How to turn $500k cash into $175k/year in passive income using senior living rental properties.

A thread:

Look for markets in major metros where you can find a 1500sqft or larger (bigger the better) single-family home with:
- a two-car garage.
- single-level
- no stairs

The worse off the condition of the property is the better. You'll be redoing everything in the house anyway, so no point in paying a premium for any material in the house that you'll be ripping off anyway. Better to start fresh.

Once you find a property around $300k that fits your criteria, analyze the floorplan to figure out how you can increase the bed/bath count to 7beds and 3 baths. Make sure you're not making the plan functionally obsolete in this process. It needs to appeal to tenants & the seniors

Once you've found something that meets the criteria above, make your offer and purchase the property. The renovation will cost you around $100k-140k, let's call it $100k for the sake of this post.

So now you're all in for:
$300k purchase
$100k reno
$15k misc costs
Total: $415k

Now that you're finished, rent the property for around $5,000/month to a tenant-operator. Congrats, you're now cash flow positive! Now it's time to refi.

Assume a conservative appraisal value of $450k, conventional bank will give you a 70% cash-out-refinance which equals $315k.

Your new $315k conventional 30-year loan, assuming 3.5% interest, will cost you a total of $1872. This includes principal, interest, tax and insurance.

Your rental income is $5,000. Subtract $1872 and you're left with $3128 in positive cash flow every month. That's $37k a year

So you took $100k and turned it into $37k/year passive. That's 37% cash on cash return.

Repeat that with the other $400k you have remaining to buy 4 more houses with similar numbers and you'll generate another $140k+/year in additional income (based on 35% return on cash)

Now you've used up your $500k and replaced it with assets generating $175k/year.

Now reinvest that money to grow! Also, if you find great purchases on the front-end, you'll be able to refi more money out, allowing you to stretch the $500k much further.

Retweet if you enjoyed!

Here is an example of a recent one I’m doing https://twitter.com/realest8hodler/status/1336369790835859456