@Larry Turowski - Thank you for bringing me into this conversation. It is certainly a topic I have spent many days pondering.
@Vincent Meoli - As a quick bit of background, I starting investing in real estate 10 yrs ago in upstate NY. During this period, I was an executive in corporate America making a 6 figure W-2 income. I'm coming up on my 1 year anniversary (March 31st) of retiring from my Corporate job and doing real estate investing full time. Similar to you, my goal was to have RE replace my income fully. I currently have 138 units in my portfolio. It consists of everything from single family houses to a 35 unit building with everything in between. With that background, here is my perspective on your questions:
where do I put my money?
There is no right/wrong answer to this question. I would suggest thinking about this in terms of:
- What type of return are you looking for? I look for deals where cash on cash returns are above 18% when I run my models. I bake in the fact that something unexpected will come up to reduce my expected return. So I end at worst around 10%
- How much money are you able to invest? In my opinion, diversification is key. There is an argument to purchase larger properties to bring in more to the bottom line. But the higher expenses (higher taxes, more maintenance, higher utility costs, etc) associated with larger properties must be watched carefully and you may be limited in how large a purchase you can make depending on your available investment dollars.
What kind of investment portfolio do you think would help me replace my income?
There isn't one answer to this question. With a sound, well thought out strategy, you can build a portfolio of many types to accomplish your goal. My model focused on building up on smaller size deals and leveraging those purchases to get into bigger deals. Diversification was important to me so I can good income from multiple sources. So if any property had problems, it didn't derail my strategy. Leveraging financing was key for me to quickly amass properties and stretch the cash I was able to invest. Buying properties at auction or thru local municipalities was also helpful as it allowed me to get homes cheap, renovate and get 80% of ARV which most times was more than what I put into the place to purchase and renovate.
Do you think my timeline is realistic?
Timeline is based on how much you want to net at the end of the day. The more money you want to net monthly, the more time you will need to build the portfolio. I started to see the income really jump in year 7 onward. I decided to make the move to RE full time in year 9. There were a number of factors that led to doing it at this point:
1) The time it took to maintain both my day job and manage the portfolio was taking its toll
2) I was making more money at a lower tax rate with real estate than the W-2 income
3) I was mentally ready to focus on real estate and change my quality of life
You are definitely asking the right questions and as someone who had the same goal and has not made that goal a reality, I'm rooting for your success! Feel free to reach out to me should you have other questions or just want to run scenarios by me. All the best!
