How to Get $10k/month Cash Flow: That's the Wrong Question

[Bill F.]

A lot of people want to use REI to escape their 9-5 and replace their W2 income so they can live the life they want. That leads to the reasonable question 'I need/want $7/10/15k/ month in free cash flow(FCF) from my RE portfolio, what is the best and fastest way to get there so I can leave my soul sucking 9-5?', which if you spend any amount of time on BP you've seen a dozen times.

IMHO the question is interesting, but not the best version: it is too abstract for people to give concrete actionable advice, not to mention there is no one best or fastest way to do things like this. Plus it doesn't lend itself well to being quantifiable. How many SFR doors is $10k/month free cash flow?

What I would ask is, how do I get to $100k/month in revenue. If someone wants $10k/month from owning RE that they then rent/lease, some form of debt will come into play. Using a DSCR of 1.3 backs into a NOI of $43,333/month.

[Skip if you don't like math: FCF= NOI-Debt and NOI/Debt=DSCR. If DSCR=1.3 then NOI=1.3debt. Plugging that in to the first equation yields 1.3debt-debt=FCF or debt=FCF/.3] 

Using a 55% expense ratio gives us $96k/month of top line revenue. [More math, NOI=Rev-exp, if exp=55% of rev, then NOI= Rev-.55 Rev or Re=NOI/(1-.55) ] 

Reasonable minds can differ about the DSCR and expense ratio by asset class, but it gets us in the ball park.  Now we can get to a number of doors one would need if we wanted to do, say SFRs ( in Suffolk County MA, which has a median rent of $1,524/month, that's 66 doors) and number of doors, gets us to number of down-payments we need, which determines financing strategy, how to manage ect. 

So, the question is: how would you get $100k/month in revenue from RE investing  (either the debt or equity side)  and how long do you think it would take? Or is this even a worth wild goal? If not, why? 

I'd be interested to hear from @Steve Vaughan @Mike Dymski @Jim K. @Steve K. @Jay Hinrichs @Joe Splitrock 

[Mike Dymski]

There is an extremely small percentage of investors who quit their jobs with a passive real estate portfolio.  And nearly all of them don't have a passive portfolio...they run real estate businesses.  The other part I don't get is why so many people do jobs they hate.  Managing residents, investors, and contractors is not exactly a solution for high job satisfaction either.  Lastly, I think most investors who do end up scaling do it organically rather than following a formula...and they make tons of pivots on the way that are not aligned at all with the original formula (markets, interests, and opportunities change).  The growth is not linear...may be one or two properties in one year and a bunch in another, then a pause, sell some, keep others...it's a fluid business.