Overleveraging, net worth, cash flow and headache factor

[Becca F.]

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

[Chris Seveney]

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated quite a bit in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent minus the property management fee due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break at the very least and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there is the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 Surprised your rents have not increased to keep up with expenses. One thing to note, MOST PEOPLE NEVER leave their W2 job. Those that do you need to understand your situation. You married with kids, single, DINK, a boomer? Where are you at in life? 

For those that do leave their job (Which I did), you will want to make sure you have atleast 6 months of savings as well as 125% of income on a consistent basis than whaBt you were making in your W2. Most of the time in real estate like any business owner, cash flow is not consistent.  By having reserves as well as a safety factor in income you can overcome some of the highs and lows. 

[V.G Jason]

You two should link up. I'd not buy another property, I'd buy the debt behind the property. Depending on how much your downpayment is, and the equivalent in debt funding that could make you actually net cash flow with way less headache. The term is your only issue but if you're trying to do shorter, it's to your advantage. 

W2 equivalency is just a pipe dream BP pushes from their GR buys & refis/rentals. This isn't really possible unless you had a low W2 AND live in a low cost of living with minimal dependents in today's world.

[Scott P.]

thanks for sharing.  I don’t know your specifics but if I were in your shoes I’d be patient.

[Theresa Harris]

For SFH#2, what did the inspection report show? You should not be getting calls for repairs every month. Either the house has problems or the tenant is a problem.

If you are feeling overleveraged, sit down and look at all your properties and decide which ones are not performing or will have big expenses coming up. Then look through those and see what you'd get the most money for if you sold (in the spring because winter is not the time to sell).

Rents should go up every year.

[Alan F.]

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 We hear this on BP all the time about leaving w2. I agree with Chris. You're ver fortunate to have a w2, you have lending available, many self employed don't.  Its really hard to get leverage as a IC or small business. Plus you get medical insurance, vacation etc.

I have to have a lot of cash on hand to flip, last year I dropped $70k on out of coverage surgery. Covered California super sucks, private insurance is extremely expensive & CA fines you at end of year for any lapse in coverage.

Employees have no idea how lucky they are, especially here in CA.

My workers comp and payroll taxes are almost 18%! 

I look forward to the day I get w2 employment.

Been a business owner 31 yrs, be careful what you wish for  ;)

[Jay Hinrichs]

Quote from @Alan F.:

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 We hear this on BP all the time about leaving w2. I agree with Chris. You're ver fortunate to have a w2, you have lending available, many self employed don't.  Its really hard to get leverage as a IC or small business. Plus you get medical insurance, vacation etc.

I have to have a lot of cash on hand to flip, last year I dropped $70k on out of coverage surgery. Covered California super sucks, private insurance is extremely expensive & CA fines you at end of year for any lapse in coverage.

Employees have no idea how lucky they are, especially here in CA.

My workers comp and payroll taxes are almost 18%! 

I look forward to the day I get w2 employment.

Been a business owner 31 yrs, be careful what you wish for  ;)

my wife and I are on medicare and with medicare and our supplimental we are still over 2k a month in health insurance.. My daughter who has 22 years at Intel I think she told me at 30 years she can retire and gets lifetime health benefits.. Only way to live on rent is to pay cash and or be extremely frugal mid western rust belt type area were primary housing is very low and all other things including gas, insurance etc are much lower than us west coast folks.
Nevada though to me is a smart choice to try to live on RE prop tax's some of the lowest in the country NO income tax utls are low . etc etc. But to live on just rental income and no other sources you just need to do the math.. with levearge its takes a boat load of Real estate . And your going to find it hard to get the associated debt you would need to qualify for the loans unless your using DSCR rent then you need a lot of cash since U need the debt coverage ratios..

I think its only been this BP dream that goes on about living on rents.. thats not a common thought out of these circles. of course investing in real estate getting it paid for and APPRECIATION is were wealth is created.. So really depends on your monthly needs to live the life you would find enjoyable  without bringing in some sort of income other than rental income.. Most of us that are in this full time have some rentals but its not our major income source we maybe RE brokers  or Mortgage Brokers or GC's and house flippers or like Chris fund manager etc etc.. granted we are self employed but we work and work hard.

PS I have never thought of my self as having a JOB I have been selling real estate since I was 18 and have done all sorts of different things in Real Estate my wife and I look at it as a LIFESTYLE not a JOB.  But if i had it to do all over again growing up in Cupertino CA in the 60s I would have figured out software and computers far better than I did would be like some of my peers that truly retired many years ago.  But hey we are still hear and enjoy all that we do. 

[Alan F.]

Quote from @Jay Hinrichs:

Quote from @Alan F.:

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 We hear this on BP all the time about leaving w2. I agree with Chris. You're ver fortunate to have a w2, you have lending available, many self employed don't.  Its really hard to get leverage as a IC or small business. Plus you get medical insurance, vacation etc.

I have to have a lot of cash on hand to flip, last year I dropped $70k on out of coverage surgery. Covered California super sucks, private insurance is extremely expensive & CA fines you at end of year for any lapse in coverage.

Employees have no idea how lucky they are, especially here in CA.

My workers comp and payroll taxes are almost 18%! 

I look forward to the day I get w2 employment.

Been a business owner 31 yrs, be careful what you wish for  ;)

my wife and I are on medicare and with medicare and our supplimental we are still over 2k a month in health insurance.. My daughter who has 22 years at Intel I think she told me at 30 years she can retire and gets lifetime health benefits.. Only way to live on rent is to pay cash and or be extremely frugal mid western rust belt type area were primary housing is very low and all other things including gas, insurance etc are much lower than us west coast folks.
Nevada though to me is a smart choice to try to live on RE  prop tax's some of the lowest in the country  NO income tax  utls are low .  etc etc. But to live on just rental income and no other sources you just need to do the math.. with levearge its takes a boat load of Real estate . And your going to find it hard to get the associated debt you would need to qualify for the loans  unless your using DSCR rent then you need a lot of cash since U need the debt coverage ratios..

I think its only been this BP dream that goes on about living on rents.. thats not a common thought out of these circles. of course investing in real estate getting it paid for and APPRECIATION is were wealth is created.. So really depends on your monthly needs to live the life you would find enjoyable  without bringing in some sort of income other than rental income.. Most of us that are in this full time have some rentals but its not our major income source we maybe RE brokers  or Mortgage Brokers or GC's and house flippers or like Chris fund manager etc etc.. granted we are self employed but we work and work hard.

 $2k ouch, yeah I left the South Bay after GFC to live El Dorado county.

I've kept 1 location running in Santa Clara since but with this current tech slowdown I'm closing it on the new year.

I'm only 45 min to the border, and Nevada's always been my choice cuz I could go see my kids in San Jose quickly. 

The problem is NV canceled reciprocity with CA so no contractors license. 

Id absolutely love to work at the gigafactory in sparks or other manufacturing.

I miss silicon valley when it was full of disc drive & semi conductor manufacturing.

[Dan H.]

To be blunt, your cash flow is likely negative on all 3 Indy properties.  Property #2 and #3 for sure are negative.  Here is the issue with property #1, your positive cash flow is small but the hold being 10 years and the majority of large cost cap ex items have lifespan of greater than 10 years.  

My recommendation is for more conservative underwriting.  Owning property is not the goal.  The goal is to make money.   I suspect Indy property #1 has made money because of the doubling in value but the decade leading to 2022 was exceptional.  Virtually any RE you purchased in 2013 would have made money.  I do not expect the next 10 years to be as kind to aggressive under writing.  

I think all 3 are more likely to produce poor return for their risk, equity, and effort than not over the next decade.

Note buying RE off the MLS to LTR will not always be a good investment. Sometimes alternate strategies are required. There are many strategies in RE. Different value add strategies, different buying strategies, different renting strategies, different financing strategies, different types of RE, etc.

Good luck

[Mike Dymski]

Thanks for sharing.  This should be required reading for all members.  And, keep in mind, things can get worse in a down economy.  Take action and pivot as you learn.  I focus on adding value and investing in growth areas to insulate against risk.  Built in equity mitigates risk, and value and rents increase with time.  Many investors have experienced life-changing value increases in the last ten years (some in the last few years that are higher than decades of "cash flow").  Good luck, you are farther along in your journey towards your goals than you think.

[Nick Maugeri]

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 Hi Becca, 

I am in Modesto and invest out of state - several states. This sounds like a matter of strategy and the need to identify a strategy that increases your cashflow. 1031 exchange, don't lose the real asset because you have to start over. I will send a DM.

[Allan C.]

@Becca F. Investing is about creating long term wealth, not replacing W2 income. While many have done well over the past 10 yrs, it's unlikely you can replicate that income generation through REI without risk or effort.

Think of this - how realistic do you think it will be for you to become a day trader so you can quit your W2. How is this any different than generating enough income from REI?

The appeal of REI is the low barrier to entry, but that is also what makes REI more challenging to sustain long term. I work a high-demand W2 and self-manage 30 units, with intent to move to 50 units shortly - but I also have 0 expectations that I'll leave my W2.

This quitting W2 to survive on REI reminds me of the FIRE movement or Paleo diet. It's a catchy fad but will pass when reality sets on. Markets are efficient and everyone should understand that. Maybe you should redefine your aspirations. Life is about trade-offs, so figure out which ones fit you.

[Michael Smythe]

Real estate is a long term investment and investors should look at things in 5 year projections, even 10 year projections.

Rents will eventually increase to cover the property taxes and your equity will continue to build.

Landlords are typically asset-rich, but cash-poor.

[Jordan Tinning]

@Alan F.

What a healthy and balanced perspective on W2 versus entrepreneurship. The whole narrative around a lot of RE platforms (including BP) is quit your job pursue real estate full time get your time back etc etc. but the reality is that having a good job is often best for most people especially today. Doesn’t mean you can’t get there or shouldn’t work towards entrepreneurship but it’s the other side of the equation that is never talked about and I for one appreciate the balanced (and nuanced) approach to the topic.

[Carlos Ptriawan]

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

in my opionon just sell out of state and put it index AS LONG AS the equity curves is more than 8-12 years you already have good enough equity property.

btw i dont think i would ever leave my stressful w2, because it's fun... you should move to different w2 job that you like but dont leave w2 lol

If i get bored in my w2 i just stay in my airbnb in hawaii and then after 9 days i feel refreshed lol....for us that has large NW in real estate we need to combine investment with lifestyle, gone the day we chasing 100 200 dollar per month that only gives headache....so i'm started liquidating the homerun from all those indianaville/ohioville rental,etc,etc lol ....

we can meet in person to discuss too

[Carlos Ptriawan]

Quote from @Michael Smythe:

Real estate is a long term investment and investors should look at things in 5 year projections, even 10 year projections.

Rents will eventually increase to cover the property taxes and your equity will continue to build.

Landlords are typically asset-rich, but cash-poor.

 hahahaha how true is that.... asset rich cash poor
this is why after year 6-8 is coming to realization that for asset is better to be sold at after certain years, i still remember the ranting from myself why i can't just sell these house.. now i move to different strategy to make landlording asset rich cash richer.

btw if we follow multifamily GP cycle they area avoiding capex at year 4 by bring the problem to the next buyer, hence the cycle continues...

[Carlos Ptriawan]

Quote from @Allan C.:

@Becca F. Investing is about creating long term wealth, not replacing W2 income. While many have done well over the past 10 yrs, it's unlikely you can replicate that income generation through REI without risk or effort.

Think of this - how realistic do you think it will be for you to become a day trader so you can quit your W2. How is this any different than generating enough income from REI?

The appeal of REI is the low barrier to entry, but that is also what makes REI more challenging to sustain long term. I work a high-demand W2 and self-manage 30 units, with intent to move to 50 units shortly - but I also have 0 expectations that I'll leave my W2.

This quitting W2 to survive on REI reminds me of the FIRE movement or Paleo diet. It's a catchy fad but will pass when reality sets on. Markets are efficient and everyone should understand that. Maybe you should redefine your aspirations. Life is about trade-offs, so figure out which ones fit you.

 one thing that's negative from Out of state investing is that we as landlord never grow up.

we don't develop business channel, we don't develop business skillset, and we give money to out of state realtor and out of state property management only.

in term of business education, investing and creating local business locally is way preferable.

I'd rather want to know much the NNN lease in san mateo in-n-out burger rather than 2/1 in indianapolis.

Passive investing IMO is detrimental in long term as we almost don't gain anything from a family dinner cash flow.

Try to become active investor, invest locally, try to become GP or co-GP and not just waiting like any other LP investor.

[Henry Clark]

Google REP hours versus W2 hours.  Don’t think you will meet qualifications even if you hit the 750 RE hours. 

[Henry Clark]

Forget your current investments.

What is your personal and financial objectives?

What is your risk reward effort expectations?     

Are you wanting to retire in 5 years or x?

You want to reduce stress?

How much free cash do you want per year? Take into account you will be paying medical.

Other???  Where do you want to live while w2?  Where afterwards?

Now figure out which REI strategy will meet that objective.

Now what are your current assets?  Including your house?  No $$$$ info on BO.  This is point A.   Above is Point B.  

Now build or ask for help developing a plan from A to B.  Timeframe.  Dollars available for investment.  

Right now you don’t have a path and a $$$ objective.  

[Becca F.]

Quote from @Chris Seveney:

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated quite a bit in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent minus the property management fee due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break at the very least and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there is the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 Surprised your rents have not increased to keep up with expenses. One thing to note, MOST PEOPLE NEVER leave their W2 job. Those that do you need to understand your situation. You married with kids, single, DINK, a boomer? Where are you at in life? 

For those that do leave their job (Which I did), you will want to make sure you have atleast 6 months of savings as well as 125% of income on a consistent basis than whaBt you were making in your W2. Most of the time in real estate like any business owner, cash flow is not consistent.  By having reserves as well as a safety factor in income you can overcome some of the highs and lows. 

I have children but they aren't little so no daycare and no nanny/babysitter costs but there will be college costs. My ex-husband and I split the kid costs. I also live in one of the highest cost of living areas in the U.S. so that doesn't help but If I move to a lower cost area my W2 income will decrease significantly. High S.F. Bay Area salary to go with the HCOL. I have more than 6 months savings but I don't have the 125% of my W2 income in net rental income.

With Indy SFH#1, this is the second set of tenants. I didn't increase the rent on my tenants after first year since I asked two of my investor friends and they said they don't increase rents on great tenants (which is whole other topic). I think property taxes in Indy are relatively high to the home value and there are unlimited increases as far as I know for investors - no Proposition 13 like in California with a 2% cap. I increased rent the last lease renewal but increasing it $300 a month at one lease renewal is excessive and I wouldn't do that to my tenants.

With Bay Area SFH rental, I'm renting it out to family members...long story but there are getting a deal which is why it's cash flow negative. I should be getting more than $5400 gross rent on that SFH but it's less.

I will DM you and can give you more specifics. I don't want to pull all my financial info out on a public forum. 

[Becca F.]

Quote from @Theresa Harris:

For SFH#2, what did the inspection report show? You should not be getting calls for repairs every month. Either the house has problems or the tenant is a problem.

If you are feeling overleveraged, sit down and look at all your properties and decide which ones are not performing or will have big expenses coming up. Then look through those and see what you'd get the most money for if you sold (in the spring because winter is not the time to sell).

Rents should go up every year.

With Indy SFH#2, the inspection report showed minor issues like back door was sticking, a few GFCI issues, etc. A contractor fixed all of it for about $1500. I didn't mention this part but my AC unit was stolen right before the tenant moved in - the thieves climbed a 7 foot fence. I paid the $4600 for new unit (labor and materials), didn't file a claim since it might cause my insurance premium to go up.

This is a Class C area potentially moving up to Class B. The tenant has called about at least 3 times for the PM to repair things. My PM repairs anything under $500 without having to call me but I will ask specifically what is going on. This is what I mean about the headache factor, having to deal with my W2 job along with PM issues and repairs out of state. 

[Becca F.]

Quote from @Alan F.:

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 We hear this on BP all the time about leaving w2. I agree with Chris. You're ver fortunate to have a w2, you have lending available, many self employed don't.  Its really hard to get leverage as a IC or small business. Plus you get medical insurance, vacation etc.

I have to have a lot of cash on hand to flip, last year I dropped $70k on out of coverage surgery. Covered California super sucks, private insurance is extremely expensive & CA fines you at end of year for any lapse in coverage.

Employees have no idea how lucky they are, especially here in CA.

My workers comp and payroll taxes are almost 18%! 

I look forward to the day I get w2 employment.

Been a business owner 31 yrs, be careful what you wish for  ;)

 Thanks for your perspective. I'm grateful to have a W2 job - I could be much worse off. Ironically I'm paying for Covered California like I'm self-employed. My employer offers health care coverage but employees have to pay 100% of the premiums. This was in exchange for a significant higher salary when I compared it to other employers my friends work at in the same field. I did some calculations and went with Covered Cal since the costs were significantly less per month with the premiums. I'm pretty healthy (so far) but my blood pressure goes up at times with all the stress of managing my W2 and these rentals and trying to acquire more properties. 

I jumped on the "leaving W2" bandwagon that has been popular in recent years. I have 2 friends who left W2s and neither of them own 100s of doors or commercial real estate. They both bought before 2017 so not in this current market. One is in his late 30s with 9 doors from income from rentals and being frugal (he doesn't live in CA). He has now said to me that he's bored because there's only so many times you can go to the gym, go on hikes, and watch movies at home. Most of his friends in 30s to early 40s are still working W2s and don't have free time to socialize with him.

The other friend and her husband retired from corporate jobs in the Bay Area and live off his stock dividends and rental income around the age of 45. They own 4 properties. They bought Bay Area property a long time ago, in early 2000s so they reaped the benefits of appreciation. My friend started her own business and her husband just sits around and plays golf. 

[Becca F.]

Quote from @Allan C.:

@Becca F. Investing is about creating long term wealth, not replacing W2 income. While many have done well over the past 10 yrs, it's unlikely you can replicate that income generation through REI without risk or effort.

Think of this - how realistic do you think it will be for you to become a day trader so you can quit your W2. How is this any different than generating enough income from REI?

The appeal of REI is the low barrier to entry, but that is also what makes REI more challenging to sustain long term. I work a high-demand W2 and self-manage 30 units, with intent to move to 50 units shortly - but I also have 0 expectations that I'll leave my W2.

This quitting W2 to survive on REI reminds me of the FIRE movement or Paleo diet. It's a catchy fad but will pass when reality sets on. Markets are efficient and everyone should understand that. Maybe you should redefine your aspirations. Life is about trade-offs, so figure out which ones fit you.

 I agree with you on building the long term wealth as evidenced especially by many of my Bay Area friends who own property and bought prior to 2013. My W2 is stressful and changing employers won't mitigate the stress since I'd have the same job duties(this was mentioned in another comment about changing jobs). This is actually the best employer I've had compared to previous employers. My bosses don't micromanage etc. 

Thanks for your perspective about not leaving your W2. It's all over social media "I'm 30 years old and left my W2 from BRRRRing and using Other People's Money". They make it look easy without using any of your own capital which is why newbies with little net worth are jumping on this. Trying to BRRRR especially out of state is difficult - I've already tried this in Indy with 6 offers. The seller won't accept a lower offer price, the renovation costs are too high after the inspection report or the ARV is not high enough. I wound up making offers on renovated homes - I know the seller got the equity but the stress and time were major factors.

[Alan F.]

Quote from @Becca F.:

Quote from @Alan F.:

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

 We hear this on BP all the time about leaving w2. I agree with Chris. You're ver fortunate to have a w2, you have lending available, many self employed don't.  Its really hard to get leverage as a IC or small business. Plus you get medical insurance, vacation etc.

I have to have a lot of cash on hand to flip, last year I dropped $70k on out of coverage surgery. Covered California super sucks, private insurance is extremely expensive & CA fines you at end of year for any lapse in coverage.

Employees have no idea how lucky they are, especially here in CA.

My workers comp and payroll taxes are almost 18%! 

I look forward to the day I get w2 employment.

Been a business owner 31 yrs, be careful what you wish for  ;)

 Thanks for your perspective. I'm grateful to have a W2 job - I could be much worse off. Ironically I'm paying for Covered California like I'm self-employed. My employer offers health care coverage but employees have to pay 100% of the premiums. This was in exchange for a significant higher salary when I compared it to other employers my friends work at in the same field. I did some calculations and went with Covered Cal since the costs were significantly less per month with the premiums. I'm pretty healthy (so far) but my blood pressure goes up at times with all the stress of managing my W2 and these rentals and trying to acquire more properties. 

I jumped on the "leaving W2" bandwagon that has been popular in recent years. I have 2 friends who left W2s and neither of them own 100s of doors or commercial real estate. They both bought before 2017 so not in this current market. One is in his late 30s with 9 doors from income from rentals and being frugal (he doesn't live in CA). He has now said to me that he's bored because there's only so many times you can go to the gym, go on hikes, and watch movies at home. Most of his friends in 30s to early 40s are still working W2s and don't have free time to socialize with him.

The other friend and her husband retired from corporate jobs in the Bay Area and live off his stock dividends and rental income around the age of 45. They own 4 properties. They bought Bay Area property a long time ago, in early 2000s so they reaped the benefits of appreciation. My friend started her own business and her husband just sits around and plays golf. 

All very interesting, this is the down to earth learning that I get from being on the forum. I really appreciate your response and when I read my 1st response back I think I was a little abrasive (sorry) 1 thing about covered CA is age, those us that are a little more (ummm) seasoned pay more lol.

Its funny because I've got friends that weren't trying to be investors and got lucky on the buy, rode high appreciation & bounced with $ to another state. In fact I know a few very lucky investors.

We all start in different times, spaces and with different skills etc. I came back to this forum for 1 reason, to be at least 1 little component in helping those that are climbing up. 

I sincerely believe that at your age & considering what you've already pulled off if you hang in there, you'll hit your goals.

We're all stuck in our own heads & sometimes it's tough to find answers. I throughly empathize with your frustration. 

I think sometimes just getting away from the noise and clearing your head (in nature?) can help. Then re-examine the plan & process.

For me real estate still comes back to location & you're in 2 great locations. I think as equity catches up you'll have more piece of mind.

FWIW you just helped me learn more things, maybe your doing better than you knew :-)

Thank you & I sincerely wish you the best!

[Theresa Harris]

Quote from @Becca F.:

Quote from @Theresa Harris:

For SFH#2, what did the inspection report show? You should not be getting calls for repairs every month. Either the house has problems or the tenant is a problem.

If you are feeling overleveraged, sit down and look at all your properties and decide which ones are not performing or will have big expenses coming up. Then look through those and see what you'd get the most money for if you sold (in the spring because winter is not the time to sell).

Rents should go up every year.

With Indy SFH#2, the inspection report showed minor issues like back door was sticking, a few GFCI issues, etc. A contractor fixed all of it for about $1500. I didn't mention this part but my AC unit was stolen right before the tenant moved in - the thieves climbed a 7 foot fence. I paid the $4600 for new unit (labor and materials), didn't file a claim since it might cause my insurance premium to go up.

This is a Class C area potentially moving up to Class B. The tenant has called about at least 3 times for the PM to repair things. My PM repairs anything under $500 without having to call me but I will ask specifically what is going on. This is what I mean about the headache factor, having to deal with my W2 job along with PM issues and repairs out of state. 

 The PM should know better than to say yes to every request, then again it isn't their money.  Talk to the PM and tell them to have a chat with the tenant.

[John Morgan]

These are all money pits. I'd sell them all and 1031 them into cash flowing SFR. Your numbers clearly aren't working with these properties. Find some properties that will work. And maybe buy 2 or 3 properties with each 1031 exchange if you can find some they cash flow. I target C to C+ class hoods which appreciate the most and have higher demand with good cash flow from day one. I'm not buying for the school district and amenities these neighborhoods have. I'm buying for cash flow, very low turnovers and high demand SFR which are in highest demand.