Which real estate strategy works best to escape the 9-5 rat race?

[Rodney Love]

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

[Peter W.]

We can rephrase this question: How do I turn my 70000 into approximately 2 million so I can retire.

The answer is leverage, forced appreciation (value add work), time, operational excellence and risk management.

There are several strategies, but the two most recommended are BRRR and househacking.

Househacking is nice because you get favorable loan terms and higher leverage than investment loans. You also lower your own cost of living so you can invest more.

Rehabs are nice as well because you have a lot of value add work at the beginning which allows you to develop equity more quickly.

Strategies like rent by the room, and short and medium term rentals can generate higher returns.

Ultimate you probably want to combine all these strategies, at least in the beginning, to supercharge your initial returns before moving to a more sustainable model. This might look like buying a duplex, rehabbing it while living in it and renting it out by the room as able and then repeating the next year.

[Carlos Ptriawan]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

 househacking is equivalent to reducing substantial expense, and it's also the easiest.

Flip would be heavy money maker if done correctly.

The other one are just typical double CD rate investment LOL, 70k brings you nothing lol

[Linda Labbe]

HI Rodney the answer is all of the above. You develop a solid business plan that outlines the order to go in but to be successful you will need more then one line of income and a logical way to upscale. More then willing to explain if you want to chat

[Andrew Syrios]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

I think the best way to use real estate to escape the rat race is also the best way to get into real estate, which for 90% of people is house hacking. Preferably buying a duplex or fourplex with an FHA loan (96.5% financing) or some banks will go up to 95% on similar properties with conventional financing. Then, when you move out, hold that property and buy another one to live in to take advantage of homeowner terms. (If you used FHA to buy the first, you will need to refinance as you can only have one FHA loan at a time.)

This "hop scotch" method allows you to build a decent portfolio that you can later tap the equity from with refinancing and move into strategies like BRRRR and what not.

[Carlos Valencia]

Hi Rodney, 

Real Estate is a long term game especially in this market as its challenging to find actual cash flow properties. Is it possible to replace your income? yes it is. Rentals will take the longest but also the least amount time spent on them in regards to managing. Air bnb do take more work in regards managing and preparing as your basically running a hotel business but higher probability to cash flow more than rentals. Once you have your systems in place running your air bnb will get easier. Fix and Flips if done right have the highest return in your investment but also take 6-12 months to complete and get your return. One deal can be your salary for the year but its also very stressful and takes a lot of your time when working with fix and flips. Same with Fix and flips once you have your systems in place it can be very lucrative. 

@Albert Bui @Matthew Kwan @Kin Meng Sio

[Rodney Love]

Quote from @Peter W.:

We can rephrase this question: How do I turn my 70000 into approximately 2 million so I can retire.

The answer is leverage, forced appreciation (value add work), time, operational excellence and risk management.

There are several strategies, but the two most recommended are BRRR and househacking.

Househacking is nice because you get favorable loan terms and higher leverage than investment loans. You also lower your own cost of living so you can invest more.

Rehabs are nice as well because you have a lot of value add work at the beginning which allows you to develop equity more quickly.

Strategies like rent by the room, and short and medium term rentals can generate higher returns.

Ultimate you probably want to combine all these strategies, at least in the beginning, to supercharge your initial returns before moving to a more sustainable model. This might look like buying a duplex, rehabbing it while living in it and renting it out by the room as able and then repeating the next year.

Thank you for the advice! Looking forward to connecting 

[Rodney Love]

Quote from @Andrew Syrios:

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

I think the best way to use real estate to escape the rat race is also the best way to get into real estate, which for 90% of people is house hacking. Preferably buying a duplex or fourplex with an FHA loan (96.5% financing) or some banks will go up to 95% on similar properties with conventional financing. Then, when you move out, hold that property and buy another one to live in to take advantage of homeowner terms. (If you used FHA to buy the first, you will need to refinance as you can only have one FHA loan at a time.)

This "hop scotch" method allows you to build a decent portfolio that you can later tap the equity from with refinancing and move into strategies like BRRRR and what not.

Great information! Looking forward to connecting

[Rodney Love]

Quote from @Carlos Valencia:

Hi Rodney, 

Real Estate is a long term game especially in this market as its challenging to find actual cash flow properties. Is it possible to replace your income? yes it is. Rentals will take the longest but also the least amount time spent on them in regards to managing. Air bnb do take more work in regards managing and preparing as your basically running a hotel business but higher probability to cash flow more than rentals. Once you have your systems in place running your air bnb will get easier. Fix and Flips if done right have the highest return in your investment but also take 6-12 months to complete and get your return. One deal can be your salary for the year but its also very stressful and takes a lot of your time when working with fix and flips. Same with Fix and flips once you have your systems in place it can be very lucrative. 

@Albert Bui @Matthew Kwan @Kin Meng Sio

Thank you for the response! Looking forward to connecting soon

[Kevin Menard]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

[Dave Rodwell]

Hey Rodney! Do you own your primary residence already? If not, I'd highly recommend looking into a house hack to build a solid base, and, for the following reasons:

- Cut down or totally eliminate your biggest overhead (assuming that is rent?). This will ultimately leave you with more to invest into real estate in the long run. 

- Gives you the "hands on" taste of investing, on your doorstep, and you will be able build up sweat equity in the property to lock in higher rents and appreciation for your property. 

- You can then potentially leverage the equity in that house hack to invest in more real estate. 

- Tax benefits on the income side of the property (Consult with your CPA) 

It all really depends on your risk appetite, I've heard there are good opportunities to make quick cash in AirBnb rental arbitrage, but personally the risk is a little high for me. I'll stick to my boring long term rentals in Tennessee! 

All the best! 

[Dave Kush]

Quote from @Travis Timmons:

The one where you build a rock solid financial position over time. My path was owning a business that I sold and acquiring real estate along the way. I like the position of Wes Moss from his books and podcast - more than 1 source of income (RE + something else), paid off primary residence, a pile of liquid cash or investment reserves (he suggests $500k+). I realize that this is likely not the answer that you were looking for; however, It's going to take  more time than you were planning and be harder than you thought. 

Real estate doesn't pay you well if you need the money. It's like the house knows you need the cash - something is going to break and deplete all of the cash flow for that year. 

As far as a strategy goes, I would suggest leaning into your current skill set and knowledge to find an unfair advantage. Flipping, short term rentals, tax liens, etc. are all great strategies if you are good at them and terrible strategies if you are not. If I had 20-70k, I'd buy a house hack in Dallas if your DTI is solid. I'd then work my a$$ off to pile up another down payment, and buy another as soon as possible.

"Real estate doesn't pay you well if you need the money. It's like the house knows you need the cash - something is going to break and deplete all of the cash flow for that year. "

man, that is the truth! 

[Henry Lazerow]

House hack gets you in with a low down payment and if property appreciates/value add you can use that equity to help fund the next project. 

[Andrew Syrios]

Quote from @Rodney Love:

Quote from @Andrew Syrios:

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

I think the best way to use real estate to escape the rat race is also the best way to get into real estate, which for 90% of people is house hacking. Preferably buying a duplex or fourplex with an FHA loan (96.5% financing) or some banks will go up to 95% on similar properties with conventional financing. Then, when you move out, hold that property and buy another one to live in to take advantage of homeowner terms. (If you used FHA to buy the first, you will need to refinance as you can only have one FHA loan at a time.)

This "hop scotch" method allows you to build a decent portfolio that you can later tap the equity from with refinancing and move into strategies like BRRRR and what not.

Great information! Looking forward to connecting

 Sure thing, good to connect Rodney!

[Jim Unsworth]

Quote from @James Carlson:

@Rodney Love

A couple thoughts from what I've seen at least here in Colorado:

The process is longer than you think
Replacing W2 income with rental cash flow is a longer process than most think. Unless you're super aggressive, it's probably 10 years or more.

House-hacking might be quickest way
If you have to live somewhere, then might as well get paid for it. 

I've seen a few people accelerate financial freedom by aggressively house-hacking in Denver and Colorado Springs. Buy a 5br, rent the four other rooms for $800-$1000, so that's $3200. Save what you would have spent on rent. Buy another in a year (renting out the 5th bedroom in the original), and repeat over and over for five or six years. Voila! 

Flipping is just another job
I think fix and flips are just another job. They're not an investment. If you stop working, the cash stops flowing. I think buy-and-hold is the way to long-term wealth. And within that realm, STRs/Airbnb are often your best bet for cash flow.

(Just need to make sure you're within the STR laws. Like, here in Denver, short-term rental laws are city to city and vary widely.)

Good luck!

-- 

Hi James, I’m also new here. My concern with rentals is the work managing them adds. My long 

Term goal is buy and hold. Short term plan was to do some flips to learn and earn. I’d like to have a property manager before I pick up rentals. Did you manage your own properties at first?  

[Mason Parsons]

Hey Rodney! So, I was in a similar boat with around 50k to play with. Went for the fix and flips initially, quick cash but a bit hectic. Transitioned to rentals and Airbnbs later for that sweet passive income. It's a grind, man, gotta find the right deals and manage tenants. Mix it up, maybe a couple of rentals and a small flip? Diversify, ya know? But remember, there's no one-size-fits-all. 

It's a wild ride, but if you hustle smart, that 9-5 could become a thing of the past. Good luck!

[Michael P.]

Columbus

[Tami Goodwin]

All the options listed are GREAT! I would house hack and do the BRRRR method. Right now I am buying houses that need some repair. After I repair them I rent them (by the room) and then refinance them to take out the equity. I usually can get about $15k. If you could do 4 of these a year with house hacking you could replace your income faster. Also, these funds you acquire are tax-free. I am doing this method and I am on my 3rd house. I have two other homes; however, I sold one and when I finish the other I will sell it so that I can clear out my personal debt. Like most people have stated have a good mixture and know it's a hustle! However, if you hustle while you are still young you will LOVE it when as you get older because you will have more time because of the passive income you have built. Also, put funds in other places to make money.

[Patrick Culleton]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

I would suggest going for whatever your local market supports, and lines up with your personal goals and skills. Over many years, you will likely use a combination of some or all of these strategies as you grow and try new things. So whatever gets the ball rolling fastest is the best route for you to take. There will be mistakes, challenges, and many many learning opportunities between now and retirement. So take it one step at a time but definitely make a plan to take that first step as soon as you can.

Personally, I like AirBnb/STR's and Fix&Flips for your budget because I have a number of clients who started out in these areas and were able to build up cash and personal wealth faster than the clients who started out with long term rentals. However, that doesn't mean that those are going to be the right strategies for you.

If you ARE going to pursue investing in real estate in the next 6 months, I would suggest starting by building your network. If you want to buy STR's, find agents/brokers and other investors who are already doing that in your market. Connecting with them and learning hands on is the best way to get going. Same for flipping - find a flipper that is willing to teach you a few things or maybe even be a strategic partner in the future. Or look up the brokers who are listing the flipped homes in your market and call them. Maybe you already know someone who could help put in some "blood sweat and tears" with you to help you both get there faster?

Either way, you are on the right track by asking questions and growing your knowledge. BP is a great resource for learning through others. Best of luck on your journey!

[Bob Stevens]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

 You're not, you are not replacing 85k a year with 40k in cash. Lets say you get a prop for 100k, 20k- 30k down with repairs, ok that's 300ish month net income or maybe you get another, that's another 300, still 6k away from 7k. 40k cash is not enough to invest and retire, 

[Mark Cruse]

I dont have much more to add here. There has been tons of great advice thus far. The only thing Id add is to maybe adjust your expectations. Its a long shot that investing 70k right now will immediately replace your 9-5. In fact, very few make it to that level and it takes time. If you are doing rentals you could build over time, make intelligent acquisitions and execute a strong strategy; eventually you will have enough doors for that. The STR game is over saturated and complicated and no way a 70k investment will get you that anytime soon. Lots of overhead and uncertainty over time. The liens are complicated as well and even if you master it. it can be hit or miss. Flips are cool but you have to find the right numbers. Its hard to be consistent in providing steady income. I guess in general Iḿ saying is get in and see what fits you and perfect that. Over a sustained period time and you will reach your goal. Not sure if you meant it this way, but if you believe just jumping in on some investment now will make you rich to the point of quitting the job soon, it needs to be adjusted. Believe me, if it were that simple everyone would do it and we wouldnt have many employees left. Its a long game and if done with precision eventually you will have vast financial freedom. Some of the younger mindset functions out of a get rich quick bitcoin mindset. Its a marathon, not a sprint. Bust of luck. I want you to win.

[Maxine Brown]

I love Buy and Hold. Just make sure the numbers work. 

[V.G Jason]

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

 You're asking the wrong question. But to answer yours, there's very limited options that's just not enough to money to invest and get that kind of return. You want to invest a max of $70k and make $84k/yr net?

Let me explain why you're approaching this wrong, for one you're working the $7k angle as if it's never going to change. 

$7,000 a month now is what in 15 years, in 30 years? Take your age and expected retirement & death into account. You realize stepping out of the 9 to 5 means incurring your own retirement and health expenses, go ask people north of 55+ that are on their own how much their health insurance costs. Then realize that is today, where's that cost when you're 55+?

Then now add for retirement. You need to be putting away quite a healthy percentage for the later years. Can you afford to put 15-20% away monthly for that on that $7k/mo budget?

Basic math. What you need today, add 40-50% every 12-15 years. So if you're 30 and wanting to live to 80, your goal at $7,000 should be to get to really $15,000 on the low end, $18,000 target, $21,000 high end. You realize now why you're question is off?

Let's also take into account every 7-15 years, if you're an American, you'll face a recession followed by an interest rate cut. You covered the math above for inflation, now cover the math for when you're bleeding. You have a few houses, no one making payment, capex still a necessity, etc. Your reserves need to be (very) high. These aren't market based reserves, these are fixed income to help survive these 2-4 more deep lows you'll face in your life. They will define you more than your gains. 

If you're making $85k/year. My best advice is buy a house every 1-3 years, in a good to very good area. After you accumulate 4-6 houses, in 12-15 years. Sell one, refi the other and get rid of the debt. 

You're not equipped be financially free as is, and thought process of thinking so needs to be nipped in the bud. There's folks who make 5x-10x what you make but they can't be financially free. Life is costly, I'm sure you agree with that today so be prepared for tomorrow with a little more fiduciary responsibility. 

[Carlos Ptriawan]

Quote from @V.G Jason:

Quote from @Rodney Love:

My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use?  Example if you had between $20,000-$70,000 to invest in real estate.  How would you use that to replace your income of  $7,000 a month from your job? Fix and flips, tax liens, mortgage notes,  rentals,  Airbnbs?

 You're asking the wrong question. But to answer yours, there's very limited options that's just not enough to money to invest and get that kind of return. You want to invest a max of $70k and make $84k/yr net?

Let me explain why you're approaching this wrong, for one you're working the $7k angle as if it's never going to change. 

$7,000 a month now is what in 15 years, in 30 years? Take your age and expected retirement & death into account. You realize stepping out of the 9 to 5 means incurring your own retirement and health expenses, go ask people north of 55+ that are on their own how much their health insurance costs. Then realize that is today, where's that cost when you're 55+?

Then now add for retirement. You need to be putting away quite a healthy percentage for the later years. Can you afford to put 15-20% away monthly for that on that $7k/mo budget?

Basic math. What you need today, add 40-50% every 12-15 years. So if you're 30 and wanting to live to 80, your goal at $7,000 should be to get to really $15,000 on the low end, $18,000 target, $21,000 high end. You realize now why you're question is off?

Let's also take into account every 7-15 years, if you're an American, you'll face a recession followed by an interest rate cut. You covered the math above for inflation, now cover the math for when you're bleeding. You have a few houses, no one making payment, capex still a necessity, etc. Your reserves need to be (very) high. These aren't market based reserves, these are fixed income to help survive these 2-4 more deep lows you'll face in your life. They will define you more than your gains. 

If you're making $85k/year. My best advice is buy a house every 1-3 years, in a good to very good area. After you accumulate 4-6 houses, in 12-15 years. Sell one, refi the other and get rid of the debt. 

You're not equipped be financially free as is, and thought process of thinking so needs to be nipped in the bud. There's folks who make 5x-10x what you make but they can't be financially free. Life is costly, I'm sure you agree with that today so be prepared for tomorrow with a little more fiduciary responsibility. 

 Most realistic answer for common avg joe investor 

[Joe S.]

Quote from @Zachary Jensen:

I would look into buying small businesses. Real estate everyone is trying to make a buck in, and it makes the "market" unsophisticated on the buyer and seller side where each is trying to push and unfair deal most of the time. You can buy a business with that money and replace your income fairly easily compared to buying properties. You need much more capital for real estate, as it is a wealth protection and cashflow engine for large sums of money when done right IMO 

What kind of business any ideas you would suggest?

[Zachary Jensen]

Quote from @Joe S.:

Quote from @Zachary Jensen:

I would look into buying small businesses. Real estate everyone is trying to make a buck in, and it makes the "market" unsophisticated on the buyer and seller side where each is trying to push and unfair deal most of the time. You can buy a business with that money and replace your income fairly easily compared to buying properties. You need much more capital for real estate, as it is a wealth protection and cashflow engine for large sums of money when done right IMO 

What kind of business any ideas you would suggest?

 High cashflow, recession resistant like a plumping company or another core service company would be my suggestion