Planning the Strategy

[William S.]

Hi All,

I hope you're ready for some serious, what could be "analysis paralysis." Before I begin my purchases I wanted to set out my plan to make sure I'm not making a mistake. I don't want to get burned by CapEx items. On the forums there have been debates on using percentages of rent to calculate for expense vs using IRR off the monthly cash flow. I'm attempting to combine both methods.

See attached image

Strategy:

Year 1-3

Purchase three turn key SFH's with 25% down 30-year fixed mortgages

Have $25,000 of reserves to survive any major CapEX items that may come up

Set aside each month 30% for vacancy, repairs, PM off of the gross rent

Year 4-10

Use cash flow from all three SFH's + savings to pay down mortgage on property #1 and so on...

Have what may be left of my $25,000 reserves

Set aside each month 30% for vacancy, repairs, PM off of the gross rent

Year 10 and on...

Have what may be left (if any) of my $25,000 reserves

Use cash flow from properties to set aside for CapEx items (using IRR)

Does this seem like a good strategy? Is anyone else taking this approach? Have I missed something?

Thanks!

Bill