Why shouldn't I buy a hundred cheap SFH in a cashflow market?

[Chris Parker]

I live in SF Bay Area, CA, and have a fancy tech job that I enjoy (at least I did before COVID). Have about $8k a month to invest in real estate after maxing retirement accounts thanks to high income and modest lifestyle as a single guy. 

Started in real estate by buying a newish construction SFH in Bay Area last year for ~$625k at 5% down. Now have an amazing tenant in place (section 8) at $3,300/mo. About $50k of appreciation in 18 months, but rent only covers HOA, PMI, interest, taxes, and insurance - principal I pay out of pocket, and self manage. I bought this property as a hedge against the local market because I intend to stay in the Bay Area long term. Bought a duplex out of state for my mother - she covers the mortgage and all expenses while AirBnBing out the other side - I only bought it to subsidize her; pretend it doesn't exist. Have a bit over $100k in cash/index funds, and want to keep about that much as reserves since I'm prone to long hospitalizations due to chronic illness.

Over the least year I have 4 other out of state single family homes, in a small (but not tiny) midwest city which I deem to have a long term stable market (national average population growth, diverse stable economy, largest city for some distance, has both hospital and university, low crime). Total combined purchase price is $120k with $25k rehab resulting in about $80k of forced appreciation. Gross rent is $3,150/mo (average: $30k purchase, $6k rehab, $50k ARV, $785 rent). I own them all free and clear. (Double checked title and with tax assessor.) That's a 2.25% average gross monthly rental yield. If I scaled up my acquisitions to a bit over 1/month I would expect that ratio to drop closer to 1.8% (guesstimating), but I've also broken 3%. Everyone has paid on time in full this year so far. 

I found a mentor in the market who is done scaling his own portfolio (he refuses to take on debt, just rode the 2011+ wave, and his cashflow pays for his crazy frugal lifestyle more than 10 times over). He opened his team to me. So, I have an investor friendly real estate agent. And I have a property manager / rehabber who leads a crew that works for (what I consider to be) peanuts. They appear to do good work (and are itching for more work this year). I've met those 3 core players all in person and they all seem like genuine people I can trust who know what they're doing. I'm perceptive enough to be sure of my assessment of them.

By my nature I'm (reasonably?) cautious, but ambitious and extremely-numbers-oriented. (I could have been a quant.) Every signal I'm getting is telling me to go to a portfolio lender and scale in this market until I can't anymore. I've been avoiding further debt so far because of how highly leveraged I am on the Bay Area property. I also didn't want to give up the superior financing rate/terms with conforming loans, but I now realize that missing out on even one deal over their restrictions cancels out the benefits they offer. (Talk about shifting to an "abundance mindset"!!) 

Why should I not just go full tilt and double and triple down on this market? I watched a BP podcast of a guy who scaled to 100 properties in 2 years, and I think I could do that in 2-4 years, so 100 single family homes has become my next goal. I understand that there is significant logistical and maintenance overhead with 100 SFH, but I also don't hear about people acquiring multifamily at >2% monthly rental yields. How bad would the problems with 100 single family homes really be? I feel like those problems are firmly "good problems to have". Should I be balancing learning how to do something else while exploiting this opportunity? My disposition is agreeable enough, but I am not a marketing or sales guy.

My goals are to reach $5k+/mo passive income ASAP, then safely maximize IRR until I decide to quit my day job, which will realistically be several years (or tomorrow if I win the lottery). I've identified a couple other markets that look similar to the one I'm active in, and could expand into if I built a team there. This makes me nervous, since I'm not sure I could actually replicate the shockingly-easy success I've had in this market. I feel like there are big parts of the learning process I've just lucked into skipping. Am I just suffering from imposter syndrome?

[Lee Ripma]

@Chris Parker

There is a lot here. I don't know, buy 5 more SFH in the market and see what happens? If you have good PM and have accounted for coming capex there is no reason you can't have 100 SFH. However, start with 5, then 10, etc. Maybe at 10 you'll have a reason you don't want more or you want to diversify out of this town, or whatever. Don't worry about the 100 houses worry about what to do to move your goals forward. If that's buying 5 more houses, great. Just be careful getting over-leveraged with a bunch of rehabs going on. If that's not issue, awesome, go for it. Seems like you've given it some thought!