Becoming a landlord

[Account Closed]

What is the best way to get started as a landlord? Also, after obtaining your first rental house, how does one work their way up to owning 20 to 100 houses?

[Azeez K.]

Hi @Account Closed

Good Question. There are basically two ways people end up as landlords (intentional and accidental).

My experience was more on the intentional side and more of an informed decision. However, the thought process was less of being a landlord and more of owning a business (such as a real estate holding company) that acquires multi-family/SFR that generates enough cash flow and to acquire multiple properties with the positive cash flow and over n..number of years have the properties pay for itself so I could reap the benefits of passive income and have properties more free and clear with enough equity.

Define your Vision: What is your overall vision from being a landlord (i.e. one time thing or have XX# of properties that generate enough income so that you can quit your day job and work on things you like)

Once you have your vision. The next thing you need to work on is a strategy that will help make your vision a reality. Your strategy could be to buy Multi-family properties in distressed neighborhoods and reposition and resell the properties and move on to the next one. You have to define this.

Next you will need to work on defining short term, medium term and long term goals. For example short term goal could be to buy a Fourplex in the next 6-12 months, medium term could be 2-3 duplexes/quad plex in the next 3 years etc.

Create a business plan - Now would be a good time to create a business plan to put your vision, strategy, business structure, investment strategy, criteria for investment, investor strategy, financing strategy, target location and properties ..the list goes on.

For example Business Structure in my case- I have an S-Corporation that serves as the parent company, each new property is an LLC under the parent S-corp..again you will have to consult your CPA etc. Most importantly think of it as owning a business and less as being a landlord.

You will have to identify the following

Attorney: to define and create initial business structure and entity for the company

CPA: ·To help create methodologies for tracking revenue and expenses

Real Estate Agent: provide access to list of properties that match your criteria

Property Management: Initially, I would encourage you to manage your own property so that you know what it takes before you hire a property management company

Appraiser:·To help define comps and reasonable market value when dealing with non-typical properties or non-typical investments

Insurance Agent: to provide insurance on investments

Mortgage broker or lender

The following maintenance and repair companies/people should be identified prior to making a purchase:

·General Contractor, Landscaping, Handyman, Plumber, Electrician, Cleaning Service, Carpenter etc.

Now you don't need to identify all of these individuals before you buy your first property but at some point you will have to identify/work with these individuals.

Our friend @Brandon Turner has a great step by step guide that you should read that highlights ways to build up your portfolio after the initial first investment. http://www.biggerpockets.com/renewsblog/2013/04/09/how-to-buy-a-small-multifamily-property/

I would also recommend you read this book Multi-family millions by David Lindahl that answers your question in greater detail.

In summary: Focus on positive cash-flow so you can rinse and repeat and think of it less as a landlord and more as a business owner.