Buy and Hold strategy. Am I going about this the correct way?

5 Replies

Ok so a little bit about me. Im 32 live on Long Island (ny) I currently own a single family home that I live in. It has a basement apartment that I currently rent out for $1300 a month.

House is probably worth $215k-$230k on the conservative side. Have about 12 years left on a 15 yr with $160k left. Mortgage and household expenses cost around $3k a month

I also run a landscape construction business with my father. However its getting harder and harder to compete with all the hacks and I feel that the glory days of 15 years ago are over. Id like something more stable for retirement. And I would really like to relocate to SW Florida in 10-15 years.

Heres my "plan" keep paying down my house as I currently am. Somehow purchase a rental property in my area either with my brother or my best friend who I would consider a brother. If I do it with my brother he would probably occupy the main space like I do and we would rent out the apartment. If I did it with my friend we would simply rent out both spaces. Im really not looking for a huge cashflow per say Im looking at them in the sense that if I can have them payed off in 15-20 years and have the rents cover the entire house in 15-20 years I can collect the rent free and clear for the most part (my half in this case) or build up enough equity in the first rental property to borrow against any appreciation or increased value from repairs and upgrades to purchase another similar property.

In the long run I'd like to be in florida collecting 5-6k of rent in addition to any money I would be making down here and maybe start investing down here as well. I understand Ill have to pay either my brother or friend or a property manager at that point but thats ok.

I understand that finding a great property like my current home is key. There homes on my street that have sold for under 150k (needed probably 50k) in repairs but I could probably do 99% of the work myself and also keep my guys busy during slow times doing upgrades on the house. But for what I am getting for rent from my basement at $1300 and I know I could rent out the main part of the house for at least $1700 I would think the house would cover itself minus any repairs or vacancies that will occur (hopefully there will be some small cashflow to be able to save for those, if not at least I would be splitting the cost with someone)

As far as financing the next purchase I may be able to buy the house cash at a discount (with money borrowed against my fathers home which he owns free and clear) and then take out a mortgage in my brothers name.

I also have another contractor friend who is interested in partnering up and doing some flips. I would probably try and use my portions of those profits to invest in more buy and hold properties.

I know I probably missed some details but as a rough plan does it sound plausable?

Any comments?

ps. been doing a ton of reading on here and the books recommended on here as well.

@Jason Zullo   Without addressing the specifics of your plan, I like your creativity but I would keep the partnerships with friends and family to a minimum as much as you can.  This will be my first winter that I get to spend in SW Florida, I live and invest in Iowa so I'm jazzed.  Your goals are very reasonable and achievable so keep reading, learning, and engaging on BP.  Good luck!

Originally posted by @Glenn McCrorey :

@Jason Zullo  Without addressing the specifics of your plan, I like your creativity but I would keep the partnerships with friends and family to a minimum as much as you can.  This will be my first winter that I get to spend in SW Florida, I live and invest in Iowa so I'm jazzed.  Your goals are very reasonable and achievable so keep reading, learning, and engaging on BP.  Good luck!

 yes I agree about the friends and family and would only consider it with these two people, I work with family on a daily basis so I know the pitfalls lol Its just I feel having half of two pies is better than no pies and just as good as one pie, so if it helps me get my foot in the door Im willing to do it. Where in SWF? me and my wife spend a few weeks a year in naples and love it. I can not wait to be down here full time

just want to make clear Im not looking to get rich quick, just looking to live comfortably down the road

Hello Jason!

Yes this interesting. In my opinion it is somewhat feasible. If you had a 15 yr mortgage on the new acquisition at $150K it would be around $1300-$1600/month and your scheduled to collect approx. $1700+$1300=$3000/month. Decent cash flow.

Would definitely recommend laying out a full plan of who you really want to work with, and your strategic objective. Also I would recommend not working with your brother if he is going to live in the unit for free. Nothing personal, my opinion, that is $15K lost a year if he lives in the basement and $20K lost if he lives in the main.

Also highly recommend getting your financing in place before you start placing bids on properties. I would figure out if borrowing against your father's home is first wise, then feasible. I would talk to our lenders see what your opinions are and shop to see who has the best product for you.

Best of luck.

Hope this helps!

Originally posted by @Thelonious Jones :

Hello Jason!

Yes this interesting. In my opinion it is somewhat feasible. If you had a 15 yr mortgage on the new acquisition at $150K it would be around $1300-$1600/month and your scheduled to collect approx. $1700+$1300=$3000/month. Decent cash flow.

Would definitely recommend laying out a full plan of who you really want to work with, and your strategic objective. Also I would recommend not working with your brother if he is going to live in the unit for free. Nothing personal, my opinion, that is $15K lost a year if he lives in the basement and $20K lost if he lives in the main.

Also highly recommend getting your financing in place before you start placing bids on properties. I would figure out if borrowing against your father's home is first wise, then feasible. I would talk to our lenders see what your opinions are and shop to see who has the best product for you.

Best of luck.

Hope this helps!

 thanks for the input, but I wasn't clear, my brother would be paying to live there, he would own half the home and split half the costs with me so we would have to come up with a fair rent. Like I said this would be a deal just to get my foot in the door. after the first house I plan on investing myself.  I just figure with him wanting to buy a house and us splitting the cost and risk it wasn't a bad idea. If he decided in five years he wanted to move we could rent out the entire house or I could buy out his half. And also having him live in the house has its obvious advantages. 

Im going to see what I can get approved for but owning a business and not declaring 100% of my income thats not going to be much. Although my wife has no current debt and makes decent money so going to see if she can get approved for more.

Updated over 2 years ago

wanted to add that I wanted to use my fathers money to get a better price on the house and then obtain regular financing to pay him back with a little extra for his investment.

Updated almost 3 years ago

wanted to add that I wanted to use my fathers money to get a better price on the house and then obtain regular financing to pay him back with a little extra for his investment.

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