Would Love Some Suggestions

Question

Hello, new to investing myself, been in the industry selling for about 8 years and have worked with investors in the past and still currently. Most are Buy & Hold or do Flips, almost all SFH. What I personally would like to do is set up a type of Trust for my family (3 households) that will buy and hold property to create supplemental income amongst the three households (families) and ultimately form a type of generational wealth long term for our children. Starting fund is $500,000. Any suggestions where to start, what type of property to go for from the jump, how to set up the trust, how we can rutinely use the initial 500k in a sort of BRRR strategy that works in the current market. I'm not shying away from paying other for Prop Mgmt so I assume the first couple properties won't be cash flow super stars but obviously the more the merrier. Thanks to all and happy Memorial Day

Michael Smythe · Answer

@Evan Rager

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class
greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class
and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

• Property Tenant Pool: closely linked to location, but not always.
• Property Location: closely linked to tenant pool, but not always.
• Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years. 
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.

We can also share numerous examples of properties & portfolios we’ve assisted investors with!

DM us if you’d like to discuss this logical approach in greater detail!

undefined

Kerlous Tadres · Answer

Happy Memorial Day, Evan! With $500K and a goal to build generational wealth via a family trust, start by setting up a proper trust or LLC with an estate attorney to keep things organized and protected. Focus on affordable, cash-flow-positive markets outside your median price area, like parts of the Midwest or Southeast, where BRRR strategies still work well. Buy 1–2 small multifamily or single-family homes below $200K each, renovate for forced appreciation, refinance, and repeat. Outsourcing property management is smart to keep it passive and scalable. This approach balances steady income now with growth over time, even if the initial cash flow isn’t huge.

Melissa Justice · Answer

@Evan Rager,

Hey Evan - I'm from the Detroit area too :-)

I love that you’re thinking long-term and approaching this as a family legacy strategy. With $500K in starting capital, you’re in a strong position to build a solid portfolio that produces income now and appreciates over time.Here’s a strategic breakdown:Since you're already familiar with the investor space, consider starting with turnkey rentals in landlord-friendly, high-cash-flow markets across the Midwest and Southeast-think Indiana, Missouri, Alabama, or Florida. These areas offer:Affordable entry points ($100–200K range)Strong rent-to-value ratiosReliable property management infrastructureYou could diversify that $500K into 4–6 fully renovated, professionally managed single-family or small multifamily homes across multiple markets to lower risk and maximize returns.Trust Structure:It’s smart to hold your properties under a trust or LLC owned by a trust. You’ll want to consult an attorney or estate planner who’s experienced in generational wealth planning to:Set up a revocable or irrevocable trustCreate operating agreements that define how profits are distributed among householdsEnsure clear succession and tax advantages for your heirsBRRRR vs Turnkey in Today’s MarketBRRRR can still work, but with higher interest rates, compressed margins, and limited inventory, it’s more competitive and riskier if you're remote or not experienced in construction/project management.Turnkey rentals may be a better fit for your goals:Properties are already renovated, tenant-ready, and managedPredictable cash flow from day oneCan be scaled over time without as many moving partsHow to Use the $500K Strategically:Put 20–25% down on 4–6 turnkey homes (~$100–120K each)Keep reserves for CapEx, emergencies, and future opportunitiesOptionally, cash purchase 2–3 properties for max monthly incomeRefinance or 1031 exchange as equity buildsIf you'd like examples of markets or property types that fit this plan, happy to share! You're already way ahead by building a family-centered, long-term investing plan.

Best of luck,

Melissa

Ashish Acharya · Answer

@Evan Rager With a $500K starting fund and a goal of building generational wealth for three households, the best strategy is to create a family trust-owned LLC to acquire and hold rental properties using a BRRRR strategy. Consult a real estate and estate planning attorney to properly structure the trust and define roles, succession, and ownership shares. Focus on purchasing 2–4 small multifamily or single-family properties in landlord-friendly markets (e.g., Southeast, Midwest, Texas) that allow for light-to-moderate rehab. After renovating and renting, refinance to pull out capital and reinvest, repeating the cycle to scale. Use property management to keep operations passive and consistent. From a tax standpoint, all operating expenses (repairs, interest, management fees) are deductible, and depreciation especially if accelerated through cost segregation—can significantly reduce taxable income, even at the trust level. Rental income flows through to the trust or beneficiaries depending on setup, and proper tax planning with a real estate-focused CPA ensures compliance while optimizing write-offs and long-term tax efficiency. This approach builds scalable cash flow and a tax-advantaged legacy asset for future generations.This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Nadeem Alamgir · Answer

Hey Evan, since you’re focusing on a family trust and long term buy and hold, I’d suggest starting with small to mid size multifamily properties (like duplexes, triplexes, or quads) in stable markets. These types of properties offer steady rental income and the potential for long term appreciation.

For a BRRRR approach, it’s important to keep in mind that in today’s market, finding true BRRRR deals has become more challenging. You’ll need to be patient and be prepared for tight competition. Also, lining up a reliable contractor for renovations is key and may take time.

Evan Rager · Answer

Fyi, Median SFH is about 350k in my area.

Would Love Some Suggestions

Most Popular Reply