Good money is a relative term. Some background: I graduated an Engineer, live a really conservative lifestyle by many peoples standards (I still have everything I want), work in Oklahoma, and have a great job. I contribute the maximum employer match to my 401k and plan to start maxing it within the next 5 years or so (16,500 right now). I have been working for a little over a year and have around 16000 saved up, had to drop a bit on student loans.
Now my question, I have parents who have a few rental properties. It is something that interests me and I see it as a way to build wealth over time. My current plan is to buy a house that is very affordable for my current salary (around 80k) and have it paid off in 4-5 years, use the equity to buy another house to move to and rent the first one to start me off in the landlord business. Hopefully accumulating around 6 rental properties (small homes, maybe duplexes) by the time I am 40. It seems pretty aggressive to me personally, I just wanted to get some real estate investors opinions. What would you do if you were young, cheap, ambitious, and ready to retire early?
I’d start by talking to your folks. They obviously have some experience in this and can share it with you. You have enthusiasm and some cash and together I see a nice partnership.
I don’t think 6 properties in 15 years sounds too aggressive. You need to figure out how much money you’ll need and make the appropriate investments to make that happen. For instance, are you going to target buying 100k homes or 50k homes? The higher dollar homes should rent for more, but will take longer to pay off.
You’re off to a good start with saving and living frugally. I agree w/ AJ. Your parents should have plenty of guidance and stories related to the rental business.
Yea I would say that doesn’t sound that aggressive, trust me you can do more especially with the market being the way it is! I am 25 as well and at our age it is good to be aggressive now because we have time ( unlike our old head counter parts lol old head is Philly term in case you were wondering) So buy as much as you can right now and get a property management co. Give harder everything is so cheap I trade in the financial markets and do MLM and people say I am doing to much but I am making great money and having FUN. How I keep from getting burned out is put time limit on things and work on things exclusively and always self education and application is key. Here to your wealth and hopefully at 40 we will be on Nectar Island or some exotic island and/or beach.
Depending on where you live, the cost of living in that area, your debt, and financial situation, it’s possible to get a “conservative” 6 rentals the next 6 years. Just keep in mind, it’s not the amount of money you make, it’s the amount you keep!
Your goals are admirable. Like mentioned before, talk to your parents. Ask them about the headaches of landlording if you do not know them yet from living with them
Your still new in the business world so bank financing maybe tough. I talk to a local banker to see what you qualify for loan wise. Since it is your first purchase, you can go owner occupied on a loan for better rates and most likely 3 or its 3.5% down.
Homepath.com has homes where investors need 10% down and are foreclosures and REOs. Nice website but can take time to close, but seems you have time. Look into a multifamily 2-4unit home for better cashflow. Of course SFH will generally appreciate better over time, but a 4plex will more likely have better cashflow over time.
I do not know where you live so its hard to target prices and cashflow figures.
Biggest thing is fall in love with numbers, not the home. If you want it as an investment, you need numbers to work out right. Make sure you can afford the mortgage if you have a vacancy for a few months.
When looking for tenants, prescreen them solid. The job market has changed. I require my tenants to earn 3x the monthly rent. So if the rent is $1500 a month, they have to have a combined income of $4500 a month. A rule I just will not bend on, I want to know they can afford to live there. Yes they can be paycheck to paycheck but if they earn 3x the rent and you run a credit check you can see there bills and qualify them like a mortgage. If the rent is $1500 a month and after the basic bills they have $2000 left, then comes rent,.I wont deal with someone who has $500 a month extra. Its easy to fall behind then.,
Ahh the dreams of youth. Actually it sounds like you are on the right path. Like everyone else said, learn from your parents. They probably made some mistakes you won’t have too.