All Forum Posts by: Account Closed

I would like to have $100,000 in passive income as soon as possible.  Please help me formulate a specific plan that will get me there.

For example, I could obtain $100,000 by owning 20 units that each provide $5k in cash flow each year ($417 per month).  Is that reasonable?

Obviously, there are thousands of variables, permutations, and complexities, which are keeping me confused and reluctant to take any action at all.  Help me to develop a reasonable plan that I can implement.

Thanks everyone for your discussion.  Obviously, the percentage goals are aspirational, but many of you say that you find deals meeting those criteria.

Can someone walk me through how they find those deals by finding/posting a property listing that meets those criteria?  At this point, I'm most interested in house hacking, but I have not yet seen any duplexes or four-plexes selling for a fraction of their value in areas with healthy rents.  Maybe seeing some examples (and seeing the search process in action) will help me overcome my skepticism.

Thanks for the helpful response, @Corby Goade.

Two questions:

1 - Everyone keeps agreeing that you won't find good deals on MLS (Zillow, etc.). But that's the only source I know. Is there a comprehensive list of other sources I can look at to begin analyzing properties?

2 - You said that "cash talks, you will often get a significant discount if you make cash offers."  That sounds fair.  But if you're starting out (like me), isn't leverage with a mortgage a big part of building a portfolio?  If I have $100k to start with, I might be able to get a good deal by offering it all as cash, but then I only have one property until the cash flow builds up enough for a second down payment (in which case I would not be getting the best deal on the second house because it would not be a cash offer). 

Thanks, Joe.  That was a really helpful response.

REI can seem overwhelming because there are so many interrelated variables that can be manipulated in different ways. I'll try my best to answer your questions:

1 - What are your financial goals?  My general goal is financial independence as soon as possible. Specifically, I would like to generate $75,000/yr in passive cash flow within 10 years.  My skill set and temperament is probably better suited to buy-and-hold renting than it is to flipping, etc.

2 - What Market?  I am currently living in an expensive city for work, but am looking for less expensive markets where I'd enjoy to live, and where I could earn a living while ramping up a passive stream.  I am from the Wichita / Kansas City / Oklahoma City area, but my dream is to live in Maine (Portland, Bangor, or Mid-Coast) and spend winters somewhere warmer (preferably with a beach).  I guess I could invest in one market and live anywhere, but would prefer to be within driving distance, if possible.  I am open to either multi-family or single-family.

3 - What Entrance/Exit Strategies?  I could commit $100k towards this goal.  Entrance strategy would be to use this money to buy 2 or 3 properties, perform minor repairs/upgrades, and fund an emergency/reserve account.  Exit strategy would be to sell the properties, hopefully at an appreciated value, and invest the proceeds, likely in a passive index fund.     

I am new here, and along with the Bigger Pockets guides, I recently read Brandon Turner's "7 Years to 7 Figures."  That piece lays out 3 fundamental principles: get a good deal when you buy (20% discount), appreciate the property early on (10%+), and ensure a certain level of cash flow (2%+).  I appreciate the article and understand the principles at play, but I find the specific number goals to be unrealistic.  I'm hoping that's just from my lack of experience, but I'd like some insight before I jump into this market.

First, something is seriously wrong with a market if a person can ever (let alone consistently) get a 20% discount. If a property is listed at $100k and you get it for $80k, that means that either the property was never actually worth $100k, or that the seller was wildly misinformed or under severe duress.  Maybe this business plan hinges on restricting your search only to the latter situations; indeed, he says that "less than 1% of properties currently for sale are worth buying."  If smart, Bigger-Pockets-reading real estate investors require a 20% discount, and only 1% of the properties for sale meet that criteria, won't there be competition for those properties, which will drive their price back up?  Again, I don't intend to be a nay-sayer; I'm just new to this and don't see practical, repeatable, consistent ways to find 20% discounts on properties -- please fill me in!

Second, I don't understand how one can "force 10% appreciation" under the circumstances described.  If I buy a $100k property, and my only investment is the $20k down payment, how do I make the property $10k more valuable?  I guess it's assuming that you bought the property for $80k, so your 20% down payment was actually only $16k, giving your $4k to make improvements.  But I see two problems with this.  First, this assumes a 20% discount (see question #1).  Second, this assumes that you can spend $4k on improvements and get somebody to believe that its a $10k improvement, which again, assumes that someone is misinformed.  Am I misunderstanding?

Third, the plan assumes that you can earn $200 cash flow.  As I understand the material on Bigger Pockets, you charge rent, save half for reserves/repairs, then use the other half to pay the mortgage, and what's left over from that second half is your cash flow.  If we bought a $100k home with $20k down at 5% interest, the mortgage/tax/insurance would be roughly $600/month.  To assure $200 cash flow, the rent price would have to be $1600/month: half ($800) for reserves/repairs, and the other half used to pay $600 mortgage to allow $200 cash flow remaining.  I'm sorry, but the $100k homes that I'm looking at on Zillow will never, ever rent for $1600. 

Again, I'm not trying to be difficult or argumentative.  But, before I make a plan and commit capital, I need to know that the principles work out in realistic, real world dollars and cents.   Any help is appreciated!      

I am a new member here. I've saved around $100k and am evaluating investment options.  I initially considered adding to mutual funds, but I want to diversify, and my wife and I have really enjoyed house-hunting, painting, and fixing up the homes we've had in the past. Also, I am an attorney and my wife works in marketing and social media, so there are several ways we could reduce expenses by doing some legal and advertising work ourselves.

Hypothetically, if I wanted to invest up to $100k in rental property, what are my best options?  Is there a formula to determine the sweet spot(s) on the continuum between using all $100k on one property or using as little as possible to buy multiple properties?

Any other introductory advice is welcome.  Thanks in advance.