New and Looking for Advice

[Jared Swiecicki]

Hello everyone, 

My name is Jared and I am new to the forum.  I have a background in Healthcare Revenue cycle.  I am very analytical, goals and numbers focused.  We live outside of Chicago and are preparing to purchase our first rental property.  Unfortunately, we started this journey a bit late, so some of the common recommendations, like house hacking, don't make sense for us right now.  My wife is a former property manager, so we have a leg up, but she is currently a fulltime mom to a wild 4 and 7 year old.  In the coming years she will have much more time to dedicate to managing, but we don't want to wait.  We want to jump in.  Looking for any advice to ensure the first purchase goes well.  In the future, we may be able to take more risks, but would like the first one to be more positioned for success.  

1. Should I buy local.  My local market is more expensive, but we would be present.  If not local, what markets would you recommend I research?

2. For a first purchase, with very limited skills, how much rehab work is too much in order to add value?  Should I avoid a rehab project and just take lower cashflow as a start?

3. How do I rise and repeat quickly?  I have a down payment available for a modest purchase, but cashflow alone wouldn't replenish that quick enough to purchase again within 1-2 years.  

4. How should I be using metrics to validate opportunity?  I have built some spreadsheets to show cap rate, cashflow, cash on cash, expenses, total cash outlay, debt servicing, and net operating income.  Am I missing anything?  Are their industry benchmarks I should be set as goals for each metric?

5. Any books, articles, or podcasts you think I should start reviewing now?

Thank you for any help you can offer.  

Jared

[Matthew Irish-Jones]

HI Jason,

1. Yes always buy local when you can.  If you can't buy local every agent on here has a great pitch as to why their market is the best.  My advice is find a great team and they will beat the market. 

2. If you are going to out source the entire thing to someone that knows what they are doing, it can be done. We have newer investors use the BRRR method through our company. If you are going to go at it alone and figure it out as you go... DON'T. Any amount of renovation is too much. You should buy turn key. Local, small contractors can be as bad as local, small property managers and used car salesmen. There is just too much that can go wrong no matter how smart you are. Renovations rely more on experience than intelligence.

3. BRRR method is really the only rinse and repeat method, but it also adds a lot of risk, so you have to weigh the two. I have done both BRRR and long term slow portfolio building. The latter is safer, has less headaches, and after every 7 years you can refinance and keep building. The BRRR is faster, more risky, more exciting, and has way more moving parts. High risk, high reward.

4. IN this order... Grade:  Location, asset condition, returns.  You need a grading form for these three categories and they should be weighted.  Most investors are hyper focused on returns.  If you ignore the first two you will end up in a D class property with the promise of 20% returns when absolutely everything goes right... which it never does. 

5. Everything on BP is a good start.  Read their publications, spend time on this site... and remember... the people you choose as vendors are more important than the property you choose to invest in.  The right property with the wrong people and you are upside down.  The right people... and you won't end up with the wrong property because they will make sure you steer clear of bad investments. 

Good luck!