Scaling Rental Properties

[Errol Alexander Dowis]

Hi everyone, I am new to the forum and to investing (I am currently working on my first deal) and I have set myself a goal. I want to have an annual income of 500,000 by 2030. Now I have the advantage of having a pretty good starter job and own a budding company so hopefully my first few down payments will be no problem, but there is my question. Based on my calculations, if I was to average $300 per unit per month, which I believe to be realistic in my area, I would need to own 1,667 units to average this paycheck. My question is, how can you scale? would you recommend buying apartment complexes or increasing the value of each unit I purchase? I ask because that is quite a few units to manage even with a property management company..... 

[Caleb Heimsoth]

Errol Alexander Dowis let’s start with what does a “good starting job” entail as far as pay goes? I think your 300 dollars in cash flow per unit is kind of high unless rents are 1000 or more per.

Think of it this way. Let’s say you can earn 10 percent return on invested capital. This isn’t horrible, it’s not great, it’s just good or average.

To get to 500k a year would require 500k/.1 or 5M invested capital. Can you do that between now and 2030? Of course you can raise money from others but then you need bette returns to cover what you’re paying them.

Value add apartments can be a good way to scale but you need some serious coin to do that and most people don’t get there in a day.