beginner Cash flow strategies

[Dustin Murphy]

Hello all, very interested beginner here. I’ve started self educating on real estate investing with the goal to take action later this year or beginning of 2024. Specifically looking in the state of Wisconsin (Madison and/or Green Bay markets). However my questions apply to a more over arching strategy in addition to regional nuance. 

Q. If your ultimate goal in REI is a specific cash flow per month (example $5,000, $10,000, or $20,000), then what are your thoughts on ways to get there in the shortest amount of time if you were to reverse engineer the units/rentals needed to generate that cash flow per month? (example: should you strategize acquiring 50 single family rentals at cash flow of $200 vs multi family homes vs apartment complex etc, where you could theoretically jump right into multiples higher cash flow) Are there other factors besides the relationship to size/number of units, up front cost of acquisition, and cash flow that would be a necessary factor in acquisition of any of these solutions if they "theoretically" presented the shortest path to the desired amount of cash flow per month?

(Also understanding property management either self or outsourced would need to be accounted for in addition to many other expenses)

Lastly, is there a known “generally universal” pattern to the difficulty of acquisition of any of those types of investments vs the other (other than amount of money). Example, 50 unit apartment complex might be fastest solution, but in your area there are tons of legal road blocks or competition, so for “fill in the blank reason”, it would actually be quicker to acquire 50 individual rental homes despite the slower potential total cash flow acquisition.

Hopefully that all makes sense or at least paints a relatable picture as to insight I am hoping to gain that others may be curious about as well just starting out!

-Dustin 

[Fran Bourassa]

For context, I'm an active investor and own a property management company headquartered in Green Bay.  

I imagine there is a huge degree of difference depending on the specific market, but if you're looking at cash flow per door in the Green Bay and/or surrounding areas, specifically upper/lower duplexes will come out on top with rare exception.  

Certainly, they don't appreciate anywhere near as quickly as single family homes or side by side duplexes, but that's the tradeoff.  When I first started investing I purchased almost exclusively single family homes and side by sides, but when cash flow became a much more important metric for me I leaned heavily into upper/lower duplexes.  As far as an overall strategy, especially when first starting out, having strong cashflow is extremely important - it will help you weather those inevitable bumps that you'll come across throughout your investing career, but if they occur in the beginning before strong cashflow is established they can be catastrophic.  

I'd agree with Ben's comments above, it can be very difficult for an inexperienced investor to take down a bigger building and/or complex.  Not impossible, but the odds are stacked against you and often you are competing with extremely well qualified and experienced investors.

I've been hearing for years that people have been just killing it in the short term rental space, but I'm a conservative investor at heart and while revenue is frequently higher, there are many additional expenses and often an exceptional amount of volatility just inherent with short duration stays.  We've had a number of clients convert their short term rentals into long term rentals or sell them off because they were not performing as anticipated.  That said, obviously there are many others out there that have found success.

At any rate, best of luck to you!  If I can be of any further assistance, please let me know.