Startup Ideas... What would you do?
Hello all,
I am brand new to RE investing and have been fascinated by all the opinions and strategies posted by others! I am ready to move past the psychological stage and will be ready to move forward with this process feb-apr 2019. I would like to make sure I have all my ducks in a row and am utilizing available funds for best case scenario.
My situation:
I have approximately 30k in startup funds at this time. I do have about 48k in equity tied up in my primary home. I am unsure as of now about taking a HELOC to invest and think I would prefer to get my feet wet prior to the HELOC, unless this is advised against. Current house hold income is 140-180k/yr with minimal debt besides primary mortgage.
My thoughts:
Looking at buying turnkey SFH properties in the 55-65k range. I would like these to be in C+ to B neighborhoods. Being out of state and having a W-2 job that demands 90-110 hrs/wk, it is not feasible for me to give the attention needed to the brrr method.
Goals:
Growth. The plan is to purchase 1 property in 2019 just to get a feel for things. Build reserves and funds back up, then purchase 2 properties per year from that point on. I would be interested in 2-4 unit MFH if the funds are there to achieve it. Hopefully, within 3 years I can own 5-8 properties cash flowing a minimum of 150/door and the "snowball" effect will start to take hold. If I can grow faster, that would be optimal. However, I understand this is a long term game. Eventually, I would like to supplement enough income to scale back to a 40-50hr work week at my job and break away from the turnkey side of it to further maximize returns.
Location:
Kansas City, MO
The price to rent ratio seems fantastic in this region. What I don't like is it's hard to identify optimal investment pockets.
Dayton, OH
Price to rent seems lower than Kansas City. Taxes seem extremely high changing the bottom dollars when working my numbers.
I am very open to any other locations and/or zip codes of the aforementioned locations!
What would you do?
As mentioned in the beginning of this post, I love hearing the strategies people come up with to achieve their goals! If you had funds similar to this what would be your plan going forward?
If you have made it this far I appreciate the time you have taken to read this post. Furthermore, thank you in advance for any advice given! I look forward to the start of this journey.
Regards,
Ryan
Hey Ryan good job evaluating, and I think you're on to something re: looking for that price to rent ratio. Of course, searching for a market that's over a minimum size, helps. As in, a 10,000 person town I'd stay away from - you want a reasonably diversified economy...
Here's the main concern I have with your startup plan -
Inevitably investing out of your area will put someone locally in a stronger position with regards to negotiating. There are win wins but don't assume that things will be rosy. Let's say (and this is not a hypothetical) that the first time your 'go to' hands on maintenance person does a 'no call no show' when investigating a say, water rot issue where it seems like some shingles may be failing up close to the corner of a house's gutter system/etc. How do you handle that? Of course you can hire a property manager. They are on the hook for that. However, there's a principal agent / personal exposure problem with that, not to mention the impact on your investment returns/bottom line even in a best case.
Reputable turnkey companies - well - some on these forums will recommend them, and some on these forums have also had some success doing out of area investing.
The trick, though - is volume. If you have enough funds to say, buy 4-5 houses, that's more risk to you. But, you've got to have enough to offer for someone or a company to where they know they would be walking away from a good win win if they don't meet their end of things.
I see that as being pretty critical. I know the desire to kind of 'stick your toes in'. Unfortunately when investing here there's real advantages in just 'jumping in'. Kind of like that theme from the Batman movie with Bane. He only made the jump without the rope!
Do you have any ability to take a sabbatical from your day job and get your hands dirty?
To be honest 140k+ of household income should put you in a pretty dominant life position even in a higher cost of living area, financially speaking - with the right plan.
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Originally posted by @Ryan Smith:
Hello all,
I am brand new to RE investing and have been fascinated by all the opinions and strategies posted by others! I am ready to move past the psychological stage and will be ready to move forward with this process feb-apr 2019. I would like to make sure I have all my ducks in a row and am utilizing available funds for best case scenario.
My situation:
I have approximately 30k in startup funds at this time. I do have about 48k in equity tied up in my primary home. I am unsure as of now about taking a HELOC to invest and think I would prefer to get my feet wet prior to the HELOC, unless this is advised against. Current house hold income is 140-180k/yr with minimal debt besides primary mortgage.
My thoughts:
Looking at buying turnkey SFH properties in the 55-65k range. I would like these to be in C+ to B neighborhoods. Being out of state and having a W-2 job that demands 90-110 hrs/wk, it is not feasible for me to give the attention needed to the brrr method.
Goals:
Growth. The plan is to purchase 1 property in 2019 just to get a feel for things. Build reserves and funds back up, then purchase 2 properties per year from that point on. I would be interested in 2-4 unit MFH if the funds are there to achieve it. Hopefully, within 3 years I can own 5-8 properties cash flowing a minimum of 150/door and the "snowball" effect will start to take hold. If I can grow faster, that would be optimal. However, I understand this is a long term game. Eventually, I would like to supplement enough income to scale back to a 40-50hr work week at my job and break away from the turnkey side of it to further maximize returns.
Location:
Kansas City, MO
The price to rent ratio seems fantastic in this region. What I don't like is it's hard to identify optimal investment pockets.
Dayton, OH
Price to rent seems lower than Kansas City. Taxes seem extremely high changing the bottom dollars when working my numbers.
I am very open to any other locations and/or zip codes of the aforementioned locations!
What would you do?
As mentioned in the beginning of this post, I love hearing the strategies people come up with to achieve their goals! If you had funds similar to this what would be your plan going forward?
If you have made it this far I appreciate the time you have taken to read this post. Furthermore, thank you in advance for any advice given! I look forward to the start of this journey.
Regards,
Ryan
Welcome to the site.
@Ryan Smith You asked me what I think, and as a long time out of state investor, i would say your price point is not in line with your neighborhood expectations. That is especially true in KC. At least for a turnkey property, I suggest you target $80k and above. Also make sure you are getting at least $850/900 in rent. Of course rating neighborhoods is very subjective and you may have a different view than I.
I also suggest you visit the market you are considering investing in, and meet with the providers before you close on any one property. Vet companies, property managers, and the people within them at least as thoroughly as you would vet any property you consider.
All best in your REI!