I've got 150-200k to work with, is my goal possible?

[Par Attaran]

So we are noob investors that have been reading and researching for several weeks now. We are ready to move forward with one goal in mind. We have aprox 150-200k to work with, and are trying to generate $2500 a month in passive income (to cover our main mortgage). Is this even possible? Will we find high enough yields to make this happen or are we crazy?

If so what would you do? Do we pay cash for 4 cheap turn keys out of state?(we live in Northern CA so local is out of the question)  or should we be looking for a fourplex with a huge down payment ? etc...

Thanks for any help :) 

[Scott Trench]

I think that sure - this is possible. But, there are two ways to go about it. 

- Option A involves going to a lower end rental market and trying to get as much rent as humanly possible out of the property with little work. Doing this, you *might* be able to find a few properties that will produce the cash flow you are looking for. 

- Option B is a little more farsighted, and a little less "analysis" based. It involves buying a couple of well-kept properties in nice parts of town, that are convenient, that cash flow a little bit, and that you will be proud to own. These will not produce anywhere near the cash flow you are looking for.

Next, wait 5-10 years. 

Which property or type of purchase will be producing more cash flow at the end of this time period? 

I'm not saying that either option is wrong, but I will say that a surprising number of investors on BiggerPockets forgo option B when it makes way more sense to go with option B in their neck of the woods.

There is always a tradeoff - do you want cash flow now, or the possibility of far better returns down the line? You say Northern CA is out of the question. It seems to me that investors could say the same thing about Northern CA real estate for the past 30 years straight, yet the folks who have bought there have been laughing all the way to the bank the entire time. 

I bet the guy who invested in CA 5 years ago is doing way better than the guy who invested elsewhere 5 years ago - even if h produced more "cash flow" at first. The question is - who's going to be laughing 5 years from today? 10 years from today?