I am new the real estate investing. I will have 30k up front money to invest and I work a full time job making low 6 figure income. I currently have two large liabilities (current living home and vehicle). I want to buy properties for cash flow starting out.
I have set my goal to 15-20 properties in the first 2 years but I don’t know how to really get started as far as what I should target. My credit rating is right at 700 for the 3 major CRAs.
My initial plan is to buy extremely cheap housing (7-15k homes) and fix them up. I am looking at one starter investment home that is going for $12,000. It is a 3 bedroom home and 1250 sq ft. If I put $2000 down and spend $3000 fixing up the property my plan is to rent it out at around 400-500/month depending on the average rent in the neighborhood (which I believe is around $400). If I factor $100-200/month from 20 houses I think that gives me a fairly decent monthly income to manage to continue to slowly grow to 100+ houses. Eventually as I get seasoned I will start paying them off and offering seller financing to my potential buyers and I am sure I may flip a few rehabed homes here and there but my primary focus will be my monthly rental income.
How far can 30k take me when buying 7-12k homes? Anyone here have experience buying those types of properties? My biggest worry is my up front investment. 30k wont last long when I start out buying 100k homes with only $200 cash flow (when you factor up front investment 200/month income seems like negative cash flow).
First of all, let me compliment you on your smart approach. I think you are definitely going about it it the right way. You seem to be realistic in your goals. Just don’t try to tackle to much at one time. You should build a decent base of basic knowledge before you jump in.
The main thing I recommend you do is to study real estate financing. If you take the time to do this, you will be well armed. Talk to a few lenders and find out FIRST what their lending perameters are. Find out how a primary lender will work with a secondary lender (such as a hard-money or equity lender). Understand EXACTLY what properties a hard money lender will finance if that will be your primary source of funding.
You should ALWAYS know how you will be able to finance a property BEFORE you go looking for the deals. You will find much more success and less frustration that way.
The fact that you have some cash is good, but eventually you will need other sources of financing. Savvy investors ALWAYS use other people’s money.
I would also make it my business to attend local RE investment clubs. You’ll make some good contacts that way.
I’ll be happy to talk with you directly. Send a PM if you like.
IMO - Being new and having a fulltime job, I personally believe that 15-20 properties in 2 years may be overly-ambitious.
I am not new to the game, am not a kid anymore, and also work fulltime. In my world, a 3-bedroom house that needs that kind of work takes me 2-3 months to turn around working on a part-time basis (it is freakin’ hot here in the summer and we can only work outside from about 6:30 AM to about 1:30 PM). We do all of the work ourselves (with a few exceptions) and plan to do 4-5 a year, maximum. The properties that we buy are in the $40-75K range.
You can cut time off by hiring the workmout, but you need to pay more to do so, so it may be a trade-off.
Do your homework – make sure that the properties are structurally sound and that the major mechanical systems work correctly.
I also wouldn’t purchase all 15-20 homes in the same neighborhood. I would diversify. You can do it, and you might be ok, but if the rental market slows up in that area you might feel the pain. Personally I would test the waters with a couple units to see how it goes. Also to see if you like being a landlord and to see how time consuming it is.
Ok, sounds good. I plan on buying properties all within a 50-100 mile radius but not all in the same neighborhood. I was worried about setting my goals too high; I think I will know more after I buy the first property and use it as a learning experience. I just want to do it right!
Thanks for the replies!
I would buy the first one as close to home as possible, even a 100 miles away you are looking at a 1.5 hour drive each way (not counting traffic, stops etc.). You want to keep it simple for yourself. Plus if your properties are going to be that far away, consider a property management company. Find out what they charge out there and factor that in also.