k, in fact the appreciation I just talked about it counting on it.

Do the math on this. In 5 years with rent increases, what would the cashflow be on 5 paid off houses at that rent? Eventually you’ll find a number.

From 2010-2015 I bought 12 houses with an average price of $150k with $305k. When I was buying them they brought in about $144k in rent and maybe $40k in cashflow. Today, their total rent is $275k bringing $212k/yr in to my pocket. Because I spent all the cashflow on paying them off.

I guess that brings up another factor. You talk about all that cashflow coming in during years 5-10, and yet you still only invest $30k/yr buying more houses? The cash flow alone starts buying more houses, or you use that money to pay them off.

But…you got another problem. In 10 years $100k/yr is more like $70k.I don’t know if you can do more than wild *** guessing. What are house prices going to be over the next 10 years? How much rent inflation? What are interest rates? Etc etc…

Ps. You want a trick I used? Buy 2 per year, one as an investment and one as a new primary. Every year you move out and make it a rental. That way you buy years 6-10 5 years earlier. They cost you less and rent increase more.

What’s your alternative? $1million in the bank at 4% is only $40k/yr. And you’re only talking about $300k. That’s $12k/year? You might do better you might do worse, but that’s all taxed, you don’t get depreciation, you don’t get to expense everything you use in your rental business like your cellphone, iPad, internet, etc etc.

Pps. In regards to appreciation as others noted. I paid about $1.8 million but 10 years later I wouldn’t take $4million for them. That’s an additional $220k/yr. Plus I could borrow about $3million tax free to buy something else. Not bad for a $305k investment. Time is like magic in real estate investing.

7 Reply

Anirudh Reddy

OP

Member since 2020 · 13 posts · 16 votes

3y

Quote from @Chris Seveney:

@Anirudh Reddy

Conservatively you need 10x your goal in cash, so if you want $100k a year you should have $1M (this is actually aggressive) - buying rentals in Memphis will not get you there as you have zero appreciation and one time a tenant destroys a place and $15k of damage there goes 5 years of cash flow

Realistically 10 years with $30k year you won’t get there unless you were a lot more active in the space such as flipping or renovating properties yourself or raising funds from others but that typically means leaving your w2

Thank you Chris. Your note about effect of damage by tenant in a particular case on cash flow is interesting. Thanks for sharing your insight!

0 Reply

Anirudh Reddy

OP

Member since 2020 · 13 posts · 16 votes

3y

Quote from @Eric James:

If you don't have a large amount of cash there's only one way I know of to scale somewhat quickly: BRRR or other value add strategy. You won't do it buying one rental a year, as you have realized.

Thanks for sharing your insight eric!

1 Reply

Ryan ShortPro Member

Investor · Boston, MA · Member since 2016 · 77 posts · 55 votes

3y

@Anirudh Reddy you can definitely do it with the BRRRR method. I was able to do it by starting off with $20k and a FHA loan on a 4 unit. You have to be willing to find value add properties tho. There is a lot more value and cash flow with 4 plus unit properties but you can def do it with the smaller ones as well. I'm Not sure about your area but I know it can be done in alot of areas. I would start off by reading Brandon turners book about rental property investing or David Greens BRRRR book. Both will give you a great start on getting to $10k a month in cash flow in 10 years. 100% doable no matter what anyone says. Good luck and I wish you the best in your goals.

1 Reply

Josh YoungPro Member

Rental Property Investor / REALTOR® / Property Manager · Gilbert, AZ · Member since 2023 · 384 posts · 421 votes

3y

@Anirudh Reddy

Build equity and then turn it into cash flow later, start here: https://www.biggerpockets.com/...

[email protected]802-274-8121

0 Reply

Martin Taylor

Rental Property Investor · Dubai, UAE · Member since 2019 · 19 posts · 8 votes

3y

Quote from @Anirudh Reddy:

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

What I think I would be able to achieve with the cash I have: I can buy a 120k$ SFH in Memphis with 220$ in cash flow per month. I would have to do 25% downpayment for every SFH purchase of that value = 30,000$. For the sake of analysis, I assumed I would buy the property of this value over and over 1 for every year with 30,000$ in downpayment every single time. That would give me below cash flow through my first 10 years.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

Question to the experienced folks! – What am I missing? With 30k$ in cash every year to invest, am I constrained to just 3400$ in cash flow after 10 years if I go ahead with long term rental and buying traditional SFH's without any other creative investing method involved? How can i tweak my math/investing approach to get to my goal of 10k$ per month cash flow?

Maybe switch your strategy from SF to MF and see how that improves your timeline for reaching your cash flow goal. When we started it was with one SF home but we quickly transitioned into MF and bought a triplex a short time later. We're at 4 properties but 11 doors. Our monthly cashflow far exceeds what we would see with 4 SF properties. Starting with your goal and working backwards may also help in finding the best mix of property types going forward as well. Good luck!

1 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

3y

This is not reality, you are not going to get 10k a month in cash flow with only 40k,

1 Reply

Costin I.

Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes

3y

@Anirudh Reddy Just get started, you'll get there. Best plans don't survive field action reality. You got the idea right, execution will change, accelerate at times, slow down other times, you'll have to adapt as you learn and do and experience stuff. This is the RE way.

1 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

3y

We bought multis for cf, singles for equity capture.

$220/mo 'cf' is just lunch money until a bad tenant claws back 2 or 3 years worth in lost rent and repairs/ clean-up.

Gotta buy houses below market value and self-manage to move the needle @Anirudh Reddy

1 Reply

Patty C.

Homeowner · CA · Member since 2014 · 125 posts · 33 votes

3y

@Anirudh Reddy

The amount needed in retirement depends on where you will be living and the lifestyle you want to have in retirement, and how long you live after you retire. Medical insurance (and Medicare part B when you turn 65 also needs to be factored) in. And remember to factor in for inflation and taxes.

Maybe buy where you want to retire now and rent it out and move into it when you retire. :-).

Do the numbers and the numbers will give a better idea of what your amount needed looks like so you can do more targeted planning.

Have fun!

0 Reply

Jay ThomasPro Member

Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes

3y

One way to reach your cash flow goal faster is to explore buying multiple properties each year. You could also consider diversifying your portfolio by investing in multi-family homes or commercial properties, which may generate more income than single-family homes. Good Luck!

[email protected]832-889-5607

0 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

3y

Looking at it from a simple cash invested x cash on cash return makes it easier for me to understand. If you want 120k/year in cash flow, you need 1.2M in cash invested at a 10% cash on cash return. That's a solid return on a bunch of money...I just used that bc the math is easy - don't kill me on assumptions or expected ROI.

That's why appreciation matters so much. The ability to pull equity out of your properties over the course of 10 years is going to close the gap to get you to a higher $ figure of cash invested. If you're investing 30k per year at a total of 300k, you're going to need a 40% cash on cash return to get to 10k per month. That math doesn't math, which you've obviously figured out. The fast forward button on this is to get properties that go up in value - either by market forces or by you fixing a place up and forcing appreciation. The cash flow just pays the bills and gives you some walking around money in the meantime.

1 Reply

Anirudh Reddy

OP

Member since 2020 · 13 posts · 16 votes

3y

Quote from @Martin Taylor:

Quote from @Anirudh Reddy:

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

What I think I would be able to achieve with the cash I have: I can buy a 120k$ SFH in Memphis with 220$ in cash flow per month. I would have to do 25% downpayment for every SFH purchase of that value = 30,000$. For the sake of analysis, I assumed I would buy the property of this value over and over 1 for every year with 30,000$ in downpayment every single time. That would give me below cash flow through my first 10 years.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

Question to the experienced folks! – What am I missing? With 30k$ in cash every year to invest, am I constrained to just 3400$ in cash flow after 10 years if I go ahead with long term rental and buying traditional SFH's without any other creative investing method involved? How can i tweak my math/investing approach to get to my goal of 10k$ per month cash flow?

Maybe switch your strategy from SF to MF and see how that improves your timeline for reaching your cash flow goal. When we started it was with one SF home but we quickly transitioned into MF and bought a triplex a short time later. We're at 4 properties but 11 doors. Our monthly cashflow far exceeds what we would see with 4 SF properties. Starting with your goal and working backwards may also help in finding the best mix of property types going forward as well. Good luck!

Thank you Martin! I will definitely consider this strategy.

0 Reply

James Hamling

Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes

3y

Quote from @Anirudh Reddy:

My scenario: I have 40k$ in cash right now. 10K$ in stocks. Me and wife both have W2 jobs. We both want to retire in 10 years from now with 10k$ in cash flow per month.

Goal: Buy SFH rental property and rent them out.

What I think I would be able to achieve with the cash I have: I can buy a 120k$ SFH in Memphis with 220$ in cash flow per month. I would have to do 25% downpayment for every SFH purchase of that value = 30,000$. For the sake of analysis, I assumed I would buy the property of this value over and over 1 for every year with 30,000$ in downpayment every single time. That would give me below cash flow through my first 10 years.

Year 1 – 2748$ (1 SFH)

Year 2 – 5580$ (2 SFH's)

Year 3 – 8907$ (3 SFH's)

Year 4 – 12537$ (4 SFH's)

Year 5 – 16478$ (5 SFH's)

Year 6 – 20742$ (6 SFH's)

Year 7 – 25337$ (7 SFH's)

Year 8 – 30275$ (8 SFH's)

Year 9 – 35565$ (9 SFH's)

Year 10 – 41219$ (10 SFH's)

41k$ per year would give me 3400$ per month which is nowhere close to my goal of 10k$ per month.

Question to the experienced folks! – What am I missing? With 30k$ in cash every year to invest, am I constrained to just 3400$ in cash flow after 10 years if I go ahead with long term rental and buying traditional SFH's without any other creative investing method involved? How can i tweak my math/investing approach to get to my goal of 10k$ per month cash flow?

Holly-cow are you missing stuff!

Ok, let's run down this rabbit hole of obnoxious-analysis-mania-to-N'th-degree.

You've got #'s running as if your buying a bond with a set distribution, this is real estate NOT a bond. What are you factoring for vacancy? Yeah, via tenant turn-over it's not realistic to say your going to have revenue flow uninterrupted for eternity. So, what's the market average length of tenancy in that specific asset class? What's average vacancy duration? What cost's are associated with getting new tenant?

Next, what's your cap-x consideration? 10 years, you WILL be doing some sizable reinvesting, I don't see that calculated in. Do water heaters not wear out? Flooring not require replacement? 7 years is the average for some sizable cap-x action, even if just updating via flooring and paint, that takes time and has a fair price impact.

Next, the BONKERS assumption that over next 10 years you'll be able to buy a home for the same price/down, that's just way beyond not realistic.

Look, here is the REAL #'s, as dictated by REALITY.

The vast majority of persons who start in REI, to do standard rentals, who operate solo, using their own $ to "grow" portfolio and NOT using OPM or Pyramiding, most often after ~20 years have "as many as" 4-7 properties. THAT is the reality.

Because what these people find is after PM assorted costs, they have on average 10, not 12, months revenue. And on average have some reinvestment from maintenance and cap-x. They find their actions to stack up down-payment is 2 steps forward 1 step back. And that entire time saving up $, market price keeps moving up, requiring more savings as time ticks. So each successive property takes longer and longer to acquire.

Those who have rapidly grown a sizable portfolio almost universally have a story of some "hack", be it the GC who bought horrible condition properties and renovated them to gem's, the person who "knows people" and used OPM, or the "grinder" who got out there and farmed leads to negotiate seller financing repeatedly to maximize $ leverage.

You do NOT hear stories of a person who just worked a W2, saved $ for down, bought from MLS, rented, repeated and "POOF" has 100+ properties. Nope, won't find that story because it's all but mathematically impossible.

You want to go from 0 too retired in 10 years, yup, can be done, get ready to do 30yrs worth of working in 10!

The "secret formula" is that there is no secret formula! It's about working one's azz-off, that's it. You get what you give. Doing what everyone else does get's what everyone else get's.

So if your serious on it, your gonna have to get serious and stop chasing rainbows. Writing out perfect scenarios are just a waste of time. The ONLY thing that matters now is 1. 100% of your focus and energy should be on getting 1 performing property. And then, once done, 100% of focus and energy on next step.

What's next is all that matters, not 9 years away. Look back at the insanity of 3 years, how in the heck can anyone project 10 with any accuracy at all. The ONLY known is whatever you plan 7/10 years out, WILL change, zero doubt.

Just START, that's it just START. You got a goal, great, $10k net per month, done, that's the target, now focus on what your NEXT step is and that step ALONE. Once you get on it, then the next, and so on and so fourth.

3 Reply

Bud Gaffney

Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes

3y

Joe LOL

0 Reply

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

3y

Wow, some great responses on this thread.

@Anirudh Reddy

going to be a huge grind trying to cash flow off properties in that price range as others have said.

if you're part of a couple you will have more flexibility in terms of sources of income. i'd work on a portfolio that includes real estate and might (gasp!) include one of you working, or both of you working part-time, or one of you working 3/4 time, etc.

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Goal setting: 10k$ per month in cash flow in 10 years

Goal setting: 10k$ per month in cash flow in 10 years

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