Interested in real estate investing, I have questions!

[Jonny Bursa]

Hi everyone.

First of all, the main concern I have is how long it takes to make ROI. It like typically it takes about 7-10 years from what I'm learning. That's a long time! How possible is it to find deals which give ROI in, say, 5 years? Apart from finding high cap rates and being okay with being in debt up to your eyeballs, are there any other methods of growing quickly?

I hear a lot that real estate can be a nightmare because of tenants always needing repairs or having complaints. Is that the case?

I have almost $20k I'm willing to invest in real estate. Is that enough and what would be a good first investment with that amount? I am going to talk to my bank soon about what kinds of loans I can take.

Thanks for any help and advice!

[Hattie Dizmond]

You can generate cash flow from day 1.  Again, you're focusing on terms and measurements you don't understand. Cash flow is simply does the money coming in equal more than the money going out, including  reserves?   If it does, you're cash flow positive. 

If you're looking for how quickly that cash flow will payback your initial investment of liquid capital, that's IRR.

There are a ton of ways to evaluate an investment. There are any number of "rules" used to gauge it, which are described here on BP. There is the CAP rate. However, that's better applied to MFR than SFR. There are more traditional capital invest calculations like NPV and IRR. There is CoC and ROI. The list is long.

Determine your personal goals. If you want to invest $20k and have it paid back in 5 years, then you need a net positive cash flow of $333.34/mo. That's a really simple calculation that doesn't take into account the time value of money or lost opportunity cost. But, it gives you an idea.