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Author Topic: 15% Cash Return on Investment  (Read 4417 times)

Offline AAA

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15% Cash Return on Investment
« on: April 16, 2008, 09:43:11 pm »
How many of you do or think you could get a 15% cash return on your investment if your managed your properties yourself and did much of the minor maintenence?


The reason I ask is because i'm trying to figure our how much equity I need to allow me to landlord full time.


Right now i'm thinking if I had 500k in equity that paid me a 15% cash ROI then i'll have 75k a year in cash flow/income to replace my curret income.


My question is, am i being realistic with my expectations? I think I am if buy right.


I know that nobody can truly answer this question for my situation because I know that all real estate is local but i just want your opinions if you think YOU could do it in your area?

Offline propertymanager

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Re: 15% Cash Return on Investment
« Reply #1 on: April 16, 2008, 10:25:30 pm »
If you do everything right, you can get on average about $100 per unit per month positive cash flow.  That's $1,200 per unit per year.  So, if you need $75,000 to replace your current job, you will need about 62 rental units.  If you do the management and maintenance yourself, that should double your spendable cash to at least $200 per unit per month.  Therefore, if you do the management and maintenance, you could probably get by on about 31 rental units.

How much those 31 units will cost and how much equity will be required to generate than $100 per unit per month, will depend on your local market.

Good Luck,

Mike   
www.1MinuteToRentalPropertyRichs.com 
This No-Hype, No-Nonsense Book is a step by step course in making money and building wealth with rental properties!  Everything from buying properties at a discount to dealing with terrible tenants.  Now In Paperback!

Offline fdjake

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Re: 15% Cash Return on Investment
« Reply #2 on: April 17, 2008, 07:10:09 am »
I consistantly make a solid 40-50% return on my residential buying and selling.

It's not hard to do 4 houses a year and net $50,000/home.  I'm a Firefighter so I live on the Fire Dept. income (no mortgage, no car payments, no credit card debt)  I take the profits from my flipping and roll them into severely depressed stocks and some commercial real estate.

I've owned residential rentals and hated every minute of it.  I found it infinitely easier to just buy and sell homes then take those profits and SAVE/INVEST THEM!!
 
Once those savings reach a point were they are actually financing your purchases (in other words, your paying 100% cash for your homes) your holding costs go through the floor, your profits move even higher and before long you realize your sitting on a bank account with $500,000 in it. 

Why not take $110K in equity and find yourself a home that's worth $185K???  Buy it  for $100K using the  equity line, then put $10,000 worth of lipstick on that dirty girl and sell it (under market value) for  $175,000.  You WALK with a nice clean $50K net!!!   10 of those in a 5 year period and you'll have your $500,000....... BUT IT'S ALL YOURS!!!  Then worry about the 15%. 

This is one of the reasons I mention OTHER investments in my posts so often.  Real Estate is THE QUICKEST way to INITIAL wealth I have ever seen. (and I've tried LOT'S of others) 

The issue then becomes........
What do I do once I create that big bank account?  There are FAR easier ways to turn $500,000 into $2,000,000 than by renting real estate. 

I like flipping homes because I don't have to MARRY some moron who buys the house I'm selling.  They like it, they buy it!!!  I'M.....D O N E !!! :biggrin
Renting is like be married to that tenant.  You usually end up with a relationship with a complete loser.

There are much easier ways to become rich through real estate investing.

I'm not taking away ANYTHING from anyone who does it....Believe me, I have nothing but respect for guy's like Property manager.  He runs his business like a finely tuned machine.  That is not an easy thing to do.  I know he'll say it's not that hard....but he's spent a lot of "time on the cross" as my grandfather used to say. 

Buy 'em and sell 'em..........Make a pile of money and DON'T BLOW IT!!! If you can do that a few times a year, you'll be a millionaire in 10 years.  It's a numbers game.   Once you get this machine up and running it's not hard to buy and sell 8 homes a year...Then your MONEY will make you the $75K  a year you can live on and then some!!   My money NEVER calls about a plugged toilet or broken heater.  My money is never late with rent, I've never evicted my money.
(although I have evicted a few bankers from handling that money)

Please RE-READ the DON'T BLOW IT part.   I have found through the years that this is the single biggest mistake most new investors make.  I have guy's I know who've watched what I was doing. They went out and found some great deals and made money on them!!  BUT.......They still have mortgages, they still have car payments, they still have Credit card debt.   

WHY????????

Because they went out and BLEW the profits on HARLEY'S, BOATS, and CORVETTE'S, stupid sh*t that falls like a rock in value THE DAY YOU BUY IT.
If you can resist the urge to SPEND that money for a few years a funny thing happens to you.   You actually LIKE the security having half a million dollars brings to your life.  You will also notice that your banker is now doing things for you that he never did before.  Free box seats to Red Sox games, free concert tickets, better loan rates, and MUCH higher interest rates on your MONEY because OTHER bankers are trying to GET that money into THEIR banks!!!

« Last Edit: April 17, 2008, 08:58:32 am by fdjake »

Offline AAA

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Re: 15% Cash Return on Investment
« Reply #3 on: April 17, 2008, 09:50:29 pm »
fdjake, I like the way you think and kind of felt like you were reading my mind as I was reading your post.

About 2 years ago i had enough money saved up for a 5-10 unit building. I was looking for a DEAL via all avenues I could think of. I talked to a couple realtors who said I would never find the kind of DEAL i was looking for as they dont exist. Guess what, I did a little of my own marketing and found an 8 unit where I thougt the cash flow numbers made sense. I bought the property with the intention of holding and renting. After owning for a little while I realized that I really did get a  below FMV DEAL and could sell this property for alot more than I bought it for. I figured that it made more sense to unload the property and look for another DEAL instead of continuing to rent the property and get my 5k per year in cash flow. I sold the property one year after I bought it for 65k more than I bought if for!! I grossed about 70k in one year when you include the cash flow that I kept.

This was my first real investment into real estate other than the owner occupied duplex I had before that. I did however do alot of planning prior to these purchases.

If makes excited to hear other people like yourself doing this type of thing on a regular basis!!! I was concerned that this deal was 1 in a 10,000 and was afraid it was going to take me 10 years to find another DEAL like this.

I enjoy renting but if I can take the fast track by buying property well below FMV and selling then thats the plan for me! I should have about 130k in cash shortly to make my next purchase.

 




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