Starting Apartment Investing, Looking For Ideas/Tips (with numbers)
Intro
Hello, Everyone. I'll let you in on my business plan. I'm a motivated beginner, ready to get started, and have big ideas. The reason I included numbers in this is because I haven't found very many threads/websites that talk openly about numbers. And, BP has some intelligent, successful people that I look up to when I read.
My Target
I'm looking for a 6-10 unit apartment building in Indiana. I use www.loopnet.com to find buildings in the $225,000 to $275,000 range. I want to stay away from the rougher parts of Indianapolis and Section 8 areas. As far as money goes, I'll be ready for purchase in November next year, so I have time to learn and continue setting up.
Numbers
By November 2015, I will have $100,000 on hand.
Retain $5000 just in case
Plus $10,000 for repairs/maintenance
Plus $10,000 for ~6 months mortgage (assuming completely vacant)
Which leaves me with $75,000 for a down payment.
Let's say I found a $250,000 building with 6 units and set rent at $750/mo.
$175,000 Loan gives me an $850/mo mortgage (30 yr. at 4.10%)
Money Talk
Now lets make some conservative assumptions:
5 Occupants: $750/mo rent X 5 Occupants X 12 mo = $45,000 gross income
After taxes (assuming I pay 35% taxes): $45,000 X .65 = $29,250 gross income
Pay 1 year of mortgage: $850/mo X 12 mo = $10,200/yr mortgage
Pay property manager 7% of gross income: $45,000 X .07 = $3150/yr property manager
Pay a maintenance $300/mo for lawns/repairs: $230 X 12 = $3600/yr maintenance
Now for total profit: $29,250 (after taxes) - $10,200 (mortgage) - $3150 (pm) - $3600 (maint)
Total of: $12,300/yr after all is said and done ($1025/mo).
Reinvesting
I plan on putting all of the money back into it, so:
$850/mo (mortgage) + $1025 (reinvest) = $1875/mo
Therefore: The building will be totally paid off in less than 10 years
Background
I'm in the Navy, so I'll be deployed for months on end without communication. My mom is a property manager and my dad can do maintenance, and they're both capable of running the property. Trust is not an issue; they look forward to it and will happily do it. I'll be in for 6 more years and would like to get the entire property paid off before then (so I'll have to put my own paycheck into it to take the 10 years down to 6 years).
The Need
Now, here's where I need help. I plan on setting up an LLC, hiring them, and setting up a separate bank account for the business only. The money I retained will be enough to get everything started, plus I'll be adding some from my paycheck for emergencies. If I could get your business ideas, advice, and anything you can think of to make this a smoother or more profitable process, I'd greatly appreciate it.
Thank you all so much