Escaping corporate slavery to real estate. Advice needed!

[Kate Stephens]

Hi, I am pretty new to BP and have been binge listening to pod casts - I can't believe it took me so long to discover this great community! I am looking for advice. I have 7 rental properties, 6 in California and I just bought 1 in Ohio though a turnkey company a month ago (too early to tell but so far so good). My 6 Cali properties have a value of $2.4M with an outstanding mortgage balance of $1.3M but after repayment mortgages, maintenance etc I am not cashflowing. I'd love to say that the equity I have was genius property buying on my part but I was just lucky with timing! I am 41 and the Mom of an awesome 3 yr old with a busy corporate job. Everyday feels like I am missing out on her growing up and I have some elderly grandparents that need more help than I am providing. I would like to generate income of $15k per month (before tax) from property for living costs (I have a decent size personal mortgage and I'm in the breadwinner of my family). I'm considering everything to allow me to have the life I want and more time for the things that are important. I've been researching out of state purchasing for better cash flow, syndication etc. I am very organized and action orientated and fiscally risk averse and conservative. I thought I would post here to seek advice and inspiration on ways for me to change my strategy to create the life I want in the short term without significant risk. Thank you in advance for any and all wisdom! Kate

[Saul Francis]

Hey Kate - i'm even newer to this site than you.   ran into it accidentally but couldn't resist chiming in.  thought i'd give quick thought here.  Your goal, $15K per mo is $180,000 a year.   Most seasoned real estate investors are not going to see much more than 4-7% actual net cash flow from solid reliable income properties.  At least in the first 2 to 8 years of ownership.   The math today, buy at a 5-7% cap rate, finance 55-65% at 3-5% interest only for first 3-5 years and generate a 5-7% net cash return.   The government agencies (Fannie, Freddie) and some insurance companies readily provide this financing non-recourse on proven properties.   When the interest only period expires, hopefully rents have advanced enough that while the mortgage payment increases for principal repayment the net cash flow is still in the 5%+ range on the equity.    Since most of this debt is 10 year term, and many properties in the 6-8 year time frame require additional capital improvements, you put it up for sale to recycle the equity into a larger income generating property.  

So you can back into a starting point of the amount of property you'd have to own to reach your goal of $15K free cash flow per month.   $180,000 @5.5% is $3.3 MM.   On your 6 Cali props you've already got $1.1 MM of equity, which should be delivering you a minimum of $40,000 to $50,000 a year cash flow, after the mortgage, maintenance, etc. right now by this logic for perspective.   I don't know why they are not, but i do know that every property i look at in Cali never seems to work for my minimum of 5-7% cash flow.   going to Ohio might be a very good idea for you.   In the meantime, since the Cali properties aren't doing anywhere near the job they need to be doing for you, you may want to think about recycling that equity into some real estate that will.     Honestly i've been liking Texas, Oregon, Georgia and Arizona at least for multifamily income properties.    I've looked at Ohio from time to time but the closest i can get is Indiana for properties meeting my minimum 5-7% free cash flow requirement.   Hope this helps.

Francis.