Is this realistic?

[Brendan M.]

Hi All,

I wanted to ask you guys if this type of analysis seems realistic. I have created a SS that would track the most ideal investing situation and see if others found this to be realistic/plausible. Keep in mind these are assumptions and I understand things can and do change. Instead of buying 29 new properties, I may buy one larger apartment complex. I also realize that no one is going to buy 23.19 properties. I just tried to keep it as simple as possible. 

Let me know your thoughts. 

Assumptions:

Money Saved - $40,000/year + proceeds from new properties

Cost of homes - $100,000

% down - 25%

Cash flow per month - $400/home

[Jeff G.]

There are obviously a TON of assumptions there.  I actually did something very similar but on a six year time line a month ago.  It's one of those, "if all the stars, planets, AND moon particles align" 

type scenarios which is unlikely at best.  I need to buy one property before the end of the year and 4-5 next year and right now I cant find the one.... so like I said, there are a lot of assumptions, probably the biggest is property availability which meets your investment criteria.  I'm picky, and have very high cash flow expectations so my properties are hard to come by.

If you want something more realistic tailor it down with more conservative assumptions.  What is the likely real world AVERAGE cash flow per property?  Is it really $400, if so great.  Do the same for purchase price and on and on..

Good luck

[Jeremy Brown]

I've made these. They're fun. But, like you, I'm still way up at the top of the chart. I don't think it's realistic, for many reasons. The biggest is, you will hit scaling challenges quickly. Sure, you can buy 3 houses per year. But, 50/year? That's a different business, entirely. Your financing options and challenges change, as well.

Cut it off at the 5-year mark. Look at just the part above that and make sure that much is realistic. Then, round down everything. You're definitely not going to have a 25-year streak of a perfect incoming pipeline of the right houses at the right price. You're not going to have a steady $400 cashflow on a $25,000 investment. But, you have a reasonable chance of making that work pretty well for 5 years.

In perhaps 5 years, you are less of a guy who buys and manages houses to a guy who runs a RE investing company. Not everyone is cut out for that. So, your growth could well slow or stop either because you're bad at it or find you just don't enjoy that type of business.

I don't mean to be a total downer. There are possible upsides. Maybe you do a really good job with the first 10 houses and then some investor offers you enough cash to skip ahead several years on your chart. My main point is don't get too excited yet. There's a lot of work and luck to make something like that 25-year plan actually happen.

[Brendan M.]

Thanks guys. I realize that as well. It's probably better to work on a 4-6 year timeline too which allows you to adjust after hopefully reaching your goals. Also, your goals will change throughout this time so it makes it easier to focus on the ST to achieve the LT goals. 

I've played around with the numbers so I can see the change if the purchase price goes up by $50K or if the cash flow decreases. 

@Jeremy Brown

That's what I figured as well. You're right, scaling is going to be difficult. I've also thought about it where if I am making $130,000 by 32 I'll be pretty freaking happy. I don't even know if I need to scale as quickly anymore. I can enjoy my time and do it part time and live the dream so that's part of the equation as well. 

I'm always thinking of it realistically so don't see you being a downer. It's important considerations that need to be thought of and planned for. Very true about the plan happening but that's what makes the journey fun and so exciting. 

[Jeff G.]

@Brendan M.  You have the right attitude, you have to keep your eye on the ball and stay motivated to succeed.  Real estate investing can be an up and down game, when you are frustrated or discouraged you will not succeed if you don't lift your head up and keep moving forward.  Make small achievable goals and hit them out of the park, gain momentum and never look back.  It took me over a year to get my second property, and now I am actively looking for a third just a few months after buying my second. (achievable goals)

Surround yourself with motivated people, network and talk to people who are successful.  I have coffee with a buddy I met on this sight every 2-4 months.  We get together and talk about what has been going on in our investments and feed off of each others information and ideas.  We want to see each other meet our goals and will help each other out however possible. I walk out of those coffee hours more motivated to succeed than ever!  Network and build relationships, I cant emphasize this enough.  It will only help you find deals and generate ideas.