I am a full time civil engineer in the Kansas City metro area and trying to become a real estate investor. I would like to have buy and hold rentals for a passive income. I am wondering on where to start? Create/ start an LLC even though I am only looking for a few rentals ( less than 5) to began my career in this field? What price range is a good starting point I don't want to start to low and be trapped for maintenance repairs and such but don't want to overwhelm myself with debt to begin?
All good questions, I'd first start by checking out the forums and the podcast, tons on info out there.
My 2 cents... Don't worry about creating an entity (yet) unless there's a specific reason why you'll need one to start investing. Too many people let that stop them from starting. I'm not familiar with your market but I would guess if you've lived there for a few years you might already have a decent idea of what are good vs. bad neighborhoods. So check places like Zillow and Realtor.com to at least get a better sense of your "starting price" based on the areas where people are renting. Also check out the analysis tools here on BP. If you find something you think could be a good deal plug the numbers in. Lastly, have you heard of the 50% rule? Just use this as a guideline or better yet a jumping off point. In rougher areas you might end up spending a bit more than 50% where the houses might cost less. On the other hand the nicer areas might be more expensive but people tend to take better care of the property so you could end up spending less than 50%/year
Here's a link about the 50% rule (of thumb) https://www.biggerpockets.com/renewsblog/2013/06/14/50-percent-rule/
Good luck investing
I live in Kcmo. My realtors name & number is Sherri Oaks with Reese & Nichols, 816.365.8660. She will be a great place to start. She don't mind spending time with you to get you going. She's been a big help & I have only bought 3 properties through her so I have not made her a lot of money on commission. She's very flexible on showing unit right away & does evenings & weekends no problem. If you are looking to be a money lender I'd be interested in talking to you &/or if you need management I charge a flat 50.00/unit for that service with a low hourly rate for maintenance services. If I can be of help give me a shout. 816.803.8622.
I am a real estate agent specializing in working with investors. As someone who is also looking for my first investment property, I've learned to have a keen eye for great deals. I also work for a property management company called Kansas City Management, so I have a lot of connections and information when it comes to buy and holds.
As for your question, I agree with Edgar, that there is no need to start right off the bat as an entity. As you grow, you can talk to your accountant and find out what would be best moving forward. As for a good price point, that depends on your funds and how quickly you want to get started. Are you a cash buyer? Will you be getting financing? Going the BRRR route? House hacking? I'm personally going to be house hacking my first duplex using either a FHA or conventional loan within the next 6 months, depending on the deal I can get. Are you looking at SFH or multi-family? I think your very first step is to determine how much you can afford, and then go from there. I'm really good with numbers, so if you would like to go over some things, feel free to shoot me an email and we can meet.
@Jake Allen Hattock You're fortunate that you can invest right in your own back yard. Personally, I don't recommend investing in cheap properties in rough areas. They rarely perform well. Personally, I recommend sticking to B class properties or maybe C class. I would stay out of the inner city. You'll need to decide if you want to buy turn key where everything is all done for you or if you want to do the rehab yourself. Be careful of so called turn keys off the MLS. Just because it has a tenant in place doesn't mean it's a turn key. As far as creating an LLC, this depends on if you plan to finance. Conventional lender won't lend in an LLC so you'll have to buy in your personal name. I know Kansas City well. Let me know if I can help.
As far as how to get started you
I just came across this blog post about the pros and cons of purchasing a house with a LLC. Thought I'd share since it relates to the first question you asked.
@Jake Allen Hattock , first of all, welcome to BP. You will find a ton of useful information here. I would suggest that before you do anything else, you need to decide what is your investment strategy and what are your investment goals. This will help you answer some of your questions. I would also suggest that you find yourself a knowledgeable and experienced real estate agent and/or another local investor who is willing to mentor you on your first deal.
If I can be of any help, let me know.