This sounds like a great idea, but doesn’t factor in expenses that need to be covered when something breaks in the rentals. It doesn’t factor in time and money spent trying to fill your rental. It doesn’t factor in your renters trashing your place and moving out.

Lots of problems to deal with. This is hardly passive income.

Great Blog for an Investment newbie. The author made sure to answer questions from the readers who are confused and are willing to learn! I hope to be just like you and retire rich too!

- Jack Leak

Rick,

first of all, we need to be less than 10k out of pocket on each house and that is accomplished by using “hard money” lenders, not traditional banks. Each time you buy a house, you should be capturing 15-30k in equity along with 200/mo cashflow. In that scenario, we can take your 40k and buy 4 houses, giving you 100k+ in equity and 800+ in cashflow. Check out my new real estate investing site for more info: EquityAcademy.com

Hey Brian,

I have probably about 40k in cash what do you recommend, houses from 50k to 80k rent for 600 a month in this area..

If buying with bank i need at least 20%, so that’s about 10k to 16k for the down-payment, then rehab about 10k, so I’m investing about 20 to 26k.

Knowing this, we all know that good investments are expecting the Investment Return in 3 to 5 years, so if I pay $280 to $450 in mortgage, that leaves me with about 150 to 320 monthly on profit. Then you should take out insurance and other cost about 100 per property. So that’s
About 50 to 220 of Net Profit.

Investment of 20k to 26k in profit we should expect at least to recover this in 5 years, so
Divided by 333 to 433 monthly should be the total NET profit for the house.

Cause if we look at it, as if it was this example, im going to get my investment back in 7 years investing those 20k and 43 years investing 26k.

What do you think about this scenario?? Looking that I get a good house, get lucky and never expect to repair nothing, and we all know that there’s always wrong with the house.

So that said, I want to start investing today, but I haven’t got the positive push and feedback for renting houses.

Do you prefer houses or multi-family house??

Please let me know your suggestions and advice

If I were you, I’d look for a local REIA group and see what the local techniques are. Maybe you could find deals for cash buyers and wholesale them for a finders fee.

Love this thread…
Ive always been intrigue and always dreamed about living from Rent Real Estate.. I know its hard but in the end it will profit..

I just moved to the Caribbean and there are NO Hard Money Lenders here: To bad cause bank tend to ask for 30% downpayment for investment properties..

Adding to that, rents are low, so it will not be so profitable.. Unless you find a super deal.. And around here, properties that are low, tend to need much, much work and bank loans dont lend for repairs, unless its a FHA 203k.. And again, you ask for 60k plus 20k (Repairs) You have to pay 30% of the total 80k – around 16k.. So that said, its hard to buy lots of houses, need alot, alot of extra cash..

Do you have any suggestions??
Best Regards

Do you have any suggestions??

There’s really nothing to do once you rent them out.. especially if you have a property manager. If you want to get even more passive, take the equity and become a hard money lender.

How 15 Rent Houses Can Retire You Faster than a $1 Million 401k

I wouldn’t consider managing 15 properties retired (maybe I’d consider it semi-retired with a constant headache).

The other 30% is your profit… Here is an example of a hard money lender: isbcapital.com

Thanks Brian, What kind of loan should i look in, that loans for repairs too??

So if they loan me 70k it will be the 70% of the 100k.. And what about the other 30%???? I thought the bank always want evidence of the payment of those 30%/??

If the ARV is 100k, it would look like this (ideally)

50K purchase
15k repair
5k closing cost
== 70k all in…

Since they loan you 70k, you would not bring any money to the table.

So you ask for 70% and that includes the repairs???
So who pays the repairs?? IF the bank doesn’t give you directly the 70%??

And obvious you are telling that the downpayment of the other 30% has to be made right????

Kind of lost here, sorry if my questions seems dumb!!
Regards

Hey Rick, good question… The key is to use Hard Money Lenders for the loan. They loan 70% of the After Repair Value, not the sales price. That way, you end up with a lot less out of pocket.

Brian, how can you get a loan for all of the property??
If banks are giving 70% of the price.. So if you buy a house that is for sale for 100k they will loan you 70% but the rest of the money is downpayment..
So that said if its valued at 150k the bank will NOT loan you to the value..
They are lending the 70% of the sale price..
Thats what many banks are saying..

So if you buy a house that is has a value of 150k and you want to offer 60k and 20k to rehab the house.. The bank will lend you the price of the sale.. If they sell you the house for 60k, the bank will lend you the 60k with a 18k down.. So that said i dont know how can we get a loan and load the rehab costs.. without a downpayment!

Please Advice!

@Scott, @Brian,

It is even better than that. You can probably raise the rent above $200/month at certain points for a lifetime.