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Updated over 4 years ago on . Most recent reply
How would you generate $50K per month with $1M?
Hey BP,
Let me just start out by stating that I DO NOT have $1M, nor would I disclose my net worth /cash on hand for a general post. Hopefully that eliminates the “really bright for you to post you have $1M in the bank to invest crowd (said jokingly, but I see it happen quite often lol).
That said, I was scrolling Instagram last night, and a “influencer” I follow was asked the following:
“How would you invest $1M at age 25?”
His response (not verbatim, but more or less):
“I’d buy rental properties. I’d be generating $50K/month and have the real estate worth $1.3-1.4 M in a year.”
My first thought is, smart guy. However, my instant reaction is to run the numbers in my head. $50k/ month revenue off only $1 M?....
Maybe it’s because I’m predispositinsed to California RE prices, but I don’t know if that’s possible anywhere in the U.S.
That’s:
25 units @ $2000/month ea.
50 Units @ $1000/month ea.
100 Units @ $500/mont ea.
And the single family numbers certainly do not add up....
So, my questions to BP are:
How much revenue could you generate per month with $1M?
What city/cities would you do it in?
Does anyone know a city where
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Most Popular Reply
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@Account Closed, with $1MM cash you could reasonably buy a $4-5MM property. A property worth $5MM may very well generate $50k of revenue a month, that's the 1% rule. It may even generate a fair bit more. Of course, that means using leverage.
That, of course, is not what this "influencer" is describing. Since they will "have the RE worth $1.3-1.4MM in a year," they are talking about buying cash. Here's where it falls apart:
- A $1MM property that generates $50k/month in revenue is a 5% property. That would probably be something like a 30% Cap Rate. Those simply don't exist.
- Sure, you can invest $1MM and significantly increase the value of a property. Buy for $750k, put in $250k, and reposition the property. Not impossible to image you could do that if you're able to increase rents, decrease expenses, and compress your cap rate through the reposition. Not easy to find a property like that or pull off the reposition, but possible.
Bottom line: This person is a dope who does not understand how REI actually works.