Newbie Business Plan for Buy and Hold Rental Cleveland Ohio

13 Replies

Hi!

I am sorry if this is annoying to ask, but I am a complete newbie and for now I am relying on this community to be my mentor. In short i would like to buy my first multi-family rental in the next 6-18 months. With a 16 month old child and one on the way in July I don't see any sooner feasible. Not to mention I am not at all ready, no not analysis paralysis. I have only just begun my homework and made this decision a couple weeks ago.

This is my first pass at my business plan. Please let me know what you think, feel free to critique, and let me know if I am missing any thing that is important. Thanks in advance for your help!

Side note: My wife and I's investment career  will be ran on the side of our full time jobs as supplemental income on our road to financial freedom. 

Real Estate Business Plan

Goal:

In the next 5-10 years buy and hold 8-10 rental properties or until resulting in about $2000 in passive rental income. At minimum $100 cashflow per door. Return on investment to be determined, but COCROI preferably over the stock market average.

Buying our first property within 6-18 months.

What types of Properties will we invest in:

Duplex, Triplex, Quads, to begin. Possibly trading up for small apartment buildings if it makes sense and opportunities are available. Would like to avoid single home rentals due to the hassle of buying, insuring, and managing one unit, but not opposed to it if there is a great opportunity.

Would like to focus on properties that need at least some work to receive a good purchase price. Also, the ability to force appreciate would be preferable to build up some equity.

Where?

Suburbs of Cleveland. More Analysis to come, but while starting out B cities or possibly on the boarder of B/C cities taken case by case.

How?

Down Payment will come from the equity on our primary residence and possibly some cash depending on how much saved. Putting 20-25% down.

This may change as we grow our portfolio.

Financing will be conventional mortgage loan from mortgage companies, at least in the beginning up to the allowable amount.

This will probably change and will explore options when the time comes closer. Portfolio lenders, hard money, and partnerships being a few options.

Property Management:

Initially we plan to manage the properties ourselves, having strict policies in place to make it efficient and easy for us as well as having the right team members. However, property management services will be included into our calculation for when we will want to transition or if we find out that it isn’t something we can do on our own.

What Needs to happen between now and first rental

Order doesn’t matter (except for #1):

  • 1.Finish reading, research, and learning
  • 2.Build our team
  • 3.Network
  • 4.Get approved for HELOC
  • 5.Pay down credit card debt and build up cash reserves
  • 6.Find mentor (may be highly dependent up BP community)
  • 7.Practice analyzing properties
  • 8.Determine common expenses and dollar amounts
  • 9.Get all rental documents
  • 10.Find potential deals analyzing 2-3 deals per day till at least 10 are found 

Hi @Brian Legg ,

If anything, I'd increase your cashflow per door requirements from $100 to at least $200, preferably $300 as a target. Having one surprise repair could steal 2 years of profits at $100/month a door.

The business plan looks good, time to go and do it!

Hi @Nathan Platter

Thank you! I appreciate the input. The $100 was my minimum that I basically got from Brandon turners rental book and/or the podcasts, I can’t remember. I will make sure to aim for a higher cashflow per door.

Thanks again!

@ Brian Legg

Hey Brian, we seem to have the same goals in mind. Just about everything you said has been my primary plan. I would like to focus on sfh primarily tho. I think we should talk on the phone one day soon and connect. See how we could help each other. [email protected] Shoot me an email sometime. 

You'll find that if you buy well the Duplexes, Triplexes and Quads will throw off a lot more cashflow than $100/mo.  

@Nathan Platter and @Federico Gutierrez are correct : be ready for a curveball every now and then.  A hot water tank will die, the City won't like your driveway's current status, etc.

Originally posted by @Brian Legg :

Hi!

I am sorry if this is annoying to ask, but I am a complete newbie and for now I am relying on this community to be my mentor. In short i would like to buy my first multi-family rental in the next 6-18 months. With a 16 month old child and one on the way in July I don't see any sooner feasible. Not to mention I am not at all ready, no not analysis paralysis. I have only just begun my homework and made this decision a couple weeks ago.

This is my first pass at my business plan. Please let me know what you think, feel free to critique, and let me know if I am missing any thing that is important. Thanks in advance for your help!

Side note: My wife and I's investment career  will be ran on the side of our full time jobs as supplemental income on our road to financial freedom. 

Real Estate Business Plan

Goal:

In the next 5-10 years buy and hold 8-10 rental properties or until resulting in about $2000 in passive rental income. At minimum $100 cashflow per door. Return on investment to be determined, but COCROI preferably over the stock market average.

Buying our first property within 6-18 months.

What types of Properties will we invest in:

Duplex, Triplex, Quads, to begin. Possibly trading up for small apartment buildings if it makes sense and opportunities are available. Would like to avoid single home rentals due to the hassle of buying, insuring, and managing one unit, but not opposed to it if there is a great opportunity.

Would like to focus on properties that need at least some work to receive a good purchase price. Also, the ability to force appreciate would be preferable to build up some equity.

Where?

Suburbs of Cleveland. More Analysis to come, but while starting out B cities or possibly on the boarder of B/C cities taken case by case.

How?

Down Payment will come from the equity on our primary residence and possibly some cash depending on how much saved. Putting 20-25% down.

This may change as we grow our portfolio.

Financing will be conventional mortgage loan from mortgage companies, at least in the beginning up to the allowable amount.

This will probably change and will explore options when the time comes closer. Portfolio lenders, hard money, and partnerships being a few options.

Property Management:

Initially we plan to manage the properties ourselves, having strict policies in place to make it efficient and easy for us as well as having the right team members. However, property management services will be included into our calculation for when we will want to transition or if we find out that it isn’t something we can do on our own.

What Needs to happen between now and first rental

Order doesn’t matter (except for #1):

  • 1.Finish reading, research, and learning
  • 2.Build our team
  • 3.Network
  • 4.Get approved for HELOC
  • 5.Pay down credit card debt and build up cash reserves
  • 6.Find mentor (may be highly dependent up BP community)
  • 7.Practice analyzing properties
  • 8.Determine common expenses and dollar amounts
  • 9.Get all rental documents
  • 10.Find potential deals analyzing 2-3 deals per day till at least 10 are found 

Solid plan for a newbie.. Wish I had something like this when I was getting started..  Only thing I would urge you to do is look outside Cleveland if you can.  In my research, Cleveland has very high property taxes. If you look at property taxes in some other part of the country, you will be floored as to how much Clevelanders are paying in taxes. 

With 8-10 properties, you are going to have a hefty tax bill. You can easily afford a good property manager, if you want to dip your toe into Out of State investing - in an area with lower property taxes. If you can find something in couple of hrs of driving distance, you can manage it yourself too. 

Business plans are great. Action is better. All of this goes out the window with experience. You say you don't want SFR but you've never owned or managed one. You also say you want duplexes, triples and quads. You have never done those either.

Make your plan what you’re going to do first, how you’re going to evaluate it once you do, and what you’ll do based on the results. Better plan. 

@Brian Legg , I have to agree with @Matt Motil and @Federico Gutierrez about just taking action.  While I am not as experienced as many on here, I can tell you that my "plan" has changed probably more times than I can count.  You definitely shouldn't rush into something until you are knowledgeable but by no means do you need to do all of the stuff on your list before you purchase something.  You will definitely learn by experience when it comes to the actual management side of things.  

I would also agree about aiming for more than $100 per door and make sure you account for capital expenditures.  I purchased a duplex last year with an original furnace from 1924.  On the one hand, it was 80 years old but on the other had been there for 80 years and was still kicking. What were the odds it would fail in the next year or two?  Well, it failed 6 months into my owning the property.  It cost about $2,500 to replace and ate about 6 months of cash flow.  Luckily though, I planned for those kind of surprises so no big deal.  Also, at $100 per month per door, with a duplex, a $2,500 expense is over a year of profit if nothing else breaks. 

Overall, I think you've got a great plan and great motivation.  Just be sure not to get bogged down in "the plan" and not take any action.  I'm in Parma and on a similar path to what you are going for, feel free to connect if you want to chat. 

Originally posted by @Brian Legg :

Hi!

I am sorry if this is annoying to ask, but I am a complete newbie and for now I am relying on this community to be my mentor. In short i would like to buy my first multi-family rental in the next 6-18 months. With a 16 month old child and one on the way in July I don't see any sooner feasible. Not to mention I am not at all ready, no not analysis paralysis. I have only just begun my homework and made this decision a couple weeks ago.

This is my first pass at my business plan. Please let me know what you think, feel free to critique, and let me know if I am missing any thing that is important. Thanks in advance for your help!

Side note: My wife and I's investment career  will be ran on the side of our full time jobs as supplemental income on our road to financial freedom. 

Real Estate Business Plan

Goal:

In the next 5-10 years buy and hold 8-10 rental properties or until resulting in about $2000 in passive rental income. At minimum $100 cashflow per door. Return on investment to be determined, but COCROI preferably over the stock market average.

Buying our first property within 6-18 months.

What types of Properties will we invest in:

Duplex, Triplex, Quads, to begin. Possibly trading up for small apartment buildings if it makes sense and opportunities are available. Would like to avoid single home rentals due to the hassle of buying, insuring, and managing one unit, but not opposed to it if there is a great opportunity.

Would like to focus on properties that need at least some work to receive a good purchase price. Also, the ability to force appreciate would be preferable to build up some equity.

Where?

Suburbs of Cleveland. More Analysis to come, but while starting out B cities or possibly on the boarder of B/C cities taken case by case.

How?

Down Payment will come from the equity on our primary residence and possibly some cash depending on how much saved. Putting 20-25% down.

This may change as we grow our portfolio.

Financing will be conventional mortgage loan from mortgage companies, at least in the beginning up to the allowable amount.

This will probably change and will explore options when the time comes closer. Portfolio lenders, hard money, and partnerships being a few options.

Property Management:

Initially we plan to manage the properties ourselves, having strict policies in place to make it efficient and easy for us as well as having the right team members. However, property management services will be included into our calculation for when we will want to transition or if we find out that it isn’t something we can do on our own.

What Needs to happen between now and first rental

Order doesn’t matter (except for #1):

  • 1.Finish reading, research, and learning
  • 2.Build our team
  • 3.Network
  • 4.Get approved for HELOC
  • 5.Pay down credit card debt and build up cash reserves
  • 6.Find mentor (may be highly dependent up BP community)
  • 7.Practice analyzing properties
  • 8.Determine common expenses and dollar amounts
  • 9.Get all rental documents
  • 10.Find potential deals analyzing 2-3 deals per day till at least 10 are found 

 Very well thought out plan Brian.

I am with some of the others on the thread though. I think you may be over analyzing this. It's not overly complicated. All you really need to do is get enough cash to cover the 25% down payment, hook up with a Realtor & buy the sucker. 

So long as you purchase something in a B-Class or higher neighborhood you can't really loose. As you want to self manage you'll properly learn a lot of the ropes on the fly. At the end of the day owning a small rental property in a decent neighborhood is very low risk & low impact. If you find out down the road it isn't for you so long as you checked comps when you bought it you can simply sell it & move on with your life. So my advice would be to jump in the pool, water is warm.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

I would not buy a SF rental property that did not cash flow at least $350.00 a door. If you buy at the 1.5% rule, which is clearly achievable in NE Ohio, you would be at about $4,000 cash flow per month with 10-15 single family in NE Ohio.

I have $160,000 cash flow right now in NE Ohio and have transitioned to true Multifamily from single family. By June 1st I will now have 8 apartment complexes and 4 single family in NE Ohio.

Whatever the mind can conceive and believe it will achieve!! Napoleon Hill said that!!

Do not discount condos or townhouses too. They may have more cash flow. That's how I started in 2011 and now have over 6 million in RE and 2.5 million in Equity.

Swanny

@Nathan Platter forget the plan past getting your first deal. Focus on that. Trust me, your plan will change as you get into this business. I started off with one duplex with the goal of owning 100 of them. Now I own ~2000 units (all larger apartment communities) and sold my duplexes to buy more big deals!  Get the book 10x Rule by Grant Cardone. Read it 10 times! :)

Hi all. I Greatly appreciate all of the info and responses! This community is truly amazing. 

The overwhelming consensus is to go out and buy my first property. I know that taking that first step will be the hardest but once it is made it should hopefully be a snowball effect from there. Trust me I plan to do there is no doubt in my mind. I am not making excuses by all means but I have a full time job, a 16 month old, and a pregnant wife due in July who also works full time. I just made this investment decision weeks ago, so I planned to take this down time in out lives to do my homework and make the plunge after we establish a new normal once the new baby comes. I assume some of you have children. I am not sure if you could imagine juggling this scenario, if you can good for you! But I cannot, at least not till like I said we figure out our new normal. I say this with self managed properties in mind.

If anyone has any other thoughts or comments please let me know!

@Joshua Ryan Meador Sounds great! I definitely want to connect with some people locally. I will probably try to make it to the meet up this month. We can certainly chat soon over email or phone, my email is [email protected] 

@Chinmay J. Thanks for the tip! You make a good point and I may consider that in the future, but for my first rental I would prefer to stay local and gain more experience and knowledge before investing in other markets.

@Matt Motil Thanks Matt good tip.

@Nick Ferguson Thanks for sharing! That is a bummer about the furnace. 80 years old! that's incredible. I may take you up on the chat offer soon. I need to make some local connections.

@Michael Swan That's Awesome!

@Ivan Barratt Thanks, especially for the book recommendation. I need those right now since I am still reading a lot.

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