One of my friends who has had to listen to my incessant ranting about REI had a question for me the other day, and I felt sheepish that I had no idea how to answer him. My plans are largely centered around SFH buy and hold, long-term investing, and my knowledge ends there. He is well-to-do and has money saved up, and was curious about how much cash flow he could get with it in the short-term. So, my question is this: if you had $150k in capital to blow, were just starting out, and you were mostly concerned about getting the max amount of cash flow in the near future (and if possible setting yourself up to get some more long-term benefits) what would you do? Two extra criteria.....he lives in the Washington DC metro area, so things are pricey (but probably willing to look farther out) and seems averse to house flipping.

@Joe Villeneuve you're claiming that ALL Expenses, ALL vacancy and ALL capital amount to $330 out of $975 of rent. That's 33%. You may well have seen those sort of numbers. Two very large datasets that have been posted here in the past that covered hundreds of thousands of units do not support that number. That number is unrealistically low. That's the kind of number turnkey sellers use to sucker in naive investors who don't know better. Building a business based on that number will result in failure when the cows really come home and those big capital items start hitting. If you're building a portfolio of properties you WILL be replacing roofs, appliances, furnaces, and sewer lines on an ongoing basis. You WILL have tenants that wreck the place. You will have lengthy and expensive evictions. First time I every shot craps I started with $200 and walked away with a purple, $500 chip. But I'm not naive enough to think that's a normal outcome. So, @James Z. use whatever assumptions you want when making investments. I personally do not use a number like Joe's unless I'm willing to manage the property myself and willing to contribute that labor for free. No matter what assumptions you make up front reality will be whatever it will be. If you have just a few properties you may get lucky like I did at that craps table and have very low expenses. Or you might have a really big expense like I did on one of my properties last year where I spent over 50% of the year's rent just replacing a sewer line. This business is chock full of property listings that say "this cash flows" when all the seller or their agent really means is "if you put 20% down and get a 30 year fixed rate loan the PITI will be less than the rent."

Folks, lets PLEASE get back to the "what returns can I get from my $150K" question. @James Z. my big warning here would be that as soon as people know you have serious cash to invest all sorts of opportunities will come out of the woodwork. Many of those offers will look a lot better than they really are. You MUST understand what you're investing in thoroughly before you invest. Otherwise you can easily be separated from your cash and left with investments that return nothing. Real estate also has a bad habit of sucking more cash out of your pocket.

I would say that notes are the way to go. No tenants,trash,toilets or BS. At $150k to invest, you could buy a 1st position mortgage with $200K in the secondary market. The mortgage is covered by equity in the home and it will pay you about $11K a year, After 5 years with the principle not affected hardly at all you could sell the note and buy another one. Once you make a little money, funnel it into a little higher risk mortgages like seconds and make even more return on investment without affecting your original $150K. This is a simple example but, you can make more money depending on your involvement. Your cash cow is now mooing......Good Luck

I'm sure this comes as a nasty shock, but it turns out that the rent on your listing must also be a typo. Because a quick glance at the properties currently for rent in Dearborn Heights reveals that $1050 cannot possibly be right. Maybe it was supposed to be $950? Or maybe even $850? Because $1050 in rent gets you newer, larger houses in nicer neighborhoods.

Whatever Joe. I encourage anyone reading this to go to the DTE appliance repair site themselves. We have taken the thread off topic again. But to the OP I would say that you will make very little for that investment if you buy cosmetically rehabbed houses in crappy neighborhoods from people who pretend that rentals can be run with no expenses, that a coat of paint but no appliances or major systems replaced justifies the highest rent in the neighborhood, and that comps should be selected from houses with similar prices rather than houses with similar characteristics.

Yeah, that's fair, sorry. So James to answer your question, in my area (which does not attract out-of-state investors for a reason) I could get into single families that would REALISTICALLY return 7-8%. Say $13-14k a year. That is just carefully buying rent-ready houses off the MLS. Doing what I actually do, which is a sort of small-scale fix-and-hold, I can do better. Maybe 10 or 12 percent after a significant amount of effort up front. Both scenarios with a better-than-average chance of real appreciation in the mid-to-long term, not that you should count on it. But I am careful and conservative, and working in a rural area with pretty high property values and a stable but not growing population. I expect others are doing much better. But this is working for me.

How much cash flow could one get with $150k starting capital?

Curt DavisBusiness Member

Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes

12y

It all depends on where he buys property and what price range. Would he be a cash buyer or doing financing? You can get better cash flow on cheaper homes but long term they are not better.

Curt Davis - KAIZEN Realty538 Reviews

How much cash flow could one get with $150k starting capital?

Most Popular Reply

94 Replies