My Business Plan - Feedback Appreciated

[Rob Randle]

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!

[Wayne Smith]

@Rob Randle

I had the same goal when I started investing 13 years ago.   I attained that goal and then realized it didn't matter as much to me about what the total value was, I became more interested in my monthly income.  I sold a few houses,  in lower end neighborhoods that were farther away than I wanted to manage them.   currently my rentals are within 15  minutes of where I live with 2 exceptions.   One is 4 hours away in Dallas and I am currently selling it, and the other has a tenant in there that's been there for 14 years, and takes care of everything (I haven't been to the house in 2 years but do drive by occasionally).   Currently I am working to pay everything off and then I will think about getting into multifamily, maybe before I retire early, maybe after.   I only bought properties that were below appraisal and had positive cash flow.