In part one of my plan to purchase 100 rental properties by January of 2023 I discuss the mindset I need to reach my goal. In part two I will discuss my plan on how I will purchase the properties, get the money to purchase the properties, possible road blocks and strategies to remove those road blocks.
Breaking down the goal
I have broken down other goals in my life, but I have yet to break down how I will purchase 100 rental properties by January 2023! I am going to work through the goal while writing the blog and see where I end up in 9.5 years. One reason I wanted to write this article was to help myself and motivate with the goal. I wanted to walk through it on paper, motivate myself and convince myself it is possible. What better way to do that than to write an article about it!
I need 93 more houses in less than ten years and right now I am on a pace that may reach 3 houses a year by 2014. That leaves 91 houses to purchase in 9 years. I want to break down each year to see what I have to do to reach my goal.
Year One 2014
I can purchase three rentals off my current savings from my income as a Realtor. I should be able to do a cash out refinance on at least one rental property and get enough money to buy another property. I am also counting on my new attitude and work ideas to create enough extra income to purchase one more rental property. I also just acquired a HELOC on my personal residence for $60,000. I think that will allow me to purchase one more rental. New goal for 2014 is to purchase 6 long-term rentals.
I will have 15 houses total with about $9,400 in monthly cash flow coming in. That is $112,800 a year all going toward paying off mortgages on my properties. I will have paid off one house at the beginning of 2014 and will pay off one and a half more in 2014.
Year two 2015
I should be able to purchase four properties from income and savings from 2014. I should be able to do another cash out refi and purchase another rental. I also believe my continuous improvements will allow more increases in income either through listing houses or flipping houses allowing me to add another rental and the HELOC should help get one more. I am hoping the addition of my friend will be bringing in more additional income from his Real Estate activities and that will allow another purchase. Goal for 2015 is to purchase 9 rentals.
I will have 24 houses with about $15,200 in monthly cash flow coming in. That is $182,400 a year all going toward paying off mortgages. I will pay off the other half of one property and two more rentals in year two for a total of four properties paid off.
Year three 2016
I have upped my income and savings now to be able to purchase 5 rentals. I have 24 rentals now and I should be able to refi at least two of them. That will allow two more purchases and the HELOC is still there and should add the flexibly to add another rental. I am still planning on adding to my income every year. This year I see a big jump with my friend being around for his third year and our new marketing and listing techniques taking off I see three more properties from new income. Goal for 2016 is to purchase 11 rentals.
I will have 35 houses with about with about $22,200 in monthly cash flow coming in. That is $266,400 a year all going to pay off mortgages. I will pay off four and a half more properties for a total of eight and half properties paid off.
Year Four 2017
From my current income I will be able to purchase eight rental properties. I will continue to refinance two properties a year and that will allow at least two more purchases. I also am going to use the HELOC to buy another and I am still planning on increasing my income. I am going to stay conservative and assume enough income to buy one more property this year. Goal for 2017 is to purchase 12 rental properties.
I will have 47 rental houses at this point with about $31,400 in monthly cash flow coming in. That is $376,800 a year all going to mortgage pay off! I will pay off the half from 2016 and 5 more properties in 2017 for a total of 14 properties paid off.
Year Five 2018
From my current income I will be able to purchase 9 rental properties. I will refinance two more properties this year and use the proceeds to buy two more rentals. I may not have enough money in the HELOC this year so I won’t count on that, but I will count on my income increasing enough to purchase one more rental. Goal for 2018 is to purchase 12 rental properties.
I will have a total of 59 rental properties with a monthly cash flow of $41,000. That is $492,000 a year all going to mortgage pay off. I will pay off seven and half more properties in 2018 for a total of 21.5 properties paid off.
Year Six 2019
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties and use those proceeds to buy three more rentals this year. With inflation and appreciation I should be able to refinance for more than in previous years. I will not use increased income to buy another property. If my income increases I am using it for fun stuff like vacations or cars! Gola for 2019 is to purchase 13 rental properties.
I will have a total of 72 rental properties with a monthly cash flow of $51,600. That is $619,200 going toward mortgage pay off. I will pay off the half mortgage from 2018 and 9 more properties in 2019 for a total of 31 properties paid off.
Year Seven 2020
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties and use that money to buy three more rentals. I won’t count on any more raises in income since I don’t need it at this point. Goal for 2020 is to purchase 13 rental properties.
I will have a total of 85 rental properties with a monthly cash flow of $63,400. That is $760,800 a year going towards mortgage pay off. I will pay off 11 more properties in 2020 for a total of 42 properties paid off.
Year Eight 2021
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties again and purchase three more rentals with that money. Goal for 2021 is to purchase 13 rental properties.
I will have 98 rental properties with a monthly cash flow of 75,600. I will have $907,200 a year going towards mortgage pay off. I will pay off 14 more properties in 2021 for a total of 56 houses paid off.
Year Nine 2022
I only need to buy two more properties to reach my goal! I made it ahead of schedule and when I started writing this article I wasn’t sure how I would be able to reach 100 properties by 2023. I don’t need to refinance any properties at this point and I can start using my income how ever I want or I could retire!
I will have 100 rental properties with a monthly income of $82,400. I will have $988,800 a year going to whatever I want it to go to at this point. I can stop paying down mortgages if I want too or I could always keep buying properties if I get bored. I came really close to the figures I estimated at the beginning falling just short of one million in income from my rental properties, which was more than I thought and just shy of 60 properties paid off.
Assumptions
You may be wondering how I came up with my figures. To be honest I used very basic figures to make things easy on myself.
- I assumed $600 in monthly cash flow per property. I am making between $600 and $700 per property now.
- I assumed each mortgage I paid off would increase monthly cash flow by $400.
- I don’t assume any inflation because that would cause my brain to work way too hard!
- I assume my portfolio lender will continue to lend on as many properties as I want. At the peak I will have 43 houses financed.
- I assume I can continue to do cash out resonances with my portfolio lenders.
- I assume interest rates will not increase significantly
- I assume rental rates will not go up
Potential roadblocks
Those are a lot of assumptions and one or more of them may not work out as I plan. However, there are other factors that may help me do even better than I planned or balance out any road blocks I run into.
- New ways to find properties: I am going to start direct marketing to off market owners. This should allow me to buy properties even further below market and I may even find a few owners who will finance down payments.
- Private money: One of my goals is to find new sources of private money that will allow me to finance more repairs and down payments. This would allow me to put less money into properties and buy them faster.
- New income sources: I have no idea what the future holds as far as opportunities and money. I may find a gold mine that will allow me to buy properties for cash and not have to worry about financing at all!
- I assume I will not do anything with the houses I pay off free and clear, but if needed I could easily get a line of credit or refinance one of these houses to bring in enough money to buy a few new properties.
What will I do in 2023?
I have many things I would love to do if I did not have to work. Here is a list of a few of the things I would love to do with one million dollars a year coming in and no job!
- Start a pizza restaurant
- Start a car dealership
- Travel the world with my family
- Donate time and money to those less fortunate
- Play in the World Series of Poker
- Attend a Superbowl
- Play golf all over the world
I have a much longer list than this and many of these things I hope to do before 2023. I know for sure I will have time, money and the freedom to do these things at that time.
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Interesting plan – but wouldn’t you be able to expand faster if you didn’t worry about paying off mortgages first, particularly while the money is so relatively cheap? Given that you’d profit $400 by paying them off but $6-700 per new property, and your lender continues to lend, it seems like expanding but not paying off (at least until you hit your goal of # of properties) would be a faster route.
Yes, it would be faster if I reinvested all my cash flow into new purchases, but there are a couple reasons I don’t.
1. I don’t know if my lender will continue their policies of lending on as many properties as I can buy. If they do change their policy then I will be in much better position to find new means of financing with many homes paid off then if I have loans on every property.
2. My portfolio lender gives me the option of 15 year fixed or 5/30, 7/30 ARMS. I am choosing 5/30 ARMs to increase cash flow, but that also means the rate could adjust in 5 years. If I have my houses paid off I won’t have to worry about any adjustments.
3. I also do a lot of flips, those take a lot of money as well and the easiest way to do them is with a large line of credit. If I have multiple houses paid off, it will be easier to get a large line of credit against them.
4. My lender still requires 6 months in reserves on every mortgage I have, so the less mortgages the less cash reserves they will require.
I figured my article was already long enough, that I shouldn’t add too many more details!
Thank you for the comment!
Awesome goals Mark! You have a very detailed plan outlined. I admire your positive attitude and look forward to following your blog and watching it all pan out! I’m in Cheyenne, so when you open that pizza restaurant, we’ll be sure to come by!!
Thank you Michelle!
Nice May snow storm we had today!
No kidding…80 degrees in Ft. Collins on Sunday, a whopper of a snowstorm today – go figure!
Very impressive and inspiring article series. I would not have thought about owning such a high quantity of single family homes. What are your thoughts on multi-family, including apartment complexes? Is there a point at which it would make sense to trade in many homes for a larger complex? How does real life differ from Monopoly?
Haha on the monopoly reference. I loved monopoly as a kid, maybe that is why I am into rentals so much.
There are a lot of investors who swear by multi family and will not touch single family homes. I think a lot of it depends on your market and which one cash flows more. We don’t have a lot of multi family properties around me, so I don’t see that many good deals on them. I can actually cash flow more on single family rental than I could a multi family property. Right now I don’t see myself switching over, but things could change.
Mark,Thank you for posting your goal. I believe visualizing your goals is very important to achieving them. I am also a fan of shooting high, if you aim low you may hit your target, and it will be low. I have been a part time investor for many years, but only recently have I decided to become more aggressive about increasing my portfolio and getting better paying properties. I hope we can share success stories soon.
Thank you for the comment Jerry,
I just recently started raising the bar on my goals. I had very vague ideas in my head previously that could pass for goals and I still always managed to hit those marks. Those so called goals were always well within reach of wherever I was at the time. I never pushed myself with goals that seem a little overwhelming. It is surprising how achievable some crazy goals can be after they are broken down into steps and time frames. Now with clearly defined goals and a method to achieve them I am hoping to hit much higher more aggressive marks.
Assuming $600-$700 cash flow per property. I wish I could just find one or two like that.
They are tough to find around here too. It takes time and the ability to work quick. I am hoping my direct marketing techniques will bring in more great deals. I will make sure to keep everyone updated on how it goes.
Mark,
Love your plan! Good luck! Can you tell me the name of your lender? Do they lend out of state? Thanks in advance.
Hi Dustin,
I just sent you an email. I am not sure if they lend out of State, but I will try to find out.
For those of you wondering, my portfolio lender only lends in Colorado, Arizona; the Phoenix/Mesa area and Palm Desert, CA.
Great job Mark! Is there a certain GRM or CAP rate you strive for on each purchase? Is your cash flow the actual net income? It seems the lenders in my area all want 25% down. Do you have any sources that offer better financing options than 25% down? If so, could you pass on their contact information.
Thanks, Tom
Hi Tom, My lender requires 20% down and they can do that since they are a portfolio lender. I am not sure if they lend outside of Colorado, but I am checking. My cash flow is the net income. I have very little maintenance or repairs since I fully repair all the properties and our market is smoking hot so renting them is not an issue.
Tom, I forgot to answer your first question! I don’t look at a certain GRM or CAP rate, I look at what my cash on cash return will be and what my ARV(After repaired value will be). I want to know how much I am going to make after my down payment and repairs. I also want to make sure I am getting a good deal and will be able to sell just in case something unforeseen in my life happens and I want to have the option to refinance and get a good chunk of cash out in the future.
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Hi Mark wow l’m so inspired great goals . I have very similar goals and have always thought i must be crazy as hell to think like this. I want to buy apartments and eventually build apartment blocks and malls for rental. ho would you suggest i start. At the moment my plan was to buy cash on one property or buy land and start building but the time frames do no favor me as I want to have purchased at least 3 properties by the end of the year. How would you advice I start?
Have you ever built before? If so, then you have more experience than I do! I am not an expert on building and don’t know the first place to start as far as buying the land and deciding on what to build. As far as me personally I would make sure I solid base in investing before I ventured into building. Do you have current investments?
Hi Mark
Thanks for your response. I’ve never built before but l have a couple of people l know who are opting to build so l thought maybe let me ask you what you think. But anyway I don’t have any properties yet wanted to knw from you how would start? I have been educating myself with Kiosaki’s books on financial IQ but I just want to knw from someone who has hands on experience.
Reading is a good start, Kiosaki is good for the general idea of money, but he doesn’t go into much detail. I would keep reading and find some Real Estate investing specific books. Check out this article I wrote a while back. It lists good books and how to get started investing. Invest Four More’s Complete Guide to Purchasing Long Term Rental Properties
I applaud you for a well written blog and being inspirational. It seems as though your tax rates in the Denver area are lower than many other cities which is obviously beneficial on the cash flow. What might be a typical $ in taxes for $100,000 in property value? Thanks
Thanks for the question Mike,
My taxes are about $600 to $800 per year on my rentals and the county values them at $110k to $130k.
Wow, I like those low tax rates. I pay about $4,000 / year on a 4 plex here in Idaho. Is there a trade-off somewhere else, like a high sales tax (which I don’t care about) or a high state income tax? Mark, what are four plexes going for in your area and what kind of rents are they getting? In the Boise, Idaho area they run $325k – $350k, rents range from $650 to $700 per unit. Thanks, Tom
Our sales tax is around 3% for the state and then each county adds around 2% to 4% on top of that. We have state income tax that is 4.63% of federal taxable income. I just checked some four plexes on the market and there is one under contract for $220,000. Rents are $500 to $550 a unit and taxes are $1344 a year. We have very few four plexes come on the market around here so it is harder to get a good deal. I cash flow better with SFR than multi family because I can get better deals on the SFR.
Where exactly are you buying these houses? and who is managing them? I really want to get into real estate investing as I’ve worked in real estate accounting for the past 4 years and I love the nature of the industry. The problem is anything worthy buying where I live is ridiculously expensive and I’m not sure how to approach/manage a long distance investment.
Hi Luigi,
I am buying my homes locally in Colorado, but it is tough to find a good deal here too. I am managing them myself for now, but I am looking to start my own management company soon. I have had many people inquire into long range investing and how to do it. I may have to look into this more as I have never done that myself.
Hello, I am new to this real estate market and I live in southern Utah. Currently, in the process of getting a Utah real estate license. I just recently bought a condominium in st. goerge, Utah for 95K with all cash down. Now I do not have any reserve in the bank but soon that property will going for a rent. All I will have is just that rental income of net cash flow about $350 a month. Would you please share with me how I can acquire another property before this year ends. I am currently not working anywhere and have no saving. However, I would like to build my rental portfolio. What is my best strategy at this point. Also, would you please share where are you buying your properties that gives about $500 to $600 cash flow each month? Thank you for the blog. It is very inspiring.
Hi Mona,
It is going to be very hard to qualify for any type of loan without a job or income. It will be even tougher without any savings. My advice would be to save up money and work on getting your new career started. Once that is solidified I would start worrying about buying more properties.
If you really want to try to buy a new house, I would look for sellers who will consider seller financing, but it is going to be very difficult. You may be able to buy a home subject to the existing loan, but if the bank finds out the home was sold they could call the loan due immediately.
I am in Greeley CO, but it is not easy finding those deals. I search and search for months before I find properties that meet my criteria.
Hi there,
I will start buying properties soon. I bought my own house a year and a few days already. I am planning to pay it off in 2 years. In 2014 i am planning to start buying the second property. I will be looking for around 80k to.140k price range in my.properties. I like the idea of paying them off first rather than buy a few on credit. I have an uncle who has 12 rentals and every few months he has problems with tenants. How are you looking for the tenants? Do you ask for two months deposit or something? I waa thinking of lowering $50 off the rent for every extra monthly payment they deposit.. Up to like 6 or 7 payments.. Who has that kind of money anyways… That was me just thinking of getting a very good tenant with money. Anyways, i plan to have more than 10 properties paid in a 10 year span. I bring around 200k cash a year so, ten houses would be conservative. I have a small business and sometimes we cant produce the same as we Maywant.
Hi Andy,
Thank you for the comment. I just charge first months rent and one month deposit when tenants rent from me. I find most tenants don’t have that much cash like you mentioned. Otherwise they would probably be buying a home. That sounds like a good plan, I don’t mind the risk of having loan on my properties so I can buy them quicker. We each have our own comfort level and investing strategy.