I own a small business with 18 employees in a real estate related field. I'm very familiar with buying/selling real estate. I've dabbled in it, flipped 5-8 houses, been a real estate agent, and had a couple of rentals over the years. I'm considering buying, rehabbing, renting properties as a diversification to our main business. I would be hiring a full time position to help manage the rehab of these properties, and look for a third party management company to do the management. I will have a good line of credit available to purchase a lot of properties, considering the neighborhood of 2/month. I like the class C type property area. I've found I can consistently buy ~$30k properties, rehab for $10k and rent $600-$700. I've seen the discussions on here about that price point of properties. These houses are built in 1920s-1950s, 800-1000 SF 2/1 and 3/1s.
I'm looking to hold and rent to create a different income stream than my primary business. It is doing well, but looking for a little diversification.
Are there any others out there that are purchasing these in more of a "systematic" method like this, or have in house staff to help with purchasing and rehab? I've considered keeping the property management in house and hiring a W-2 employee to help with the management.
I did this and bought 350 of them. In house is the way to go.. run it like a business with full command and control and you can do well.. Where this model breaks down is when you do not live there and you have to trust others for your income. .C class is high touch and will be as long as you own it.. If you do not touch it it will bite you big time.
Remember you have a tenant pool top of the pool the best renters are not renting your properties.. your getting the bottom of the tenant pool so they always have issues.
below your tenant pool into D and F is just plane suicide to me.
Thanks Jay. Yes I agree "systematizing" something, in house with control as you said is the best way to do things.
I have purchased a few from the local sheriff sale, and will continue to do that. There are deals there in every class. I plan on keeping everything local for the time being, there seems to be enough to satisfy my appetite.
What class are your properties primarily in?
@Jay Hinrichs Is correct about systems. I run everything like a system...sometimes called a Business Plan. Develop one, and stick to it. Too many REI use the "dart board" method, where they see a property and grab it, with no reason other than it looks like I can make money on it. If it's out of your system (Business Plan), it will pull you away from the course, and you'll probably be taking a step back.
@Jay Hinrichs I agree with Jay. As long as you have a scalable business model in place you can grow tremendously. Make sure you have policies and procedures in place, I have learned from experience that anyone can find a good deal when aquiring them. The true test is to make sure that asset gives you a return monthly. The only way you can do that on a large scale is by having procedures in place.
We grew our portfolio to a very large management company of over 400 homes. I can tell you what we did for 100 homes did not work for 300 and definitely will not work for 600 which is where we are projected to be by end of 2015.
Just remember the IRS, fair housing and many other governing agencies say you are a business. You have to comply with all laws and regulations and have A PLAN!!
Thanks for your response. I'm glad to hear a little confirmation that others have been successful doing it this way.
If either of you wouldn't mind sharing, what kind of business structure do you have setup? Meaning, the job roles you have? Example, I was considering a project manager role, basically in charge of the initial rehab and "get ready to rent" services including passing rental inspections. Then a property manager role in charge of renting and day to day tenant issues. I think I could get the project manager role busy right away but the property management role would take a little time until it was a FTE. But, we can utilize them in our other business until then.
It's inspirational to read about the investors here that have owned or currently own and manage hundreds of properties. 50 would produce a comfortable amount of income for me. With 500, I would have to hire a full-time contractor and an assistant.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.