BiggerPockets

Here is what I am thinking of as my first step in increasing my portfolio:

Purchase at least 2 suited properties (or duplexes) for $800,000 (or less) (cost $600,000 after 25% DP)
Rents in my area will be between $4,000-$6,000 ($48,000-$72,000 per year)
Interest cost $2,000 ($24,000 per year) at current rate (assuming interest only LOC)

So I have potential net of $24,000-$48,000 per year (less taxes and insurance)

Correct me if I'm wrong. I'll try to interpret your numbers to make it easier to evaluate.

Total for 2 duplexs
Purchase price 800,000
Down Payment 200,000
Amount to finance 600,000

Gross Annual Rent 48,000 to 72,000 (1,000 to 1500/mo/unit)

Your vacancy, property taxes, insurance, property management, capital expenditures, repairs, maintenance and other rental costs will like eat about half of this rent on average.

Your intention is to finance with an interest only LOC. Approx 24,000 annual cost

If your rents are 1000 per month you will just be breaking even and paying nothing on your principal. This seems like a very risky investment.

If your rents are 1500/mo you might average 6K annually for cash flow, but again your principal is not getting paid down.

A 6K return on a 200,000 investment is only 3%. That net income comes with a LOC that will not always be interest only.

If you have a good job that early in your career, congratulations! Unfortunately, the property, if you get $5,000 a month gross, probably gets you $2,500 a month net, which is $30,000 a year. From there, that's an 8-cap, rounded up.

It's not the best cap rate you can find, I'd look more towards 11- and 12-cap properties, but there's also appreciation to be figured in. Now, you probably won't hold the place for the rest of your life, so selling it is a definite exit strategy. Using the cash-flow to pay the mortgage while letting it appreciate is definitely a strategy, but you are banking on appreciation.

If the area is good, and it's not already overpriced, it might be a good investment, especially if you can get it for $350k or less. Remember, you have to both beat inflation and cover the seller's costs, like commissions and closing costs. So, even if you bought it for $400,000 today and sold it for $408,000 next year, you'd still be losing money, since inflation is 2% (8k) and you are paying a good amount in closing.

Also, I find it a little more difficult to hedge my bets on appreciation, but that considers the areas I work in. Just my input, I'm sure lots of other people around have completely valid viewpoints different from my own.