Starting a buy and hold portfolio at 23

[Lisa Yang]

Hi Everyone!

I have been heavily researching starting a real estate portfolio and was hoping to get some advice/feedback on my plan.

I am 23 years old, have a salaried job in corporate finance, 750 Credit and recently moved to Michigan. I am originally from Seattle and don't know a lot about midwest markets so I was hoping to get some advice on which areas to focus on. I purchased a home here in Michigan which I am living in but I would like to start purchasing property to use as rentals. My goal is to make $500 a month on each property and get to 4 properties within the next 5 years. When I ran numbers it looked like I am able to come up with about 20K in personal savings annually (only including my salary). Is this a realistic goal? Thank you in advance for your responses!

[Mike H.]

I think buying 4 properties in the 5 years with 20k a year to put down towards the purchases is definitely doable. That plan will work. I think your goal of net cash flow of $500/mo per house is where you're going to run into the biggest road block.  You're going to have to really dig deep to find properties that can net that much with only 25k as a down payment.

I'm not saying it can't be done. But thats a hefty net profit margin to hit for sure. You've got to target the right price point in houses and the right areas for lower taxes. If you do that, then maybe you'll find that kind of net profit.