Goal: $7000 per month income (How?)
Real Estate Investor · Huntington, NY · Member since 2014 · 26 posts · 3 votes
I have been kicking the can down the road for 10+ years with REI and have never pulled the trigger. I think that is going to change though.
Recently, I sat down and wrote out all my dreams and goals and what the price tag of each of those would cost. Turns out, I need to come up with an extra $7000 or so per month. This sounds like a lot, but I was encouraged by the differential between where I am now vs what I need to accomplish 100% of these goals.
My question is.... I am on Long Island, NY and the home prices here are very expensive. I am trying to figure out the best strategy to come up with this extra money. Is it to buy / hold and try to make a few hundred dollars per house? Or is it to try and build up the number of flips I do, where I close $7000 a month on flips? The main issue is that with the home prices and taxes being where they are on LI, does it make sense to do this out of state?
Thoughts, concerns, ideas?
All it takes is 10 $100,000 leveraged properties. Just gotta start with that first one.
@Jason Stephens That depends a lot on your risk tolerance and if you want this to be an active venture into real estate or do you want it to be passive.
If you are comfortable working at a distance you would be able to get different deals(may or may not be better).
1. Also are you trying to build up your net worth or are you just trying to make money?
2. If you buy and hold are you managing yourself or are you passing off to management?
3. If you are flipping are you planning on always managing/selling the properties yourself or passing it on to other people?
You don't need just one strategy to get you to this $7000/month number. Maybe you could flip one house to make a little money to buy a rental property and then do another couple flips to buy another rental and keep some of the income.
4. Are you planning on quitting a job as soon as you start this REI or will you be working until you get to your $7000/month?
Perhaps if you continue working you could flip and use all the money made flipping to buy rentals until you can bring in money with rentals and flips that equal $7000/month.
5. Do you want this venture to be something that you could scale to something much larger if needed?
Hope some of these questions help you get thinking a little more.
@Erik Johnson Thanks for the quick response.
A little background. I own a successful recycling company, and will stay on at that company full time. This would be extra income on top of what I am currently making.
1. I am looking to do both, build net worth as well as build income. I guess at first, it is more important for the extra money monthly.
2. I would pass to management if it is at a distance, I need things to be automated the best I can if I am going to succeed.
3. My wife is a realtor in NY, but if it is out of state we would hire a real estate agent.
4. No, I will continue to work at my current job and use this as supplemental income.
I am open to flipping and using that money for rentals. The issue would then shift to getting a loan for the work I want to complete (hard money, etc).
5. Yes, I would want this to scale like any investment or business.
@Jason Stephens Most people in major cities in states like new York and California are doing fairly well investing out of state because of how much more bang for your buck in states like Florida & Georgia. $7,000 month can be do easily. You could leverage 1-2 rentals in a major market and Air BNB it out that can accelerate things quick and get you 3-4X times your monthly rent. Property Management, it could take time to build your clients up but would pay off quit well. And when all else fails flips are in style right now. The market is holding up pretty well and you could ride this wave for a while and build up some capital.
All it takes is 10 $100,000 leveraged properties. Just gotta start with that first one.
Hey @Jason Stephens, If you'll be keeping your full time. Then it sounds like you're targeting some passive buy and hold investments. Flipping out of state with no boots on the ground or at-least a trusted resources to walk the project can be difficult to manage. Believe it or not there are some brokerages that specialize in purchasing and managing for buyers out of state. We run that very ship here in VA :)
At the end of the day it comes down to a level of comfort. Who ever you end up working with. They need to know the numbers cold. Especially if you don't have a previous relationship and they're out of state. They should be able to provide you a report with options in their area based on your criteria and then explain how they got it there numbers. Then take that report and have a third party validate it.
In the grand scheme of things, obtaining an extra $7,000 per month is extremely obtainable. Depending how risk averse you are, it doesn't have to be a decade project either :)
Good luck!
Hey Jason,
I also live in NYC but bought a house in levittown, so soon me and fam will move to the island. Me and My wife's best friends which the contractor would do this venture together but still waiting for my primary home to close very soon. I'm looking to flip or buy and hold around the island and also open around queens area too (because I'm very familiar with queens). My goal, i'm looking to add $3000/monthly for me to quit my current job and do Real Estate as full time.
How bout we link up if jv makes sense in the future.
Frank
Welcome @Jason Stephens! Lots of NYC based guys here you will be able to get advice from.
I'm in your boat, FT day job and looking for passive buy and hold. I've been working 9-5's for 16 years now, bought my primary residence 11 years ago. I didn't pick up my first investment property until 5 years ago.
In that time, I've been able to accumulate 7 units in Queens, and over the last year 7 units in Nashville which I picked up with a partner. I've never done a flip.
All of this has has put me about half way to your magic number. I figure it will take another 4-7 years to get to $7k a month NOI passive at which I hope to FI btwn REI and stock market investments.
I do think it's worth point out that in NYC/LI, the playing field is definitely not level and things like this make it even less so: http://www.npr.org/sections/money/2016/05/27/479717380/episode-703-how-to-hide-a-million-dollars-in-plain-sight
Any questions, feel free.
Best of luck!
Kicking the can around for 10 years?
I'm curious have you made any offers on any properties?
If you need $7K a month, passive cash flow from buy and hold is the ONLY way to go.
I'm sure you have read them but all of the Rich Dad books would hold your answers.
$7000 a month in gross income, $7000 a month in net income, or $7000 after tax income?
Those 3 things make a world of difference.
Just using the $100 a door rule, which is what i'll be using living in CT with extremely overpriced homes and property taxes. You need to have 70 units to hit your goal for passive rental (NET) income.
Try to close between 5-15 units a year if possible, or more if you can and maybe between 5-12 years you can accomplish that goal.
-Matt
@Jason Stephens - I feel like i'm in the same situation. I've been looking all over LI/Queens for something.... a property to flip, a property to rent, but everytime I work the numbers, the math just doesn't add up.
@Amit Kal - I'm definitely looking to do something like what you have in Queens. I work the numbers on a lot of different areas. I look at the middle to higher income neighborhoods, then the purchase prices i'm seeing are too high to have a positive cashflow. I look at the lower income neighborhoods and the purchase prices are much more affordable, but the rental income isn't sufficient to support the expenses. Perhaps i'm doing my calculations wrong.
We bought a 4 plex in the LA area, put every spare penny into it, and paid it off. Net income is 7.5k/month and restful nights with no debt. Some people may say that we are dumb not to leverage, but we are loving the easy income. 4 free and clear units is a lot easier to handle than 70 highly leveraged doors! I shudder to think about what I would do with 70 leveraged doors if the market tanks...
@JIll R. that all depends on if you are managing yourself or have property management. And why would it matter if the market tanks and you have 4vs70 units? If you do it right shouldn't they still be cash flowing either way? Also what do you do if your 4plex burns down? Or if the street that your 4plex is on just became the worst street in town? If you had 70units these last two scenarios would be less likely. I guess it all depends on your situation.
@Erik Johnson thanks for your reply. Yep - we are managing ourselves (which is quite easy to do with 4 units in one of the best parts of town). I realized after posting my original reply that I hadn't been very clear in my thought process about the market. If the market tanks, I'd rather have zero debt and steady income than 10-20 underwater mortgages. Here's why. I own another condo in the Palm Springs area. In 2008, these were selling for ~185k. During the downturn, many of the 185k people walked away, resulting in short sells, foreclosures, and all cash purchases. I bought one for $100k. Low prices (coupled with other factors) increased competition and drove rents DOWN. Thus, if you have 70 units cash flowing at $100 a door but rents drop by $200...you're in trouble.
If our 4-plex burns down...we are screwed! (Which is why we have jobs. And insurance :))
Hi Jason,
If you want to start in REI and don't have the capital, you could look into flipping mobile homes. They will give you a starting point with a lot less money to start with and with the same ROI or better. I don't know anything about the market you are in but this is a way to get your feet wet without over-leveraging yourself. You will learn the basics through this process and could use the profits to build up for the purchase of your SFH or Multi-Family Units. There are many people on here on BP that could help you learn about this special niche. Take care and good luck!
It is like Mark Cuban said
"Every five years or so there is a bubble bursting or amazing deals available because of a change in the economy. Anyone who just kept their cash in the bank rather than in stocks over the past five to 10 years could be buying the home of their dreams for half price in most of the country. They earned good money in half the past 10 years on the cash, and even though they aren’t making much now, they have the transactional value available to them. Plus they have cash to invest if the market craters and, most importantly, they sleep great at night. Cash is king–and works far better than Ambien when you want a good night’s sleep every night."
I understand what you are saying I think I just missed it in your first comment.
Maybe if @Jason Stephens was going to use your method it might make sense to have a few units fully paid for to prevent catastrophe but also keep cash liquid to buy when the market turns at a discounted price.
I'm with some of the others on this one..It's all about how much risk and how much work you want to put in. I too own a business that is my base income but for my RE portfolio, I am at about 50 apartment units and doing flips throughout the year. I have a small crew of guys who I keep busy with flipping houses. I am now at a point where I have one flip I am working on and another one just waiting so the guys can keep moving. This way I am not stopping the process and keep going (also my guys are happy because they have steady work).
My apartments essentially are no work for me as I have a PM that manages. They have a cloud based system so I can oversee all details/transactions from anywhere.
Flipping is a little involved but I enjoy doing the material selection and design aspect of it (my passion). It's creating a great base of additional capital.
My goal is to continue to purchase more APT buildings to increase monthly passive income. Passive income to me = freedom which is my ultimate goal.
On the upside of APT buildings, the mortgage pay down is awesome. When it comes time to sell, not only is my downpayment returned but also my gained equity is cashed in.
I am still searching for bigger goals... Until then, I will keep doing deals. Essentially the more cash you have the more your options open up for bigger opportunities. Cash can create a source of passive income if used properly!!