All Forum Posts by: Aaron Kaminer

Thank you for your time and for your reply. I have some thoughts/questions here. 

Doesn't this leave out the concept of forced appreciation and other creative solutions for minimizing cash investment and maximizing returns? For example, on our SFHs, we do not leave any money in the property. So, this 10% return concept doesnt really apply in that particular case, right? At some point, we will own 100 properties and its very likely that we will have no cash tied up in that portfolio. In that case, we would be cashflowing around $15k-$18k/month (all things considered) without having invested $1.5mil - $1.8mil cash to make that happen.   

Couldn't this concept (broadly speaking) be applied to larger scale purhases as well? Perhaps I am missing something or oversimplifying? 

Hello all, 

I am a partner of a real estate investor group working out of Oklahoma City. We have a 5 (or less) year goal of hitting $50k/Month in passive income, via property cash flow. I am trying to map out a reasonable/practical strategy for achieving this goal. Here are my thoughts. 

1) In order to scale quickly in the beginning, without leaving a bunch of money in our properties, we are using the BRRRR method. We have been purchasing homes at the $50k mark, investing around $40k in rehab, and cash-out-refinancing at an ARV of roughly $145k, taking out 75% to pay off debts. With this, we break even on the refinance and end up with no money left in the property. In these scenarios, we still have 25% equity in the property and it cashflows. This is great, however, cash flow is roughly $200 for these properties (when we calculate actual cashflow, including cap-ex, vacancy, repairs, etc.) Considering our goal, we would need to do this 250 times. This vehicle/style of aquisition is working nicely for our short term goal but its fails to deliver on our long term goal, most likely due to the 5 year (self imposed) time constraint. That would be a lot of properties to process in that relatively short amount of time. Doing so would require more infrastructure and thus, more expenses, etc.

2) In light of this, it seems obvious to me that commercial properties are the most practical way to hit such a high level of monthly cashflow. Not that you couldn't simply BRRRR/purchase 250 SFH.. but that is a lot of property and comes with its own risks and difficulties. So, the long term goal must be apartments (assuming we want to stay in the residential/rental lane.) I can imagine owning 5 50 unit properties.. or something like that. Assuming these properties also cashflow at a rate of $200/door/month we would hit out goal. But, how would we purchase these expensive properties?

3) I am thinking the best way to purchase those may be by leveraging the equity in our BRRRR SFHs. Example: We continue to BRRRR properties for a year or 2. Perhaps we accumulate around 25-30 of these (at our current pace, this is very reasonable.) We save all of the cashflow along the way. We pair that cashflow with a bunch of refinancing OR dispositions in order to pull the equity out of our SFHs and move it over to a down payment on an apartment. Basically, we leverage the equity in our SFHs to invest in commercial properties - making our BRRRR strategy on SFHs an equity game.. and our commercial apartment strategy the actual cashflow mechanism.

Of course, we could just skip #1 (the SFHs) and start with purchasing apartments in the first place. Maybe even a BRRRR apartment.. and this is not off the table. But those deals are much more rare and financing is more difficult for us. So, I do not want to bank on that. We will take it if we find it (and can manage to pull the deal together) but I dont want to rely/hope that we will find such a deal.

These are all just thoughts on how to get to $50k/month in cashflow, for a group of particularly determined individuals, in 3-5 years time. I am posting here for feedback. Tell me what you think. Do you see another path? Has anyone here achieved such results? I am looking forward to picking this apart. 

@Will Fraser your response is greatly appreciated. It is great to see someone in the same areas as myself replying to my first post! 

I realize, via your reply, that I was not clear about my goals. I am not looking to achieve $20k/month in gross rents but rather $20k/month in net posisitve cash flow. i.e. A $20k/month gross salary for myself. I realize I will need a ton of SFH or something like a small apartment complex or two to achieve this goal. I am planning to take my journey at least that far.

I am curious your thoughts on the 10 loan limit I have read about. How does one go about owning 30-40 rental properties with this limit? Do you find that people are able to get past this by working with portfolio lenders? Obvioulsy there is hard money as well. 

One weakness of the BRRRR strategy has been suggested to be its linear fasion. Though, this is not really a critique of the strategy itself but more so of a slow cadence of aquisition. Say, for example, I have $150k cash on hand when I start. Could I not put 20% down on 4 or 5 sub-$100k houses and start off with many more that a single SFH? In this case, I could potentially purchase 5 units fairly rapidly and then 5 more in 1/2-3/4 a year later. This example is still linear, however, it is starting at 5 instead of 1. Also, with 5 initial purchases behind me, I could then pool all net positive cashflow + any profits pulled from the cash out REFI on each property + an disposable personal income I am willing to commit to the effort and buy potentially 6-7 houses inthe second round. This is still not compounded but it is also not linear.

In any case, I am trying to understand if these models are realistic or if I will not be able to borrow enough to achieve these goals? In which case, I suppose I will have to find a means of generating more cash along the way (via flips, etc) to pay cash for additional units at some point.

Thank you for talking with me on this. I realize this contribution takes time and energy. I truly appreciate it and hope to connect with you and talk more on this subject. 

@Joe Villeneuve

Firstly, thank you for taking the time to reply to me on this topic.

I completely understand agree about compound purchasing in order to achieve my goals. Compounding is extremely powerful and I fully intend to utilize it. I am also willing and able to use other methods to supplement my growth instead of sticking strictly to the BRRRR strategy. I do, however, have some questions about some of your other comments. Much of the material I have read provides testimony of people who have many more than 15 houses with no problems. You suggested that 15 would never happen as I would not qualify for that many. I know there is a limit of 10 conventional loans. Is this what you are referring to? My understanding: In order to surpass that limit, one can work with portfolio lenders who have more flexibility. Is this incorrect? Finally, how are so many people on the Bigger Pockets youtube channel aquiring 20,30,40 or even 50 houses in a short period of time (sometimes as little as 5 years) if they cannot get access to high counts of loans? Are you suggesting they must be purchasing these units with cash? I will look into those testimony for these details buth they are rarely provided in such granularity for sake of brevity.

Thanks again for your time and knowledge. I hope to return this to you in the future. 

Hell All,

This is my first post here on this forum. In fact, I am brand new to real estate. I recently finished "The BRRRR Rental Property Investment Strategy Made Simple." In addition to this, I have spent a couple of months researching this topic in general and I feel I have a reasonably good grasp on the method. I believe I will be ready to make my first purchase in the next few months.

My question: I am starting with only the knowledge I have gained from the research outlined above, healthy disposable income, perfect credit, and a strong desire to gain financial freedom. Is it realistic to expect (given a strong work ethic and reasonable intellectual capacity) that I could achieve financial freedom in 5-10 years using only the BRRRR method? (Obviously, continued research and learning should be assumed.)

Some parameters to help flesh out the question:

Financial freedom : $20,000.00 gross per month

Strong work ethic : willing to put 20-30 hours per week into this (in addition to my full time day job)

Location : Oklahoma City. Ideally I would to this region for property acquisition. 

I understand that there are many more factors at play here, however, I believe that realistic goals are important and I am looking to validate  this broad stroke aspiration by asking more experienced real estate investors to weight in on this hypothetical.

I am deeply appreciative of any feedback you might be willing to share with me.