$1 million in capital to get to $20k+ a month in income

[Paul Ryan]

Hello,

I have been reading the forum for some time and doing research.  I’m  Just getting started in real estate.  I’ve done a lot of research looking at deals (including buying vacation rental properties, syndications, etc) but have not pulled the trigger yet.  I am exploring how I can generate cash flow of at least $20k per month using $1mm of capital.  My goal would be to see this monthly cash flow grow with time to twice that amount or more.  Based on the $20k/month on $1mm of capital, this would require cash on cash returns of 24%.  My sense is that this is an aggressive return expectation in today’s market.  I am fairly open to the type of investment (multi family, mobile home parks, vacation rentals, self storage, investing in debt , syndications, hard money lending, etc) but seek stability of cash flows and capital preservation/lower risk (I’m more of a buy and hold type investor).  I would be willing to take a very active role to achieve these levels of returns.  Also, I would be willing to move if needed (I live in a high cost city where cap rates are low). 

I understand this is a very general question - but I’d love for some ideas for a plan to get the juices flowing.  What’s the quickest way to get to the desired level of cash flow, with the least risk?  And using a model that continue to scale over time?

Thanks.

[Michael Wagner]

I am admittedly biased but I would encourage you to take a hard look at Storage.  Its funny that what you presented as your investment objectives are almost exactly what I am projecting on my most recent storage conversion project.  My initial budget was $1 Million (ended up at $1.15MM because...well it involved construction :) and conservatively it should Generate around $200K annually in cash flow.  While I realize that looks like it falls a bit short of your admittedly aggressive targets, it doesn't factor in the fact that this project was completely un-leveraged.  And it also doesn't account for the projected $1.5 Million in equity that will be realized.  Of course, its making ZERO dollars today and will be 1-2 years before the cash flow materializes.  You'll want to decide if you want to buy turn key (which I think would be quite hard to get to your desired returns) or if you have the bandwidth to take on value add properties. To me, purchasing an existing under-performing storage asset and turning it around provides the perfect balance of risk mitigation, cash flow (eventually) and equity!  

You might find some value in this case study. Note however that it is quite dated.  I have since expanded and sold the property for $1.325 Million. Over 4 years the facility made a total of $1MM in profits...It never got to your $20k per month mark in cash flow alone but the cash flow plus equity got us there....and it didn't require a full $1MM investment.  

https://www.biggerpockets.com/member-blogs/3915/48076-self-storage-case-study-2---update-14-months-after-purchase