Is Individual Real Estate Feasible?

Disclaimer: Just an intern, everything I say is from what I've read and my own limited knowledge.

A lot of those YouTube real estate gurus are trying to sell you something, often an overly expensive course. Maybe they aren't wrong about somethings, but I would take what they say with a grain of salt. It's never as easy as they say it is and RE also isn't some holy grail investment that will make you rich like nothing else will. It has it's pros and cons like anything else. You can do deals yourself and buy duplexes and 4-plexes and what not, you might do well and have decent cashflow, but shit will come up (sometimes literal shit) which you'll have to deal with. All while working a full time job, so again, not the easiest thing in the world. Also can't hire a property manager in the early stages because it'll eat into whatever little cashflow you have.

Overall, it can be pretty lucrative and the big guys in the industry did start small, but just know what you're getting into and don't fall for what the gurus say.

I think it's much easier in some parts of the country than in others, especially now. The price-to-rent ratios in expensive coastal markets are generally too high for small properties to cash flow unless you keep the leverage low (which means you need to start with a lot of capital). Totally different story in 2012, and in places like Indiana now.

Just raise capital and be a syndicator

It’s feasible, it’s not easy. Buy enough units to have your rental income reach a level you can live off of - and then some in case of major unexpected expenses occur or you lose some rent due to vacancy/non-payment. Property management isn’t a walk in the park, nor is it glamorous and to attain enough units to have sufficient cash flow, you have to have a decent amount of cash to begin with. With that being said though a major benefit of RE is being able to use leverage and creative financing so if you’re making an average to above average salary and penny pinching you can build a decent sized portfolio in 5-10 years if you make it a priority. 

My Instagram feed is filled with influencers telling me to buy some dumpster fire duplex located in a tertiary market because it's a cash flowing asset and they can't possibly depreciate. LOL

It's definitely possible, but as others have mentioned much more work and risk than those youtube videos/guru courses lead you to believe. I invest exactly in the space you're talking about (2-4 unit multifamilies) and I am trying to achieve the same goal (create enough fixed income to live off of and more); however, I will admit that I have a very strong background because this is my family's business, so I have their construction expertise and balance sheet. But even without their knowledge and balance sheet it is still very possible (at least in my area). Assuming you have a certain amount of income for a mortgage and equity saved up for a downpayment, the most important thing is to know your market/product. Investing in real estate (and probably other assets) is finding a needle in a haystack. There are good/great/home run deals out there, but you have to be able to differentiate hay from needles.

Just to give you an example, I'm in the process of acquiring a 3-family in a hot, up and coming market for ~$1.2mm (I live in a HCOL market). The 2nd and 3rd floor units (3 bedrooms each) are currently on leases for $2,500 each (below market) and the 1st floor unit will be delivered vacant (also a 3BR). The 2nd and 3rd floor units are in great condition, probably renovated in the last 3-5 years. I have no doubt that during this spring market the newly renovated 3BR's could fetch $3,000 each. The vacant unit is in decent condition (definitely livable, but nothing super nice). It could probably rent for ~$2,500. Now if all I did was lease up the vacant unit for $2,500 and bump the rents of the 2 unit already rented to $2,600 each at the end of the lease, that would be gross rent of $7,700. I estimate my operating expenses to be ~$1,900 (5% property management fee, 2% repairs, 1% turnover expenses, RE taxes, insurance, utilities etc..). At 80% LTV, 3.75% rate, my mortgage payment is ~$4,500. So my cash flow to equity would be ~$1,300/month (6.5% cash on cash return). Not bad considering all I did was lease up 1 unit and this doesnt even account for depreciation write off and appreciation of the property. If this is your first time buying real estate, then this is a solid strategy because it doesnt require any renovation but you still generate a solid return and cash flow.

But if you have a bit of free time and really wanted to maximize this investment, then you could vacate the 3rd unit at the end of their lease and increase the rent to $3000 (or keep the original tenant if they are willing to pay $3,000). Vacate the 2nd unit and put up a wall/door to convert the dining room into a bedroom to create 4 bedrooms (there is a living and dining room, no one uses dining rooms anymore) and bump the rent to $3,600. And then update the kitchen/repaint/resand the floor on the first floor and rent it for $3,300 (the first floor is larger than the top 2 floors, so it may be able to get a bit more). This would bring your total rent to ~$9,900. My operating expenses are slightly higher at ~$2,100 and lets say I take out a $50k construction loan for the renovations, then my monthly mortgage payments would be ~$4,700. My cash flow to equity would be ~$3,100/month. Also, a 3-family half a mile away of similar size and condition sold for $1.55mm a couple months ago. Now you may be saying that this is a once in a 10 year event and that I can't repeat it, but I did a similar deal 3 months ago (the financials were a little less impressive on that one, but still very good). In both these deals, the seller was retiring and just wanted to sell for a decent price and get the process over with. I know this market and product very well and can tell a good deal from a bad deal almost instantly. If you dont know your market/product, then you will have no idea if a property for the $xyz is good or bad. Once you've seen enough, then you will begin to develop a sense for what criteria you need in a property so that it fits your parameters (financial, work/time needed, etc..)

Rule of thumb: if you see it on Youtube, it is either:
a) a SCAM
b) a sailed boat

Why would someone who claims to make millions of dollars without breaking a sweat, sell courses for a few hundred books or share his secret recipe with a complete stranger. Anyways if you are dumb, then yes go ahead and purchase the course please....

As someone who owns a rental, and plans on buying more. I think the key was buying a few years ago when housing was significantly cheaper. Housing got destroyed in the 08 recession, and has been on a decade plus run upwards. My rental is just now in 2021 worth what the people in 2007 paid for it, I paid significantly less, and have a pretty decent equity position in it. For me to retire and live off the income, I would probably need 30 of these, but by the time I get to 30, I will probably have an income that would need 100 units to replace.

Most of my friends who made serious money, are a few years older and were able to start buying in 2013-2015. Most of the gains have come from the appreciation in housing, and then the high rental growth markets helped, the spreads were a lot better too back then. I know one guy who, with a partner, was able to get into 150 or so units, but it was in a third tier market, and most of the capital to scale came from constantly refinancing the portfolio down to 20% LTV.

I have a buddy that does something very similar to what Fred Fredburger mentioned above. It requires a lot of time and effort and is difficult to do while maintaining a normal corporate job. My buddy was done with the corporate grind so he quit and got involved in real estate. He was luckily able to find someone to mentor him which helped him get started. He now raises capital from friends/family (including me) and buys distressed 2-4 unit properties, fixes them up and either flips them or keeps them for passive rental income. He's been netting 150k-200k/year from his rental portfolio for the past few years and pretty much hasn't 'worked' at all since the pandemic started. He can literally stop doing new deals right now and never have to worry about money again if he wants, but he genuinely enjoys real estate and wants to get involved in bigger projects (apartment buildings).

Def doable, but it will require a lot of effort and a good degree of luck as well. My buddy got lucky in mainly two ways: 1) found a mentor that was willing to provide advice which helped him avoid some newbie mistakes and 2) timing - he started doing this around 2011/2012, when the housing market was at probably it's lowest point coming out of the 2008 crash so he was able to get his first few properties extremely cheaply which helped get his business off the ground

Been watching this guy on YouTube - https://www.youtube.com/channel/UCBYwRdRw6x9bH4PsyCLnmOw

He buys self storage. Does a walk through with numbers, has nothing to sell you. Think he gets an 18% COC return.

It is tough, and I feel that having a side gig/investment like that is tough without a double.  I wouldn't follow these YouTubers or people trying to solicit an unwanted service (nothing is ever free).  There are the folks I generally follow and read regarding real estate on this forum, and you can run the numbers all you want.  If it sounds too good to be true, probably is.  The people I know who owns properties, this takes up their time and most ended up leaving their corporate careers to live off their property income because the amount of work required to manage properties increased.

I work in IB and have one rental property (single family home) that is kind of a pain to deal with. I'm technically the property manager and my tenant is reliable (sibling hah) but expensive things are constantly breaking or leaking, some mice appeared for a while, a leak developed in the roof, etc. and it just gets annoying when I think about the actual return I'm getting vs. what my other (much larger) passive investments are getting (and how much, aka zero, work I put into those).

I think RE is a good asset class and if I wasn't in banking it seems like it'd be interesting to the do the flipping thing and own more units. But at least as long as I'm in IB I have no intention to ever buy another property myself. I couldn't imagine having to deal with random people in Indiana paying $700 in rent a month like you see on TikTok (even with a property manager). Sounds like absolute hell