First duplex purchased, seeking advice on my plan going forward

[Shane Bracewell]

BP Community,

First I just wanted to say  how grateful I am to have found this community. Without all of you, I would not have had the courage to build connections and pull the trigger on my first investment property. At the moment, I have an offer accepted on an out of state duplex in Ft Worth, TX. Below are the details, followed by some miscellaneous questions pertaining to my investment plan.

Deal #1: 

$174,250 offer accepted on a 2006 duplex (4 br/2 bath per unit) in a C neighborhood. Currently at the inspection stage, but let's assume necessary repairs will be negotiated into reducing the purchase price or are otherwise minimal. Conventional financing for 75%LTV at 4.875% with 1.75% in origination fees, fixed rate over 30 years. Total cash invested: $50,000. Anticipated rent (section 8) = $1300-1350/unit and operating expenses (including taxes, insurance, PM, maintenance/repairs, capex) project to be $1100/yr. NOI=$1380, CF=$344/unit.

Investment returns:

Cap rate=9.5%

CoC ROI=16%

This deal looks quite good on paper, but I do realize that there is a difference between theory and practice and we will see how it turns out. That said, I have done my best to mitigate as much risk as possible as an out of state, first time investor by taking my time in learning about REI, learning how to run the numbers and budget appropriately, as well as developing reliable connections. For instance, my agent is simply a fantastic resource. She is a fellow investor who works with plenty of out of state investors, so her guidance has been invaluable.

My question at this point is if you think the strategy I have planned will be robust. I intend on purchasing 1-2 duplexes in the next year, followed by 2-3 duplexes each year after that. After expenses/emergency fund, I will have 70,000 to invest in RE generated from my W2 each year. I plan to use my W2 income plus annual cash flow to make 25% down payments on more duplexes, and continuously repeat this process as funds become available. I will do this until I reach my goal of 100,000 cash flow per year. Assuming I can find duplexes comparable to this deal (which I realize is rare but bear in mind this was found on the MLS), my spreadsheet analysis indicates that I will reach my goal by the end of year 5.

Miscellaneous questions:

1) Does this sound feasible?

2) Is there any concern with linking all duplexes to the same checking account and using the cash flow to purchase new duplexes? I've heard it mentioned that it might be a good idea to have a separate bank account for each property. Do you recommend this?

3) LLCs are a pretty contentious topic. It seems some live by them while others claim they aren't worth it. Would you recommend I get an LLC? If so, when (1 property, 5 properties, etc.)? What type would you recommend? Are there any issues with obtaining conventional loans if I have an LLC?

4) I've heard that Fannie/Freddie allow 10 conventional loans, but some lenders do not allow more than 4 loans at a time. Is it just a matter of finding a lender who understands these guidelines correctly to find 10 loans? Once I hit 10 loans, is it possible to wrap all loans into a portfolio loan and then get access to 10 more conventional loans? If not, is my only option commercial?

5) I do not have an investor friendly CPA or real estate attorney yet. I would like to get one in TX if possible. When would you recommend I do that? When do you use attorneys? I will probably need a CPA before the 2019 tax season. Is it possible to interact with them remotely (I live in Alaska)? Do any of you have recommendations for either?

5) As I accumulate more properties, is there anything I am not taking into account?

I realize some of the answers to these questions will be it depends. Feel free to make assumptions about me to better answer them or ask and I will happily give more information. Lastly, I know this was a lot. Please don't feel inclined to address each question. 

Thank you for any and all help, you all are truly amazing!

Best,

Shane