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Small & Mighty Real Estate Investing
BP Team,
I am looking for perspective and advice. I have been following BP on YouTube for a few years and have been investing in real estate for the last 3 years. Over that time we have acquired 4 properties, 6 doors. Those properties are currently cash flowing $3,815 per month but if they were paid off they would generate $6785.58 per month. My ultimate goal is to generate $11K per month cashflow and retire. I have decided that I don't want to build a real estate empire but rather generate that cashflow from as few properties as possible. What has worked for me is duplexes and single family homes. I like this strategy and plan to continue. As you can see by the attached photo I am tracking current cash flow as well as what my cash flow would be if my properties were fully paid off. My goal is to shift from buying to paying off my properties as soon as the paid off property bar hits $11k per month.
I live in Sheboygan Falls, WI. The average rental home price I am looking at is between $175K and $250K for a 3 bedroom house that requires minimal work in a nice neighborhood. Those houses could rent anywhere from $1,600 per month to $2,000 per month. One of my buy box requirements is the house needs to cashflow at least $500 per month or I am not buying it. With rising prices and interest rates I have been able to overcome that requirement by putting more money down. The last house I purchased was $227,500 and we put down $85K. My wife and I both have jobs that pay over 6 figures and our monthly living expenses are only around $8K. We invest the rest in our business and reinvest all the profits from the business back into the business. We are able to save about $100K per year so putting down $85K is possible for us with our current situation. Now for the question to the group:
- I would like to be able to retire as soon as possible even though I know we are 5-10 years away from that. If I keep doing the same strategy, putting more money down upfront, I will generate more cashflow now but am delaying how quickly I can purchase houses. I always viewed it as "who cares how much money I put down", I plan to pay them all of before I retire as part of my ultimate strategy anyways. All I am doing is paying more on the front end and that saves me how much I need to pay on the backend. It's also less total interest paid because I am borrowing less total money. This also protects my downside risk because I could very easily lower my rents if I had to in a market downturn and compete vs. being forced to sell because of losing money. This also gives me solid staying power when maintenance costs arise. Should I keep doing this strategy? Below is my other option.
- Now that we are generating $3,815 per month cashflow from my current portfolio do I just continue to buy more properties putting the minimum 20% down? Doing this would put my new properties making next to nothing, running some rough numbers I may make $100 or $150 per month on new properties with mortgages that are around $1,500 per month. I would use the cashflow from my current properties to protect us if we had vacancy or repairs that needed to be paid for. Doing this would allow me to cut my down payments in half. Or said differently purchase twice the amount of houses I have been buying. I truly think I only need 4 more houses to hit my goal and then shift from buying to paying them off.
I am not sure if I am thinking about this the right way and I am sure there are things I am not thinking about but below are my thoughts:
Pros
- I can purchase the houses I need to hit my goal faster
- With getting homes fasters the depreciation, tax benefits, amortization, appreciation, rent increases all start sooner
- Home prices on average should be lower now then if I buy in 4-5 years
- I can take better advantage of leverage
Cons
- I have more risk until I pay the properties off
- Less upfront cashflow
- Longer timeframe to acquire the properties to reach my goal
If anyone has any opinions or advice I'd love to hear it.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/uploaded_images/1722047798-Income_Goal.jpg?twic=v1/output=image/quality=55/contain=800x800)
![John Cardinale's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2016855/1681044673-avatar-johnc1530.jpg?twic=v1/output=image/crop=493x493@0x44/cover=128x128&v=2)
Quote from @Paul Novak:One thing to consider is the more of one’s own money you use, the more you can be lax and lazy with the deal and your standards. If you’re using all cash you can afford to make mistakes with underwriting, or during renovations. If you’re repeatedly using OPM successfully, the processes to follow obligate stricter adherence to the system and so chances are you are a good bit more careful. Using all Cash can make us lazy so we need to watch out for that.
BP Team,
I am looking for perspective and advice. I have been following BP on YouTube for a few years and have been investing in real estate for the last 3 years. Over that time we have acquired 4 properties, 6 doors. Those properties are currently cash flowing $3,815 per month but if they were paid off they would generate $6785.58 per month. My ultimate goal is to generate $11K per month cashflow and retire. I have decided that I don't want to build a real estate empire but rather generate that cashflow from as few properties as possible. What has worked for me is duplexes and single family homes. I like this strategy and plan to continue. As you can see by the attached photo I am tracking current cash flow as well as what my cash flow would be if my properties were fully paid off. My goal is to shift from buying to paying off my properties as soon as the paid off property bar hits $11k per month.
I live in Sheboygan Falls, WI. The average rental home price I am looking at is between $175K and $250K for a 3 bedroom house that requires minimal work in a nice neighborhood. Those houses could rent anywhere from $1,600 per month to $2,000 per month. One of my buy box requirements is the house needs to cashflow at least $500 per month or I am not buying it. With rising prices and interest rates I have been able to overcome that requirement by putting more money down. The last house I purchased was $227,500 and we put down $85K. My wife and I both have jobs that pay over 6 figures and our monthly living expenses are only around $8K. We invest the rest in our business and reinvest all the profits from the business back into the business. We are able to save about $100K per year so putting down $85K is possible for us with our current situation. Now for the question to the group:
- I would like to be able to retire as soon as possible even though I know we are 5-10 years away from that. If I keep doing the same strategy, putting more money down upfront, I will generate more cashflow now but am delaying how quickly I can purchase houses. I always viewed it as "who cares how much money I put down", I plan to pay them all of before I retire as part of my ultimate strategy anyways. All I am doing is paying more on the front end and that saves me how much I need to pay on the backend. It's also less total interest paid because I am borrowing less total money. This also protects my downside risk because I could very easily lower my rents if I had to in a market downturn and compete vs. being forced to sell because of losing money. This also gives me solid staying power when maintenance costs arise. Should I keep doing this strategy? Below is my other option.- Now that we are generating $3,815 per month cashflow from my current portfolio do I just continue to buy more properties putting the minimum 20% down? Doing this would put my new properties making next to nothing, running some rough numbers I may make $100 or $150 per month on new properties with mortgages that are around $1,500 per month. I would use the cashflow from my current properties to protect us if we had vacancy or repairs that needed to be paid for. Doing this would allow me to cut my down payments in half. Or said differently purchase twice the amount of houses I have been buying. I truly think I only need 4 more houses to hit my goal and then shift from buying to paying them off.
I am not sure if I am thinking about this the right way and I am sure there are things I am not thinking about but below are my thoughts:
Pros
- I can purchase the houses I need to hit my goal faster
- With getting homes fasters the depreciation, tax benefits, amortization, appreciation, rent increases all start sooner
- Home prices on average should be lower now then if I buy in 4-5 years
- I can take better advantage of leverage
Cons
- I have more risk until I pay the properties off
- Less upfront cashflow
- Longer timeframe to acquire the properties to reach my goal
If anyone has any opinions or advice I'd love to hear it.
![Don Konipol's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/37034/1621370217-avatar-dkonipol.jpg?twic=v1/output=image/cover=128x128&v=2)
@paul
@Paul Novak First congratulations on finding and sticking to what’s successful and comfortable for you.
You can always ACCELERATE wealth creation; the question is do you want to take on more risk and or dwell outside your comfort zone in order to accelerate?
You’ve developed a moderately fast wealth accumulation strategy that’s relatively low risk, enabling you to ride out down cycles, negative cash flows, unexpected necessary expenditures, etc. Your strategy takes advantage of your employment cash flow and ability to control discretionary spending. So, WHY screw with a successful system that your able to operate without undue stress?
BUT, let’s say for personal reasons you want to “stretch” for faster wealth accumulation. That can be accomplished a number of ways. As you suggest lowering down payment to buy more properties is one way, although the downside is greater risk in event of down cycle and more time to manage required. But, there are other strategies that can counter balance at least one of the disadvantages. Think multi unit residential, commercial properties, or purchasing houses “subject to” existing mortgage. Purchasing subject to allows you to (1) buy a property and pay a lower rate (3-4%) that was in existence when the loan was originated, so cash flow will be better as well as equity buildup; (2) not have to qualify for the mortgage saving time, expense, and allowing property purchases in greater number than otherwise and (3) no personal liability on downside (4) no debt added to your PFS. There are numerous threads about sub to and many investors believe it is a high risk strategy (especially for seller) and believe buyers who use it “take advantage” of naive sellers. While that may sometime be true, full disclosure to all parties should eliminate any ethical or moral concerns (imo).
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Quote from @John Cardinale:
Quote from @Paul Novak:One thing to consider is the more of one’s own money you use, the more you can be lax and lazy with the deal and your standards. If you’re using all cash you can afford to make mistakes with underwriting, or during renovations. If you’re repeatedly using OPM successfully, the processes to follow obligate stricter adherence to the system and so chances are you are a good bit more careful. Using all Cash can make us lazy so we need to watch out for that.
BP Team,
I am looking for perspective and advice. I have been following BP on YouTube for a few years and have been investing in real estate for the last 3 years. Over that time we have acquired 4 properties, 6 doors. Those properties are currently cash flowing $3,815 per month but if they were paid off they would generate $6785.58 per month. My ultimate goal is to generate $11K per month cashflow and retire. I have decided that I don't want to build a real estate empire but rather generate that cashflow from as few properties as possible. What has worked for me is duplexes and single family homes. I like this strategy and plan to continue. As you can see by the attached photo I am tracking current cash flow as well as what my cash flow would be if my properties were fully paid off. My goal is to shift from buying to paying off my properties as soon as the paid off property bar hits $11k per month.
I live in Sheboygan Falls, WI. The average rental home price I am looking at is between $175K and $250K for a 3 bedroom house that requires minimal work in a nice neighborhood. Those houses could rent anywhere from $1,600 per month to $2,000 per month. One of my buy box requirements is the house needs to cashflow at least $500 per month or I am not buying it. With rising prices and interest rates I have been able to overcome that requirement by putting more money down. The last house I purchased was $227,500 and we put down $85K. My wife and I both have jobs that pay over 6 figures and our monthly living expenses are only around $8K. We invest the rest in our business and reinvest all the profits from the business back into the business. We are able to save about $100K per year so putting down $85K is possible for us with our current situation. Now for the question to the group:
- I would like to be able to retire as soon as possible even though I know we are 5-10 years away from that. If I keep doing the same strategy, putting more money down upfront, I will generate more cashflow now but am delaying how quickly I can purchase houses. I always viewed it as "who cares how much money I put down", I plan to pay them all of before I retire as part of my ultimate strategy anyways. All I am doing is paying more on the front end and that saves me how much I need to pay on the backend. It's also less total interest paid because I am borrowing less total money. This also protects my downside risk because I could very easily lower my rents if I had to in a market downturn and compete vs. being forced to sell because of losing money. This also gives me solid staying power when maintenance costs arise. Should I keep doing this strategy? Below is my other option.- Now that we are generating $3,815 per month cashflow from my current portfolio do I just continue to buy more properties putting the minimum 20% down? Doing this would put my new properties making next to nothing, running some rough numbers I may make $100 or $150 per month on new properties with mortgages that are around $1,500 per month. I would use the cashflow from my current properties to protect us if we had vacancy or repairs that needed to be paid for. Doing this would allow me to cut my down payments in half. Or said differently purchase twice the amount of houses I have been buying. I truly think I only need 4 more houses to hit my goal and then shift from buying to paying them off.
I am not sure if I am thinking about this the right way and I am sure there are things I am not thinking about but below are my thoughts:
Pros
- I can purchase the houses I need to hit my goal faster
- With getting homes fasters the depreciation, tax benefits, amortization, appreciation, rent increases all start sooner
- Home prices on average should be lower now then if I buy in 4-5 years
- I can take better advantage of leverage
Cons
- I have more risk until I pay the properties off
- Less upfront cashflow
- Longer timeframe to acquire the properties to reach my goal
If anyone has any opinions or advice I'd love to hear it.
Thanks for taking the time to respond. I do agree with you, when your margin of error is higher you don't have to be as precise which ultimately leads to waste in profits and prolongs your abilities to reach your goal if you are not disciplined.
![Paul Novak's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2908465/1704059934-avatar-pauln223.jpg?twic=v1/output=image/cover=128x128&v=2)
Quote from @Don Konipol:
@paul
@Paul Novak First congratulations on finding and sticking to what’s successful and comfortable for you.
You can always ACCELERATE wealth creation; the question is do you want to take on more risk and or dwell outside your comfort zone in order to accelerate?
You’ve developed a moderately fast wealth accumulation strategy that’s relatively low risk, enabling you to ride out down cycles, negative cash flows, unexpected necessary expenditures, etc. Your strategy takes advantage of your employment cash flow and ability to control discretionary spending. So, WHY screw with a successful system that your able to operate without undue stress?
BUT, let’s say for personal reasons you want to “stretch” for faster wealth accumulation. That can be accomplished a number of ways. As you suggest lowering down payment to buy more properties is one way, although the downside is greater risk in event of down cycle and more time to manage required. But, there are other strategies that can counter balance at least one of the disadvantages. Think multi unit residential, commercial properties, or purchasing houses “subject to” existing mortgage. Purchasing subject to allows you to (1) buy a property and pay a lower rate (3-4%) that was in existence when the loan was originated, so cash flow will be better as well as equity buildup; (2) not have to qualify for the mortgage saving time, expense, and allowing property purchases in greater number than otherwise and (3) no personal liability on downside (4) no debt added to your PFS. There are numerous threads about sub to and many investors believe it is a high risk strategy (especially for seller) and believe buyers who use it “take advantage” of naive sellers. While that may sometime be true, full disclosure to all parties should eliminate any ethical or moral concerns (imo).
Don, thanks for taking the time to reach out and respond to my post. I did trying to do one subject to loan an my real estate investor didn't know much about it. Where would you start with a process like this. Would I go to the current owners bank to see if they would allow a subject to loan? The deal is good and the current owner is my friend. If I could find a way to make it work I think it would be a good deal. My fear is the lender calling the loan due because I wouldn't have the cash available to pay it off.
![Don Konipol's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/37034/1621370217-avatar-dkonipol.jpg?twic=v1/output=image/cover=128x128&v=2)
Quote from @Paul Novak:I don’t know of many cases where a lender would allow an assumption let alone a “subject to “ situation. I recently did one where the lender did allow it but that was because of our position as a great customer of the bank and our impeccable credit record. Here’s the “skinny” on almost all subject to situations. All mortgages contain a “due on sale clause” which states that the lender may, at its option accelerate (call note due) if a transfer of the property securing the note takes place. Please note that contrary to common belief a lender can NOT prohibit a transfer, they could only declare such transfer a item that allows them to accelerate the note.
Quote from @Don Konipol:
@paul
@Paul Novak First congratulations on finding and sticking to what’s successful and comfortable for you.
You can always ACCELERATE wealth creation; the question is do you want to take on more risk and or dwell outside your comfort zone in order to accelerate?
You’ve developed a moderately fast wealth accumulation strategy that’s relatively low risk, enabling you to ride out down cycles, negative cash flows, unexpected necessary expenditures, etc. Your strategy takes advantage of your employment cash flow and ability to control discretionary spending. So, WHY screw with a successful system that your able to operate without undue stress?
BUT, let’s say for personal reasons you want to “stretch” for faster wealth accumulation. That can be accomplished a number of ways. As you suggest lowering down payment to buy more properties is one way, although the downside is greater risk in event of down cycle and more time to manage required. But, there are other strategies that can counter balance at least one of the disadvantages. Think multi unit residential, commercial properties, or purchasing houses “subject to” existing mortgage. Purchasing subject to allows you to (1) buy a property and pay a lower rate (3-4%) that was in existence when the loan was originated, so cash flow will be better as well as equity buildup; (2) not have to qualify for the mortgage saving time, expense, and allowing property purchases in greater number than otherwise and (3) no personal liability on downside (4) no debt added to your PFS. There are numerous threads about sub to and many investors believe it is a high risk strategy (especially for seller) and believe buyers who use it “take advantage” of naive sellers. While that may sometime be true, full disclosure to all parties should eliminate any ethical or moral concerns (imo).
Don, thanks for taking the time to reach out and respond to my post. I did trying to do one subject to loan an my real estate investor didn't know much about it. Where would you start with a process like this. Would I go to the current owners bank to see if they would allow a subject to loan? The deal is good and the current owner is my friend. If I could find a way to make it work I think it would be a good deal. My fear is the lender calling the loan due because I wouldn't have the cash available to pay it off.
Up until now, very few notes have been “called” due when title has transferred. This may be because (1) until recently interest rates were trending lower so if the lender is getting a higher rate on subject note than he can obtain on new note there’s no monetary incentive to call the note (2) in the past technology did not exist to identify the property transfers (ten years ago county recording docs were not online) and (3) the lenders rather collect payments than own property. More and more (1) and (2) no longer apply.
Processes have been set up to provide a degree of protection to parties involved in subject to transactions. You can find out more in greater detailer by searching BP for subject to. You will find a whole lot of OPINIONS as to the ethics, morality, etc. of doing a subject to transaction. The nay sayers center around two arguments. First, they believe that subject to transactions somehow “trick” the lender by not informing the lender of the title transfer. As a lender I can tell you that argument holds no water. It is the RIGHT of any property owner to sell or transfer title and he is under NO obligation to inform anyone of such. IF the lender does find out the lender can choose what course of action to take. Please note than may liability personal or corporate of the original borrower remains after the title transfer. So, while the seller no longer owns the property, they are still liable for the note. Various legal setups can mitigate a large part of this risk. The second argument is that sellers often have no idea what they’re getting themselves into; that is liability, in a subject to transaction. This is correct, so I would disclose every aspect of the sub to and how it relates to the seller, perhaps going so far as to insisting the seller sign off on an acknowledgment that he understands the ramifications. This alleviates ethical concerns.
My advice on sub to is as follows
1- COMPLETELY understand the process, implications, liabilities, and possible outcomes before engaging or attempting to engage in a sub to transaction
2- Complete disclosure going so far as making sure the other part understands the transaction and possible consequences
3- Utilization of an attorney experienced in subject to transactions for setup in such a way that provides some protections in case of default or in case the note is called
4- Have a backup plan in case the note is called
5 - only use for property that has a TRUE positive cash flow unless the buyer has substantial reserves
I myself have purchased 8 properties subject to, but 5 of those were commercial properties which often have notes where a subject to is allowable. However, 3 were residential, and I’m happy to say no problems were encountered. I have also sold properties subject to; but with safeguards in place so we had a path of problems occurred.
Good luck!
I know this may sound simple and unorthodox, but I think you should try to BRRRR as much as possible. By using the BRRRR strategy, you only need to put down money once. After that initial down payment, the bank will basically be financing your investments. You'd buy an off-market, distressed property, fix it up, rent it out, refinance it, collect your money from the refinance, and repeat the process. This way, you only need to invest your profits once.
Overall, I don’t think you should keep buying more properties and making down payments repeatedly. That approach involves a lot of work and spending, and there are better strategies to utilize. By BRRRRing, you can achieve your goal of acquiring four houses with minimal effort and financial strain, allowing you to shift from buying to paying them off. Plus, you’d probably reach your goals faster with that plan of attack if executed properly. I hope this provides some value to you.
Lotus
![Paul Novak's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2908465/1704059934-avatar-pauln223.jpg?twic=v1/output=image/cover=128x128&v=2)
Quote from @Lotus Eli:
I know this may sound simple and unorthodox, but I think you should try to BRRRR as much as possible. By using the BRRRR strategy, you only need to put down money once. After that initial down payment, the bank will basically be financing your investments. You'd buy an off-market, distressed property, fix it up, rent it out, refinance it, collect your money from the refinance, and repeat the process. This way, you only need to invest your profits once.
Overall, I don’t think you should keep buying more properties and making down payments repeatedly. That approach involves a lot of work and spending, and there are better strategies to utilize. By BRRRRing, you can achieve your goal of acquiring four houses with minimal effort and financial strain, allowing you to shift from buying to paying them off. Plus, you’d probably reach your goals faster with that plan of attack if executed properly. I hope this provides some value to you.
Lotus
Thanks for the feedback, this is something I may have to look into. I know about the strategy but have never yet put it to use.
I am glad I could help , seriously lol !
Here are some helpful links!