Beginner's plan - good or bad?

Question

Real estate investing has started to pique my interest lately, and it seems like it could be a very appealing "career" if you invest wisely. Being a 9-5 slave my whole life isn't appealing to me, which makes real estate investing look even better. Now, I realize when you first start you'll probably need to work at a 9-5 to build a bankroll, and even if you have enough startup money you'll spend a lot of time managing the properties. However, as you continue to buy more (or bigger) properties, eventually you should be able to hire-out management which results in more free time for you. Anyway, I've come up with a very rough plan and was wondering if other investors could share their opinions on it.

First a little background:
I turned 19 at the end of last year, but I'm not currently attending college because I opted to take a year off to "restructure" my life. My father is a higher-up in an interior restoration company. He said I'd be able to get a job in delivery, while doing some after-hours demos on new projects. While delivering, I'd be making decent money while simply driving around the area and dropping off supplies (aka, easy stuff for the money I'd be making). During the demo projects I'd be able to learn more about the repairing aspect which would obviously help when managing properties. For the short-term future (3-4 yrs) I'd be able to live at home. Even though some may consider it lame, it'd be very beneficial long term as I'd be saving a lot on monthly expenses.

Rough plan:
2010: Work full-time while honing my repair skills and reading real estate books/forums.
2011: Join local RE clubs to network, learn about the area, and possibly find properties. Purchase two properties (SFHs or duplexes).
2012: Purchase 3-5 properties depending on financial situation/available deals.
2013: Purchase 3-5 properties
2014: Do a cash-out refinance on a couple of the high-equity properties and use that money to facilitate a bigger purchase if able to(~8 unit, hopefully).

I want to be a buy and hold investor (or buy, fix, rent, refi, & hold). Eventually I hope to sell off the <4 unit properties and plateau at 8-25 unit properties (of course that won't happen for another 7-10 years at minimum). If the 8-25 unit properties are bought wisely, once I have a couple I should be able to take more of a hands-off approach to management and have more free time (and more wealth).

My plan may be a bit aggressive, but with hard work, smart buying, and smart spending I think it'll be possible. So...any thoughts?

Cole Haynes · Answer

Chad, I think I know what your going through. I started not to long ago at your age and my head was racing with thoughts of what I would do next year and the next year..and 5 years. Just from experience I would recommend you don't choose one strategy (buy and hold) and become blind to everything out at first. I missed ALOT of deals back when I started because of that. As it turned out the first strategy I employed (buy, rehab, sell) turned out to be my least favorite! But I closed my eyes to any other strategy because I had a, "I know everything mentality". Haha that's funny to say now because it is SOO far from true. I would learn EVERYTHING you can about investing from this site. I just found it myself and have learned alot! If your serious about investing feel free to give me a call, if you'd like. I think it is GREAT that you are thinking long-term btw. I definitely think I know where your coming from. Cole [PHONE NUMBER REMOVED]

Sam M. · Answer

I wish I had started with a plan at your age. Way to go.

David Breitzmann · Answer

Chad, Investing in self development, in whichever subject "piques" interest, is lifelong and if only more appreciated its utility. With the plan objectives for 2011 it is important to remember the "pulse" on the ground will determine what you are able to do. If the market turns bullish if in a posiiton to purchase "entry" will cost you more. A business plan has to account for all the potential fluctuations - i.e. lowest purchase cost the market will allow (REO's). Inherent to a plan must be the target date so a tie-in that will be essential, especially depending on increased difficulties obtaining credit, will be a target FICO score. Exit strategies should also have contingencies for sales that do not go through easily. That's even more a focus when you are purchasing "multi's." Lastly, at one of those REIA meetings, a contact in accounting would be critical to successful navigation of the tax consequences. Once you develop towards a large portfolio the IRS will apply a different standard. This is changing even more now that many market bottoms were the result of "passive investors."

Ana Hyler · Answer

Congratulations on your plan to be independent from the rat race at some point! I think your goals are very doable - now I would change it and make it more agressive...like the other person said - find a R.E investment group right away...you can learn from those meetings even more then you would from a book....also read a lot ! Bigger Pockets is a great resource. Your goals right now are somewhat long term...I recommend you work on Short term goals... make them specific points on how to reach the long term ones. Also... do your numbers ($$$) how do you plan to aquire and re-hab your first property? Research your market....and all these as you learn and work. Basically what I'm trying to say is..."Aim at the starts so you can at least reach the moon".

Cole Haynes · Answer

Eric, I personally wouldn't worry at this point about finding and paying thousands of dollars to a mentor. I would LIVE on this site and learn some strategies. Then figure out which strategy is best alligned with your goals and personality. Then read every possible post, article, and blog you can. Do EVERYTHING the pro's on here tell you. Doing that will take a few weeks. If you follow through you shouldn't have a problem getting your first deal.

Eric Blow · Answer

Way to be ambitious and create a plan like that Chad. i am currently just getting started myself. Not sure how far planned I will go beyond my first investment property at this point. I'm like sponge, just soaking it up. Cole, any suggestions on where to get some good mentoring? Eric

Brandon Yeager · Answer

First, I like that you have a plan. Without that, most people do not get anywhere. However, that being said. :) I'd vote to go with a more aggressive plan. Regarding learning to do repairs...skip that. Try to learn how to pay people to do the repairs...however, YES, you need to know how much things cost to have repaired. Next, don't wait until 2011 to start networking at REIA meetings. Start THIS MONTH. Start rubbing shoulders and meet other people. Find Wholesalers. Read forums. Read articles. You can do it...I'd just try to have a more aggressive plan and like...move say...your first 4 years of stuff into this year. There is no reason that you can't learn some stuff, and apply it, and have bought 3 to 5 properties by the end of this year. Brandon

Joel NA · Answer

This site is the best place to start learning! I wish I would have had a "plan" when I was your age! Congrats on starting early. BP advice will help you tremendously. Search the "50% rule" for buy and holds and ARV formulas for flipping. Good luck!