My Business Plan - Feedback Appreciated
Background: I'm in my mid 20's and acquired a my first rental six months ago. I currently work in corporate America and will be self managing my properties.
Strategy: Buy and hold.
Goal: To make real estate my sole source of income in 10 years. Owning 1 million in real estate that creates over 10% cash on cash will help me achieve my goal. (If I could replicate my first deal I would only need 8 more properties to achieve this goal).
Numbers: 10 rental properties valued at $100K each with returns of a minimum of 10% will create $100K in cash flow. Also, the debt pay-down will be around $400 per month per mortgage will help increase my net worth by an additional $48k per year.
Criteria: Investing in high end neighborhoods with good schools. I'm willing to take on less of a return to attract higher end tenants. Typically I would like 2-4br single family homes between 800-1200 square feet. Attracting good tenants will be crucial because I will be working a full time 50 hour job as well. Properties that take less than $10k in repair will be a target of mine to get the rentals up and running fast, plus less effort to manage to renovation process. Appreciation will be an added bonus, however I do not count on it. I want to purchase properties from $80,000 - $120,000. However, I will raise this number if the opportunity presents itself. An opportunity would be defined as supports business plan, good returns, falls within criteria, and helps me achieve my goal.
Financing: Live below my means and do conventional financing with loans from banks. Possibly house hack SFH's to get in with a low down payment and rent it after a year. This area will be a work in process as I grow, however I recently find a lender who funds their own loans and doesn't abide by Fannie Mae guidelines! They recently approved me for a second rental.
Finding Deals: MLS and Homepath as I do not have many contacts within real estate at this time.
Exit Strategy: 1039 properties in portfolio that are under performing. Since I will be investing in higher end neighborhoods selling will not be a problem.
I believe that I had a moment this morning where I realized how attainable owning 1 million of real estate is. I appreciate any feedback to improve and if anyone has similar success story, feel free to share!