THE SECRET SAUCE
My one big piece of advice... This is the secret sauce. If you are interested in anything I say and really want to know what I think... Here it is!!! LISTEN UP.
BUY INCOME PROPERTY
You should do this. Buy income property. Prioritize buying income property ahead of buying a forever home, or a flipped home, or a starter home. There is a way to work it in real estate. A way to get ahead. It takes time and vision and guidance (that's what we have to offer). If you have the money to buy something, buy something SMART. That's my advice. That's what I think you should do. IT IS THE SECRET.
Maybe....you've been thinking about buying something. Maybe you've even been putting in offers along with seemingly everyone else in the world. It's been a little competitive the last couple years. A cute starter bungalow comes on the market for 750k, in order to be taken seriously you bid 900k, because that's what you have to do. If you are willing to spend 900k on a starter home, you should consider what else that 900k could buy you.
You can spend 900k on a triplex with one or two units vacant. There are a lot of scenarios with multiple little houses on the same lot. There is one I will post tomorrow with a vacant 3 bedroom in the front and 2 smaller bungalows in the back (for $750k in an up and coming DTLA adjacent neighborhood) You can live there, in the front house.... it's not flipped, so you would need to spend a little to make it right for you. That might be 20k, that might be 100k. It would depend on how long you want to live there, how much money you have and what you need to be happy. The mortgage on a $900k property is about $4,500/mo including taxes and insurance... ISH. BUT, in this scenario, you have two tenants who pay you about $2,500/mo combined. Your mortgage is now only $2,000/mo because you collect rent!
Maybe the lower paying tenants eventually move on and out. Your future tenants pay higher rents and maybe that totals $4k/mo. (Maybe more... you know you can rent remodeled 2 bedrooms for 3k/mo in some neighborhoods) Now your renters are paying your whole mortgage. Maybe you even cash flow a little. If your mortgage payment is being paid by the incoming rent every month, you have $4500/mo more than your alter ego that bought the starter house in Atwater. It's not technically cash flow, buy you are $4500/mo richer than the previous scenario.
A couple years in, you are ready to move it on up. Most people don't live in houses they buy forever, even when they buy remodeled houses. People continually move to bigger and bigger houses as families grow. Once you move, you can rent out that last unit that you've been living in. Now you are making 2k-3k/mo. in cash flow. That's money left after paying all your expenses (mortgage, property taxes, insurance, some vacancy and upkeep). That's 24k-36K/yr passive income. Because you've been saving money every month up until this point, you have managed to save more money than usual. You buy another income property. You can keep doing this. Keep making money, saving money, and buying. Think of it like Frogger (this sentence dates me) Hopping from pad to pad. Let's say you repeat this jump every 3 years for the next 10 years.... in 10 years time, you have accumulated 6k-9k/mo in passive income. Thats 72k-108k a year... Sounds like what some jobs pay. Sounds like the beginning of another downpayment. You make more, you can invest more. This process speeds up, it begins to pay for itself. At some point, you don't need to live in them. (Maybe you never did) In 10 more years you are making 150-200k+ per year in passive income, because you keep building and investing. Sounds like retirement to me. It's possible that in 20 years, you might be making about 12-18k/mo in passive income. And by the way, you OWN all those properties. Cash flow is important but you are also building equity as you pay off the mortgage. Cash income every month as you build your net worth. No promises, but THIS scenario is completely doable.
Do you have a kid who might go to college? Don't freak out. That 300k you need for undergrad can be paid for by either selling that triplex (and you'll have money left over after building equity for 18+ years) or just taking out a HELOC on one of your buildings. You have options. Need to send a kid to private school but it costs 3k/mo? Or need a nanny but she costs 3k/mo? Allocate one of the buildings cash flow to pay for that... Building wealth through real estate creates options.
It's also about sacrifice. You have sacrificed. By not choosing the flipped first home, you sacrificed. By choosing to be a resident in your 3 or 4plex, you have sacrificed. By choosing to remodel a kitchen in your rental to get $500/mo more in rent instead of going to mexico 2 times a year, you chose building instead of spending. In this scenario, you chose a path of building a real solid future made out of income properties, incoming rents and cash flow. It probably involves early retirement and a lot less stress than your peers who just bought the cool starter house. Start early. Start NOW. In 10 years time, you will be amazed how far you've come. BELIEVE ME.
And yes, buying an income property is crazy right now too. BUT it is still doable. We just bought a 4 unit building and it's giving us a 15% return, IN THIS MARKET. It took a lot of blood, sweat and tears. (Usually mine) and it wasn't a project for beginners, but the deals are still out there.
I find really good deals every time I look. What I have suggested above it TOTALLY possible. BUT! You have to buy smart. You can't just buy anything. You have to buy the right thing for the right reason and yes, at the right time and make sure it fits your plan. It has to pencil out in a way that supports what you want to build.
If you need help figuring that part out, that's what we are here for. That's what we are good at, we can help you. Check out the Buyers and Sellers page and About Us pages to get in touch and we can help you get started.