Strategy Advice: How to get to $50k/Month In Cashflow

[Aaron Kaminer]

Hello all, 

I am a partner of a real estate investor group working out of Oklahoma City. We have a 5 (or less) year goal of hitting $50k/Month in passive income, via property cash flow. I am trying to map out a reasonable/practical strategy for achieving this goal. Here are my thoughts. 

1) In order to scale quickly in the beginning, without leaving a bunch of money in our properties, we are using the BRRRR method. We have been purchasing homes at the $50k mark, investing around $40k in rehab, and cash-out-refinancing at an ARV of roughly $145k, taking out 75% to pay off debts. With this, we break even on the refinance and end up with no money left in the property. In these scenarios, we still have 25% equity in the property and it cashflows. This is great, however, cash flow is roughly $200 for these properties (when we calculate actual cashflow, including cap-ex, vacancy, repairs, etc.) Considering our goal, we would need to do this 250 times. This vehicle/style of aquisition is working nicely for our short term goal but its fails to deliver on our long term goal, most likely due to the 5 year (self imposed) time constraint. That would be a lot of properties to process in that relatively short amount of time. Doing so would require more infrastructure and thus, more expenses, etc.

2) In light of this, it seems obvious to me that commercial properties are the most practical way to hit such a high level of monthly cashflow. Not that you couldn't simply BRRRR/purchase 250 SFH.. but that is a lot of property and comes with its own risks and difficulties. So, the long term goal must be apartments (assuming we want to stay in the residential/rental lane.) I can imagine owning 5 50 unit properties.. or something like that. Assuming these properties also cashflow at a rate of $200/door/month we would hit out goal. But, how would we purchase these expensive properties?

3) I am thinking the best way to purchase those may be by leveraging the equity in our BRRRR SFHs. Example: We continue to BRRRR properties for a year or 2. Perhaps we accumulate around 25-30 of these (at our current pace, this is very reasonable.) We save all of the cashflow along the way. We pair that cashflow with a bunch of refinancing OR dispositions in order to pull the equity out of our SFHs and move it over to a down payment on an apartment. Basically, we leverage the equity in our SFHs to invest in commercial properties - making our BRRRR strategy on SFHs an equity game.. and our commercial apartment strategy the actual cashflow mechanism.

Of course, we could just skip #1 (the SFHs) and start with purchasing apartments in the first place. Maybe even a BRRRR apartment.. and this is not off the table. But those deals are much more rare and financing is more difficult for us. So, I do not want to bank on that. We will take it if we find it (and can manage to pull the deal together) but I dont want to rely/hope that we will find such a deal.

These are all just thoughts on how to get to $50k/month in cashflow, for a group of particularly determined individuals, in 3-5 years time. I am posting here for feedback. Tell me what you think. Do you see another path? Has anyone here achieved such results? I am looking forward to picking this apart. 

[Nathan Gesner]

Quote from @Aaron Kaminer:

You want to drive 120 mph in a VW Golf. What if you were to purchase a Ford Mustang instead? Or a Tesla 3?

The SFH home is a bad vehicle for you. 250 homes would take a while to purchase and it's a lot of manage day-to-day. I think you should consider switching to a vehicle that has the horsepower needed to get you where you want to go much faster. Mobile home parks or self storage would be the two options I recommend.

I bought a self-storage facility in 2021. It cost me less than I would pay for two SFH but it brings in more cashflow than 30 SFH.