Hello from Sunny Scottsdale, AZ

[Neal Badru]

Hey guys,

So I've been in the mortgage industry for five years and about a year ago a co-worker told me about how he has four multi family properties that cash flow over $500 a month after all mortgages and management expenses.

I always assumed that rental properties weren't worth it because in my five years I may have come across only a handful of people who had more than 5 properties. I think now I understand the reason for that is a lack of knowledge and not because it's a bad investment. Most people will have 2-3 properties and the headaches for the cashflow you might get might not be worth it. The true value comes from scaling and increasing cashflow so those headaches become a smaller percentage of your cashflow.

After running some basic numbers here is my plan (with my brother) for the next few years. I feel like knowing all the mortgage guidelines and being a broker is a good starting point.

Goal: acquire 20 multi family properties within the next 7 years.

How: We both have around $30k saved up between the two of us. I think the most important thing we can do is use that money to find a suitable multi family unit to live in as a primary residence so we can both start off with 1 property each. We don't known any homes right now.

After that we use our savings from our jobs (both are single 27/29 year old dudes) and the cashflow savings from our rent payments to put 20-25% down to find subsequent deals that have these parameters: 1) $500 cash flow after all recurring expenses including mortgage from each property. 2) Recoup cash investment in 3-4 years

I figure once we hit 4-5 properties each that are cash flowing $500 a month. That's $24,000 a year which is enough to pay for another property (using leverage).

After the first 4-5 we will be able to grow at a rate of 2 properties a year rather than 1 property every two years.

After we both purchase 4-5 properties, we re-evaluate. Depending on mortgage market and guidelines we can either keep using leverage to acquire more properties, or use the cashflow from the properties to pay mortgages off to increase cashflow without acquiring more properties. After that we can mortgage 5-10 more properties.

I haven't thought too deep about post 20 properties.

Either I can start to manage them all full time and start a small property management company and quit my job, or re-leverage after paying them off to diversify into commercial properties (hotels, apartments, etc)

I figure 20 properties at $500 =$10k

After paying off mortgages cashflow should be $20k

That's $240,000 a year which is more than me and my brother make combined now.

I am most concerned with cashflow and purchase price of the property. Internet rates are irrelevant to me as they are out of my control and I can pay the mortgage off in 4-5 years if needed.

My target property would look like this:

2-4 unit $125-175k

Put 25% down

Start in AZ, but potentially add Las Vegas and eventually Atlanta as potential locations for investments.

I need to do more research in BRRRR, but that may be the best long term strategy if I ever want to transition to this business full time.

So anyways that's my intro and how I got here please poke holes in my ideas/plans that is what I am hear for to absorb knowledge and hopefully to give some back from my few years in the mortgage industry.