Best way to $2500 coc in 5 years?

Question

Hi BP Forum,

So I'm looking for the best way (for me) to get to $2500/month COC in five years and need a little help weighing my options...and maybe coming up with new options :-)  A little bit about my situation:

I have two rental properties in OKC both cash flowing $200/month (mixed average/door) after setting aside plenty for maintenance, capex etc... and am now hooked.

I can comfortably buy one property/year with 20% down (at $100,000). BUT in five years that only brings me to a little under half my goal and taps out my 'Investment savings' (assuming we stay at a steady income level).

I have been looking into long distance BRRR and have ample funding available from family/friends as soon as I feel comfortable spending OPM (which isn't this year probably).

I am a stay at home dad and can create time needed to pursue something by utilizing childcare (which we haven't done yet).  I'm also not very risk averse and feel comfortable taking action on things that make total sense to me.

My options are...as I see them:

---Buy one property/year and hope for massive appreciation (not likely in OKC) leaving me with 7 properties in 5 years...that may or may not meet my goal

---sit tight  for 1 year and start a BRRR funnel while saving and drinking from the information firehose.

---buy/pay off 4 properties outright to create a mixed cashflow of $7500/property/year bringing me to 30k/year...but how to pay them off...idk

---Get into mobile home investing,which Is new to me and VERY interesting but I don't know enough about it yet to make a plan from it.

Ok.. Thank you beautiful BP posters for your wisdom and generous spirits!

Jaysen Medhurst · Answer

If I read your post correctly, @Joseph Schommer, you have ~$20k/year to invest, right? That means in 5 years you want to see a 30% return on a total of $100k. That's a big return to expect all at once, but over time, very achievable.

1st thing to do is figure out how many units that translates into. If you can reasonably expect $200/unit/month, that's 13 units (to be safe). Not a lot really.

Any strategy that includes "hope for appreciation" should be discarded immediately. "Appreciation is speculation" and should be seen as gravy. This doesn't exactly hold true for commercial properties, since you can force appreciation. But that's a different subject.

I would not waste your time on SFR. You'll hit your goal faster and easier with MFR. Focus on 3 and 4-unit properties. BRRRR is obviously very powerful, since you can keep recycling your capital. Your background as a contractor is a real blessing. You'll have an advantage in properly budgeting/scheduling renovations and you may be able to pay a little more for properties, since you can get the renovations done for a little less.

• What are the prices of these kinds of MFRs in your market?
• Are you seeing any potential BRRRR properties there?
• How confident are you in your rental analysis skills?

Cassi Justiz · Answer

Hey @Joseph Schommer,

If you are interested in moving out of the Bay Area, then house-hacking could be a fantastic option for you to decrease living expenses while also increasing cashflow. However, that may not work with your lifestyle and that's okay.

I would say it would be possible to do a combo of these things to get to your goal. A couple of questions though. What price point are your current investment properties? Do you have any specific types of properties you want to invest in, or do you just care about cashflow? I would say do 20% down on the nicer properties and MFH and BRRR with other people's money on cheaper properties. There are also some local commercial lenders that will finance 90% of purchase + rehab costs, so that's almost as good as the BRRR strategy. :)

I would be hesitant on mobile homes. They are cheap and you can get good cashflow, but the lot rent/management can kill the deal. Definitely do your homework on the park.

I had a mobile home under contract at one point, but I ended up getting out of the contract because of the park manager. She had a clause in her lot rent agreement that she had to personally approve anyone that wanted to live in the park (tenants, owners, etc). She wouldn't return my calls or emails, and I couldn't get her to guarantee the lot rent agreements because "lot rental agreements don't transfer with property ownership". A friend ended up buying the mobile home and the lot manager immediately increased her lot rent by $100 as soon as the ownership changed. She also rejected two different tenants my friend had approved because of things she felt would compromise her park (DUI 10+ years ago, a utility account sent to collections 3 years prior, etc).

Joseph Schommer · Answer

@Michael P.  Haha right... I think it'd be a big risk to give me your money to brrr with before I feel comfortable brrr'ing.  I don't think I'm risk averse...I just don't want to do something before I understand it completely.

It's like pointing at a big wall and saying "climb that" to someone who has only practiced bouldering.  But once you know the ropes and systems... Oh what fun!

Michael P. · Answer

Something is not adding up.  You are NOT risk averse.  But are ARE averse to using OPM to get deals done (aka risk averse).

Joseph Schommer · Answer

Hi @Cassi Justiz.

I appreciate your input on everything.  My wife and I have talked about house-hacking and it definitely is a possibility in the next few years while our baby isn't in school yet (he's 13 months).  We were also thinking of living in Colombia for 1/2 a year to save more and practice Spanish for the little one, but that won't be until he's 3 or 4 and language is more of a focus.

To answer your questions:

1: Price points on our current properties are 75k and 95k. Both in Midwest City, the 95k is Section.

2: I don't really have any specific properties that I want to invest in.  I kind of like SFH...it feels more personal...but what do I know- I just started late last year. I'm more concerned about cash-flow and finding out what it means to be an "ethical" real-estate investor.

3: That makes sense, continue to put 20-25% down and BRRR/MFH with OPM.

Have you done BRRR'ing in Oklahoma City?  What has been your experience with it?

Thanks for your input on mobile homes.  I don't know much yet and it's good to go in with caution if at all.  I'm in the gathering info phase right now and looking at Mobile homes in the Bay Area actually!  They are the only things affordable around here and seems to be something investors are ignoring...which may be wisdom I'm observing rather than preference, but we'll see.

Jaysen Medhurst · Answer

Live where you want to live, invest where the numbers make sense, @Joseph Schommer. You could look into house-hacking an MFR in the Bay Area. My guess is that may lower your living expenses, but very unlikely to CF.

Joseph Schommer · Answer

Thanks again for the feedback! :-)  It has also occurred to my wife and I that we could move out of the Bay Area and save WAY more money literally anywhere else on the planet. We have also considered house hacking an MFR that could be part of the cash-flow mosaic.

Joseph Schommer · Answer

Hi Horton.

Glad to see I'm not the only one.  The more I learn the more options open up.  Let's see what the wisdom of BP has to say :-)

Horton M. · Answer

@Joseph Schommer  Let's connect. I am in a similar situation.

Best way to $2500 coc in 5 years?

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