My real estate strategy...

[Wayne Yates]

Hi guys I'd just like to say thanks to BP. Ive been listening to the podcast for a while now and finally came around to making a profile. I'm a listened real estate agent but looking in to investing. I have a parter who was a GC up until 2008 and is now a supervisor for a mid size construction co. Heres my strategy! let me know what y'all think.

I live right beside a really nice high school and would like to buy a parcel of land to develop a small sort of subdivision. Market here is great overall. It would be 5 acres for $50,000 total. My plan is to zone to where I can put each house on 0.25 (1/4) acres. There would be a total of 20 homes This would be a project to project basis building one home at a time.

All homes would be in the same relative layout with about 4 different designs. 3 bed 2 bath, 1,500 square foot, cost us about $100k per home to build. Worth about $130,000. We both work full time so it would take about 8 months per home build. Rents would be from $900-$1,200 plus utilities. These are based on comps 

I would ike to know how y'all feel about my strategy. My partner would prefer to build each home one buy one and sell as we go. actually I would say it's about 60-40. He would prefer the chunk of change but also doesn't hate the idea of the cashflow. plus we are in a developing community and I don't want to play the appreciation game but the cost of the homes should definitely go up over time

My only concern is taking on so much debt. I filed for bankruptcy (job loss) before and have been  scared of taking on so much debt even with the leverage ever since. We should have about $30,000 equity per home after each build and rent to qualified tenants but its still a little worrisome to think of having 20 homes lol

It seems like a great idea to me since all the properties will be together so property management would be a lot easier verses 20 homes in 20 different areas. Anyways please let me know sorry to rant

[Alvin Mercer]

@ Wayne Yates  It makes sense and I understand your concern but another concern is a diversified portfolio.  When you have properties spread out you can mitigate some of the management issues that you might have when they are right next to each other.  In addition, because real estate is local, you can alleviate some of the economic disparity from community to community.