How Realistic is this?

Question

Hey guys,

My question is "how realistic is it to get to 30 properties in under 5 years?" I did the math and if I can get an average of $200 in cash flow per property, this will allow me to live more than comfortably. Im in New Hampshire so the houses aren't terrible and Im not opposed to going to surrounding states once I start to look for more properties, but I am wanting to real dive head first into rental properties.

Im looking at buying my first 2-4 unit in the next 6 months or so and using that to "house-hack."

• If I only make about $40k now with 9% DTI and $6000 saved right now, how likely is it to reach say half of that?

I guess Im just getting into that analysis-paralysis mode and am just iffy on starting. I know this will definitely be a process and am not expecting over night results. I've just heard of people getting about 20+ properties in 4 years with no money starting and I just don't know where to start with that.

Any thoughts help! Thanks!

Dion McNeeley · Answer

Hi @Jared Chenel,

I think you will have a much better idea of how your goals can be reached after you do your first house hack. This will show you a lot about the process. Saving becomes a lot easier when you eliminate or reduce your rent with the house hack. The faster you can save the easier it will be to get the next deal going.

I think a large part of reaching your goals is taking this first step. You will become more aware of your spending and saving habits. While 99% of the rest of the people we know are still adding bad debt and justifying it because it is the normal path.

My goal was something similar but I am working on paid off rentals. Instead of 20+ units I can reach financial freedom with less units. The hard part is increasing the savings rate to be able to take down the mortgages. If you are making less than 50K you may also want to look into a better job or a side hustle to increase your income.

Also here is something to consider. Large banks like to limit people to 4 mortgages. Smaller banks / credit unions etc limit people to 10 mortgages. So after the first few deals you may find it more of a challenge to get the loans. Lenders only take into account 75% of the rent from your properties too. SO keeping the debt to income ratio at an acceptable level can be challenging. Then the lenders will also want you to have a reserve. What I keep hearing is 3 to 6 months in reserve for all the mortgages you have. This will scale. The more rentals you have the larger reserve you need to keep. Lenders will recognize retirement accounts as a reserve but only about 50% of that money counts.

Hope this helps.  Thanks,

Jared Chenel · Answer

@Jessica Stevenson@Lawrence L.@Rhett Dean@All

Thank you everyone for the encouragement!! I will save up for a few more months and stick with my plan of purchasing a multi-fam for the first one that will allow me to "house-hack" while saving all my income from my job. A year from now I want to be working on getting a second property under my belt by doing the BRRRR method. Im only 22 so I feel like I have plenty of time!

Jessica Stevenson · Answer

@Jared Chenel good for you for having those goals!  Make sure you keep a close eye on the Manchester market, as there are opportunities for owner-occupied multis all the time, and lots of redevelopment going on that could help your property value over the years.

Lawrence L. · Answer

@Jared Chenel Dont revamp those goals, stick with your first plan I too love your goals...How much money do you need to pay your bills, living expenses, everything. Now work backwards, say you need 5,000 a month to live then at a minimum you would need 50 doors  STRETCH...SHOOT FOR THE MOON...Listen to podcasts, read, read, read and KEEP GRINDING @Rhett DeanExcellent  suggestions and love those goals. KEEP GRINDING

Tj Hines · Answer

@Jared Chenel how about skip the single family bull crap and go straight into Multifamily. The economies of scale work better for you. 30sfr makes for a management intensive nightmare

Dion McNeeley · Answer

@Jared Chenel, always good to start out knowing what the end goal is. 6 figure passive income is an aggressive goal. I hope you hit it. Maybe there are some people here on BP that have the strategy that could help you. Mine would seem to get about 60k passive in ten years or so. With the tax benefits of real estate and not needing to then save for investing I feel this would be a comfortable amount.

The LLC thing is tricky and I have heard good arguments for both sides. The challenge initially is getting the property into the LLC's name. If it is an initial loan that the LLC is purchasing the property, it would be hard to show the LLC has the two years of income to be able to qualify for the loan. If the loan is in your name and you then try to put it in the LLC's name that triggers a thing with most lenders that gives them the right to call in the loan. Like when someone buys a property the first mortgage is paid off and a new mortgage is created. So I have not done any in an LLC yet. My brother hit FI with rentals and doesn't have any of them in an LLC. Instead he has an umbrella insurance policy over all of them. This helps since the mortgages are all paid off. The LLC is also something people do to protect the assets. If you have mortgages on them then there is already a form of asset protection in place. This is all something I would go and sit face to face with a lender and see what the options are for you specifically. When I have asked these questions of people who know more than I do I have heard great arguments for each way of doing it.

Rhett Dean · Answer

@Jared Cheney

I love your goals. I say shoot for 30 and do whatever you can to get there. If you start out BRRRRing you can continue to use the same pool of cash over and over if done right. If you aim high and in 5 years your only at 15 who cares keep going. I started this last year and bought 16 in one year. My goal is 150 doors in the next 22 years. I may not get there but I am going to have a blast trying. I would work On Your income the best way you can and get it up. Do the side hustles if needed. I am starting late in life I am now 42 so I had some money and a good w2 on my side. Do your 10 conventional loans first then find a small bank or credit union locally and work on portfolio loans after that. There is no limit to the amount of loans they can give you. If you want to scale quicker finds the deals and partner up with folks with more money. As they say a part of a deal is better than no deal. I am excited for you to start on this journey. Good Luck!!!

Justin Kane · Answer

its good that your planning , dont stop, but i suggest spend your time steering the ship not plotting the course. start with a 3 or 4 unit if you can find a great deal and house hack then use equity to buy other 4 plexes if you do this over 5 years you can get 30 doors within your 10 fed loan limit

Scott Smith · Answer

I think that your goal of 30 properties under 5 years is aggressive but achievable.  Check out my article on steps you can take to become a real estate pro!  https://www.biggerpockets.com/blog/cheap-free-steps-today-pro/

Caleb Heimsoth · Answer

@Jared Chenel. I would say your goals with the income and savings you listed is very unlikely to be achieved in 5 years.  Give yourself 15 years and it’ll be a lot more likely

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