The first is always the hardest, so please help!

[Alexander Mattson]

I have been recently working on the analysis stagy of my first investment property. I have developed, with a friend, a web scraper and algorithm that finds undervalued houses/duplexes to ensure a positive cash on cash return based on local loan and rent values as well as the asking price of the property. I was planning on using this system to do most of the work for me and then purchasing a house/duplex under FHA or FHA 203K loan (depending on rehab requirements for the property). After living in the property for a year (minimum required by the FHA) convert it to a rental. This investment would thus cost me the carrying cost of the first year and as long as I am factoring proper insurance, tax, maintenance, etc should then provide me with a positive cash on cash return to just hold the property and develop the equity/income for my next investment. My major concern is that this is a long haul strategy and thus the income from equity/rent will take years to accumulate. This may cause the expanse of future properties to be slow at first but my hope is that this method insures the continued ownership of the property thus laying the groundwork of a portfolio rather then the flipping game of constantly owning and selling properties.

I was wondering if this is the most effective method or if there may be another method of going about your first investment property?

Also, as this is my first investment, I am sure there are oversights in my analysis and I was hoping people could point out problems that my arise in the method I am choosing to pursue. 

I appreciate any help.

Thanks. 

Alex

[Hattie Dizmond]

Alex,

What you've described will definitely work. It's what Brandon Turner refers to as the "slow, boring" approach to REI. (Read his awesome blog post here...

http://www.biggerpockets.com/renewsblog/2014/08/02/passive-real-estate-investing/)

How well the strategy works to fulfill your goals depends, at least partially, on what your timetable is.  If you want to be able to retire on passive income in 5-years or quit your corporate job in 12-months, it's probably not the strategy that's going to get you there.

If you haven't fully fleshed out what your objective(s) are...and note that they could change over time...I would encourage you to do that.  But, if you want or need to accelerate your timeline, don't get caught in an either/or mindset.  You don't have to do all buy & hold or all flip or all wholesale.  You can set your primary business model as buy & hold and then use an occasional flip or some wholesale deals to add capital and acquire additional properties.  Also, you can make use of hybrid investing, best explained in another excellent blog post by Brandon Turner...

http://www.biggerpockets.com/renewsblog/2012/12/16/hybrid-real-estate-investing/

My 2 cents!