Buy and Hold Rental Plan of Attack

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Buy and Hold Rental Plan of Attack

Mike Miller
Member since 2018 · 37 posts · 15 votes

I am in the Tampa area.  Starting my search for our first 'investment' property.  There are so many options it can sometimes be overwhelming so I started by writing out my goals to help narrow my path.

Goals:

1) Create Retirement Income (10-15 years out)

2) Pay properties off in 15 years (probably through rent appreciation)

3) Minimize vacancies and repairs

4) Work with higher quality tenants/families

5) Purchase first rental property in 90 days ($180k-250k)

Based on my goals it seems that Buy and Hold rentals is the definitely the way to go. The BRRR method on these would allow for maximum cash flow. Ideally from what I understand I would want these to be in B class neighborhoods with good school districts. At least a 3/2/2 would be ideal.

As many people are experiencing at the moment the deep discounted deals are not easy to find.  I see a few options and would like some opinions.

1) Pay retail for something that will be a good long term investment (at least breakeven on cashflow).

2) Find something that has a quirk and has been sitting on the MLS for a while (and hope that the quirk isn't too big of a hinderance on my goals above).

3) Attend meetups/network to see if I can find something that would fit that is 'off market'.

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Chris C.
Clermont, FL · Member since 2017 · 37 posts · 43 votes
8y

Hey Mike! My goals are the same as yours but more inland in Central Florida. I'm finding the market is tough right now too.

Another thing I'm finding is that there are a lot of properties in the area marketed as MFH which are actually still SFH with a divider or something put up to function like MFH. I have had to turn away from "deals" like this. Realtors are not always your friends.. Best of luck.

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  • Chris C.
    Clermont, FL · Member since 2017 · 37 posts · 43 votes
    8y

    Hey Mike! My goals are the same as yours but more inland in Central Florida. I'm finding the market is tough right now too.

    Another thing I'm finding is that there are a lot of properties in the area marketed as MFH which are actually still SFH with a divider or something put up to function like MFH. I have had to turn away from "deals" like this. Realtors are not always your friends.. Best of luck.

    2Reply
  • Tom Parris
    Realtor · Tampa, FL · Member since 2016 · 340 posts · 248 votes
    8y

    Hi @Mike Miller,

    I enjoyed reading your goals, sounds like you even have a level headed expectation of what the real estate environment is like here. 

    If one of your goals is to minimize vacancy and repairs, I recommend going for something built within the last 20 years, and going for a condo or a townhouse. With those you know that the HOA is responsible for the exterior of the property, and you just have to handle the inside. In my experience, condos and townhouses rent quicker if the community has amenities. Those add value for a tenant when they think they're getting something included in their rent like a pool/gym, or even utilities like water and trash.

    Buying something 15-20 years old, allows you to do forced appreciation. You know that when you buy it, you're most likely not going to have any plumbing or electrical issues, and all you have to do is simple cosmetic improvements. 

    2Reply
  • Mike Miller
    OP
    Member since 2018 · 37 posts · 15 votes
    8y

    @Tom Parris, I love the idea of taking a house that is badly outdated (90s) and updating it to be current.  There are a lot of unknowns on the cost/benefit of it.  I would have to watch it very closely to make sure I don't end up losing on the deal.

    What I have found is that often they are asking too much for the houses that need updating.  Why would I pay the same for something that is beautifully updated as one that needs to be completely remodeled?  I believe this is where I might find my deals though.  Watching for a house that has been on the market 2-6 months because they are asking too much.  It is harder to negotiate and will take more offers, but could pay off.

    0Reply
  • Mitchell Jaworski
    Rental Property Investor · Boynton Beach, FL · Member since 2014 · 273 posts · 197 votes
    8y

    @Mike Miller your goals sound similar to mine when I started about 5 years ago.  It's good that you have a 15+ year picture, everyone wants to get rich in a year it seems.

    I agree with @Tom Parris comments about property age.  At a minimum it does make things easier when you are starting out.  My first two properties were in 2001 which helped eliminate alot some worries about electrical, etc.  Then again, I generally play it safe which is why my RE blog is called ScaredyCatGuide.  

    If you can find something that cash flows a bit after factoring in some maintenance and vacancy costs that does not need a bunch of work I say have at it.  In the end it's cash flow that matter with long-term rentals.

    After starting off with "safer" plays I expanded and my third property was a reno project but still mainly cosmetic.  Thus, all three of your points are reasonable and workable.

    Yes, you should be attending meetups/REIAs regardless.   I have two that I attend in my area that have lead to actionable information.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    More realistic goals perhaps:

    1) create retirement income 15 - 20 years out

    2) 30 year mortgages, reinvest income, begin to pay off properties when you are finished expanding. (Dead equity decreases return on investment)

    3)  Screening must be strict and inflexible. Rejecting a good applicant is less costly that evicting a bad tenant.

    4) purchase properties that have good positive cash flow based on a hypothetical 100% financing. 

    Do not expect to make money tomorrow investing in a bad deal today.

    1Reply
  • Mike Miller
    OP
    Member since 2018 · 37 posts · 15 votes
    8y
    Originally posted by :

    I generally play it safe which is why my RE blog is called ScaredyCatGuide.  

    I love that name!

    If you can find something that cash flows a bit after factoring in some maintenance and vacancy costs that does not need a bunch of work I say have at it.  In the end it's cash flow that matter with long-term rentals.

    After starting off with "safer" plays I expanded and my third property was a reno project but still mainly cosmetic.  Thus, all three of your points are reasonable and workable.

     This was my thought as well.  We will get more aggressive as we go, but starting somewhere NOW is the idea instead of waiting until I have it all figured out.

    0Reply
  • Mike Miller
    OP
    Member since 2018 · 37 posts · 15 votes
    8y
    Originally posted by @Thomas S.:

    More realistic goals perhaps:

    1) create retirement income 15 - 20 years out

    2) 30 year mortgages, reinvest income, begin to pay off properties when you are finished expanding. (Dead equity decreases return on investment)

    3)  Screening must be strict and inflexible. Rejecting a good applicant is less costly that evicting a bad tenant.

    4) purchase properties that have good positive cash flow based on a hypothetical 100% financing. 

    Do not expect to make money tomorrow investing in a bad deal today.

    1) 15-20 years out does not bother me for retirement income.  I have other means that I plan to be FI well before that.  Worst case other assets could pay this off if I wanted the timeline to move up.

    2) I plan on investing the cashflow into the market and letting it grow vs paying extra on the property.  This works 2 fold.

    a. Grows at around 8% instead of paying off a 5.5% mortgage.

    b. Gives me liquid cash to use if something goes wrong!

    3) Good idea.  I will need to be firm on this.  There has been a lot of good advice on the podcast about this.

    4) This seems to be the issue with what I am finding/looking at now.

    0Reply
  • Jason Luongo
    Investor · Lake Worth, FL · Member since 2015 · 107 posts · 54 votes
    8y

    Mike,

    I am currently in the process of attaining my second property in the Ft. Meyers area (new construction duplex). I have very similar goals as you stated in your OP. A few suggestions I may give you:

    • Even though you want to pay them off in 15 years, attain 30 year debt and pay them off in 15 if you choose.
    • Usually to attain higher quality tenants, you may have to sacrifice some cash flow/returns.
    • I would highly recommend attending meet ups to get any idea what other investors are doing in the area.

    Hope these points were helpful. Im not an expert by any means.

    2Reply
  • Anna Buffkin
    Investor · Pawleys Island, SC · Member since 2015 · 324 posts · 385 votes
    8y

    BRRRR a fixer upper. Though I agree you may want something newer.

    I just purchased a 3/1.5 built around 1959 (the tax office says 1958, another agency says 1960) in March.   This is by far my oldest property. It was neglected for 5 years and foreclosed on by the previous owner on a seller financing gone bad.  It was a piece of work.  Everything that could go wrong has.  A  small tree even fell on it last week. I replaced the 20+ HVAC and found the old duct work couldn't withstand the force of the new unit.  New ducts had to go in and so on; however, despite everything, I cash out refi-ed in May. It still cash flows, and I am still about $12k to the positive on cash generated from this property (including refi cash).  It is not as much as I was hoping for, but still not a total flop.

    1Reply
  • Francene Iaizzo
    Rental Property Investor · Freeport, NY · Member since 2016 · 61 posts · 18 votes
    8y

    I'm in the process of closing on three SFH with Section 8 Tenants in St. Petersburg, FL. With these homes and tenants, the repairs go very different. If the HVAC is at the end of the manufacturers life, don't replace it. If it is faulty, fix it and keep doing that until it can no longer be fixed, THEN replace it.

    You're kicking the can down the road but these homes, if bought at the right price with rents at current market value , will cash flow nicely.  A big repair will hit eventually, but if the numbers are good, the money will be there when the time comes.

    I'm excited because I do believe these particular homes are in a location where they will appreciate over time but as usual I'm very conservative when I estimate and predict.  My exit stategy can be many different ones.  

    I do believe I'm in an area that in 5 or 7 years I can Airbnb them.  My broker said he knows someone who is crushing it with Airbnb and it's vacant 30% of the time making better cash flow then a yearly rental.  That is exciting!

    2Reply
  • Tom Blake
    Specialist · Brooklyn, NY · Member since 2018 · 20 posts · 9 votes
    8y

    @Mike Miller since it's your first investment property, I would be picky. And by picky, I mean wait for an opportunity that strikes you as a great deal, not just a good deal. Don't succumb to the pressure of others' successes or activity. Talk to local investors and agents to determine what returns (cash-on-cash) would make a deal great (taking into account location, property condition, etc.). Once you know that start making offers at prices that give you the returns you need. No offers = zero chance of getting a great deal. Try to connect with local agents and let them know what you are looking for and follow up diligently. If a property you like goes under contract with another buyer - follow up with the listing agent until it closes (buyers back out and when they do it's a great time to swoop in). Off-market is always a plus because there can be a window of time where competition is minimal/non-existent. Try to find a 2bd that is over 1,000 SF and convert it to a 3bd - there is often big upside from that kind of move...also, adding a 2nd bath if only 1 exists is another win. Get ready to act fast if the right deal comes up. Lastly, BRRR is great - just make sure you are realistic about interest rates when you go to refinance - with the latest fed comments, rates may get wacky. Good luck!

    2Reply
  • Travis Rasmussen
    Realtor · Murrieta, CA · Member since 2016 · 373 posts · 203 votes
    8y

    @Mike Miller

    @Tom Blake makes some great points, especially by the "Don't succumb to the pressure of other's successes or activity."

    Don't be afraid to take the time to find your footing.

    1Reply
  • Keith Chew
    Tampa, FL · Member since 2018 · 15 posts · 4 votes
    8y

    @Mike Miller, I am also a new investor in the Tampa area and I just want to say I am learning a lot from reading through everyone's comments. My short term goal is to get my first property under my belt to gain the experience and confidence to one day get my vacation rental in the mountains.

    2Reply
  • Alex Olmo
    Specialist · Orlando, FL · Member since 2017 · 127 posts · 38 votes
    8y

    Make offers!  The listing price is not the sale price!   Brandon Turner makes hundreds of offers before a contract is accepted. 

    If you ever need any assistance in Central FL, I can help!

    1Reply
  • Joe M.
    Erie, PA · Member since 2018 · 413 posts · 348 votes
    8y

    Did you try looking in Pinellas at all?

    0Reply
  • Mike Miller
    OP
    Member since 2018 · 37 posts · 15 votes
    8y
    Originally posted by @Joe M.:

    Did you try looking in Pinellas at all?

    I currently have an alert setup for multi-family in Pinellas, but I am not sure that is what I am looking for.  Any specific areas?  I am thinking about looking in Wesley Chapel/New Tampa area, but the prices are going up there too.  Ideally a good neighborhood without a CDD would be good.

    0Reply
  • Brian D. Beatty
    Real Estate Agent · Clearwater, FL · Member since 2017 · 99 posts · 66 votes
    8y

    Mike,

    I am in the Pinellas County area, Currently have a 3/2 in Largo that gets $1,500 per month, with mortgage, taxes and insurance at $995. It cash flows good. I work with renters from time to time, almost all 3-2 SFH are renting for $1,300+ a month. Largo, certain areas of Clearwater and Pinellas Park are good areas for rentals.

    2Reply
  • Brian D. Beatty
    Real Estate Agent · Clearwater, FL · Member since 2017 · 99 posts · 66 votes
    8y

    Mike,

    I do have access to a F.S.B.O, 2/2 984 Sq. Ft. with 1 car garage, Roof was replaced last year, electric panel was replaced, water heater relatively new. Inside has worn carpet and needs paint. Kitchen is dated and has old range. Outside doesn't need much. Its in a quite neighborhood, surrounded by 55+ community and golf course community. Owner currently has family renting @ $1,200 per month. 1 block away is a 3/2 listed for rent at $1,350 per month. Good school district. Asking $189,000. Not that I think he will get that. Let me know if you are interested. I can set up showing?

    0Reply
  • Reece Register
    Realtor · Tampa, FL · Member since 2018 · 93 posts · 44 votes
    8y

    Working with a property management company/real estate team has proven successful for our investors. There are many channels to obtaining properties. Effective property management companies will know what properties are going up for sale that are already being managed by them. 

    2Reply
  • Peter Miller
    Investor · Saint Petersburg, FL · Member since 2017 · 15 posts · 12 votes
    8y

    @Francene Iaizzo Did you buy those properties with the tenant in place? I'm just curious...it seems like investors are a bit split on their vacancy preference at time of purchase. (Fyi...I'm definitely an advocate of section 8 landlording and have several investors who are section 8 landlords)

    0Reply
  • Francene Iaizzo
    Rental Property Investor · Freeport, NY · Member since 2016 · 61 posts · 18 votes
    8y

    @Peter Miller Yes, I did buy the properties with tenants in place.  The was actually my prerequisite since I live in New York.  So they cash flow and for me zero stress because I have an EXCELLENT property management company.

    In six months I want to buy something below market such as a foreclosure or a wholesale deal that I can fix and flip.  Luckily my full-time job here in New York affords me a lot of paid time off so I can be in Florida for chunks of time during a rehab.

    0Reply
  • Reece Register
    Realtor · Tampa, FL · Member since 2018 · 93 posts · 44 votes
    8y

    @Peter Miller @Francene Iaizzo I see more investors with tenants in place upon purchase. We are able to assess this with a real estate agent prior to purchase  and look at tenant ledgers to ensure cashflow upon purchase. 

    0Reply
  • Francene Iaizzo
    Rental Property Investor · Freeport, NY · Member since 2016 · 61 posts · 18 votes
    8y

    @Reece Register

    @Peter Miller
    0Reply
  • Keith C.
    Lender · Central Florida Markets · Member since 2017 · 137 posts · 135 votes
    8y

    Hi 

    I have a 6 unit ( Cash Cow ) multi family on a beach block . Under contract needing a  close by end of week — Very hard to find  6 unit Multi family most units are 2-4 .. price In the 70k range per  unit.

    Aside from beach block only 1.4 miles from the VA medical center just across the bridge . Meaning ( VA staff etc ) opening the already multitude of people's looking for rentals. In the 900/1300 range.there are 2-4 vacant rentals open at anytime in the whole town . Any PM will tell you it takes days ( not weeks ) to rent these smaller units

    Property is being sold at distressed price and already has cash flow with some leases.

    I am open to fliping the contract preferably JV—

    I Would do a 50/50 JV -as this is a Cash Cow opportunity that I would BRRR

    PM dor full details including appraisal at much higher price 

    This is only for someone who has funds available , there is no time for lengthy doc processing . I can show you units today and or tomorrow 

    Sorry for the short notice 

    One of my partners coming up short 

    ( St Pete Beach , St Petersburg, Pinnellas County , Multi family , Distressed cash sale ) 

    0Reply
  • Mike Miller
    OP
    Member since 2018 · 37 posts · 15 votes
    8y

    Are these in the Tampa area

    0Reply
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