Where is the $$$ in Small Multi Family investing?

[Joe Faruko]

Hi BP Community,

I am 24 years old with 65k saved and really pushing to becoming financially free as soon as possible. Many members mention buying small multi families until they are financial free - but how long with that take with the usual $100-$200 per door model? When does investing in SMFH really become worth it?

Example of a typical duplex in my area:

Lets say I use 50k for 25% down on a 200k duplex in CT. Let's say after p&i and setting aside money for a pm + capex/maintenance I receive 200-300 total a month. So I initially put down 50k to only receive 200-300 a month? Though members suggest to BRRRR - you would still have to wait 6 months before banks allow you to refinance and lots can realistically go wrong if you go over budget or under your estimated appraisal.

What am i missing here. How is anyone reaching financial freedom with such a large down payment and low cash payouts? Keep in mind, I’m not even including the freak repairs and vacancy in my calculations - this is if you receive 200-400 ever single month.

Is this just an economies of scale thing and needing to acquire 10+ proprieties?

Thank you in advance 

[George W.]

So I think that one of the most important things you can do financially is to pay yourself first outta every pay check before paying a single bill. Let's say you can save $1000/mo outta your paychecks at work monthly to pay yourself. That's $12,000/year I can put away. Not horrible, that's way more than the $0 most people put away. 

Let's say now I bought a multi-family that produces $300/mo after expenses and I add that to my $1,000/mo that I "pay myself". Well now I'm saving $1,300/mo 

I make some improvements to the property. Now it's got $80k in equity. I can borrow 70% of that to purchase another multi-unit that makes $400/mo now I'm saving $1,700/mo. That's $20,400/yr.

Sure it's not anything crazy but With 2 properties you can Basically double what you're "paying yourself" a year. Sure that's not crazy insane money but remember most people don't pay themselves outta their paycheck like that. This will pretty much keep compounding if you keep investing it in other properties. Eventually you'll reach a point where you'll make more through you're investments than you will at work if you keep buying more. Then in 30 years your properties all start becoming paid off one by one. 

Sure you're going to get phone calls and deal with bad tennants but remember you'll also have bad days at work making someone else tons of money while you get your little tiny slice of their wealth and you miss your child's football game because you had to work late and your stuck at a dead end job. That's the rut most people get stuck in. Investing in real estate and learning to save and spend wisely helps you avoid that rut.