$200/week + a little hustle is really enough

[Lawrence Ratliff]

So here’s my story, why I thinks a good one, and that you can do it to. I like to buy SFR buy and hold rentals in Dallas TX. I need about $25k (20% down and about $5k rehab) to buy each one. I have a full time sales job, so bills are paid. From that I have $200 per week go into a separate account. $5,200 per year, $10,400 every 2 years. Then the hustle comes in. I am also a licensed Real Estate Agent. I do 1-2 real estate transactions per year. That’s right 1-2. If I sell 1 I get about $7,500 per year, $15,000 every 2 Years. $10,400 + $15,000 = $25,400. I am married with 2 kids and love the family time, so 1-2 transactions per year is a small time commitment and just barely cuts into family time. If I sell 2 transactions in a year then I buy another property that year as opposed to every 2 years. I put all houses on a 15 year loan. They are all positive cash flow. My goal is to have 10 properties with about $15k monthly income, $180k annual. Definitely enough for me and wife to retire on. I like buy and hold because of the long term income for retirement and I’ll leave a cash flow machine to my 2 kids. Whatever life throws them money shouldn’t ever be a worry. The best part of this is that anybody can do it. You need a few things, cash (see above), good credit, a little discipline, and some serious guts (I remember sending the first wire transfer 😮). But I did it, never regretted it, and so can you. I hope this story encourages a few people. I would love to hear of others using my plan and finding success!!! Cheers, Lawrence

[Justin R.]

@Lawrence Ratliff Bravo for stepping out and sharing what you're doing - that's more than most do.  An observation based on what I'm reading from some others on this thread, from my own experience, and from an assumption that you haven't owned properties for more than a couple years...

The old-timers will tell us the past 5-7 years have been very atypical.  Rents rising more-or-less across the board.  Vacancy dramatically low in many many markets.  Tenants with increasing incomes.  Property values on a relentless march upwards.  It's been atypically difficult to lose as an investor.

I love your 15 year payoff-to-retire plan.  You probably know it's not going to go on like this for the next 15 years or the years after that, and that we're more likely to revert to the mean.  I've seen from friends what (often) happens after owning that rental for 10 years w/o reinvestment.  I've purchased homes that were rentals for 15 years.  To keep today's solid rental from becoming next decade's rehab-special, you'll need either luck, re-investment, or both.  It'll be more than $100 here and $200 there.

Ignoring that topic of CapEx for a moment and going with the numbers cited earlier in the thread...

Let's assume that you're only feeding each property $400 per year to keep it in the shape it's in now.  For 10 properties, that's $4k/yr and $60k over the next 15 years.  That's what it costs to feed the beast.  During that time, your $250k in invested capital earned a current yield of 0%.  Have you modeled out that scenario against one where your capital is earning a current return?

Back of napkin, if you found a paper investment yielding 7%, that $250k in capital + $333/m to feed the beast would be worth ~$817k in 15 years.  At 10%, $1.25MM.

So you get to choose: in 15 years, would you rather have a $1.25MM bank account, or a $0 bank account and $6324 in net monthly rental income?

Investing in these places in South Dallas may in fact be the best option, but in general anytime you're expecting to feed the beast you need to also be expecting appreciation - forced or otherwise - to make it an outperforming investment.  At 3% annual appreciation, those 10 properties could be worth $1.37MM or, after sales costs, about $1.27MM - roughly the same as the cash bank account option.

*Note: I'm a net-worth investor myself, along the lines of what you're describing.  My only observation here is that every investment should be measured against other available ones to determine relative attractiveness.  That, and in this situation appreciation is needed to come out ahead.