Critique my first investment plan

5 Replies

hello, I've posted once before regarding multi-family investing and I've come to realize that I lack the funds to get started with that.. so my plan now is to purchase a single family home roughly 15 -20% below market value, fix it up if needed, lease with a one year contact, then after holding for 2 or 3 months sell it off to another investor with an occupied tenant. Is this or does this sound like a good strategy? Any drawbacks that I may not see? Thank you for any response

@Andrew Baker

There needs to be more information in regards to giving a fair critique is concern. Why are you wanting to sell it to another investor once you find a tenant? Are you trying to capture a profit from the sale? Which is fine for the most part; however, you will find most investors are going to want to purchase any R.E. Hold with a min 15-30% below fair market value. Which you may be able to still due once you finish the repairs and calculate your purchase cost and rehab cost from the sale price with the buyer still getting the deal they want. Thus, bring me to another question if you are going to go through the trouble buy-rehab-rent-sell, why wouldn't you use the BRRR strategy (buy-rehab-rent-refi)?

As you can see depending on your end goals there is alot that still needs to be addressed. Please don't thinking I am downing your plan. Because it can still be a good deal for you. There are investors who do buy turnkey, but generally the profits from those deals turn out not to be as well as we first believed. 

Originally posted by @Andrew Baker :

hello, I've posted once before regarding multi-family investing and I've come to realize that I lack the funds to get started with that.. so my plan now is to purchase a single family home roughly 15 -20% below market value, fix it up if needed, lease with a one year contact, then after holding for 2 or 3 months sell it off to another investor with an occupied tenant. Is this or does this sound like a good strategy? Any drawbacks that I may not see? Thank you for any response

 What it sounds like is you are thinking of starting a turn key style business. It could work, but you need to find a good way to market to investors. Also good turn key is dependent on good management. Do you plan on doing the management yourself? 

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@Andrew Baker

Build up experience and a definite purpose before you sell a product or service.  

My personal experience is that it takes dozens of transactions to confidently sell anyone on the idea to buy or sell real estate.

Frank

@Andrew Baker There's a lot more that goes in to operating a turn key business. Buying a property for 15%-20% below market value (I'm presuming you mean ARV) does not leave any margin for profit for you after your rehab costs plus all of the "soft" costs. You need to be able to buy at a considerably higher discount to make it work.

Mike D'Arrigo, Pinnacle Investment Properties, LLC | [email protected] | 800 348‑0956 | http://www.investwithpinnacle.com

thank you all for the replies, I was assuming I could get more money out of the deal if I flipped it to an investor with a tenant leasing rather than flip it as a regular single family. But I now see how wrong that thought was. 

I'm going to look into the BRRR strategy mentioned above, I am honestly just trying to get creative with my investing to be able to afford a downpayment on a larger multi-family. If anyone else has any recommendations please tell me. Thanks again

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