Introduction and initial strategy

[Aaron S.]

First of all, wanted to say thanks... I've learned a ton in a short time on BP!

I'd like to quickly introduce myself and get feedback on an investment strategy that I'm looking at to get started in REI.

I have a solid job with great stability and a very good comp package. Cash flow is not an issue, but I have cash (around $250k) that I need to invest. The stock market is always an option, but it's boring and I like the idea of having some control in the investment.

I'm looking at buying a couple of townhomes for around $90k each. If I had my way, I'd buy 4-5 at current prices and use some financing. My wife is very risk averse, so I thought owning a couple of properties outright and proving success to her over a couple years might be a great way to start. The townhomes I'm looking at are less than 10 years old, don't require much more than fresh paint, carpet, etc and sold for upwards of $150-170k at their height. Rental comps are coming in around $1300/mo. It's one of the top suburbs in the Minneapolis metro with a median family income of $82k, very low crime rate, quick access to downtown, airport, etc...

Since this isn't a cash flow play I plan to reinvest all earnings into the market. I'll park the money there while things get rolling and maybe use it to invest in other properties if this goes well.

I've looked at using Renters Warehouse for property management, although I'm buying in the suburb where I live. I travel for work and $79/month is worth it's weight in gold just to take the call and diagnose problems. I'll probably use them to market the first property (they charge one month rent) and after learning from the process may list the second one myself.

The other idea I've kicked around is to spend $1500 on minimal furnishing for the apartment. If it allows me to charge a few hundred more per month in rent, it should cash flow inside a year. May not even need to go down this path... just thinking ahead.

I've put some pretty detailed models together and with the most conservative estimates it looks like I can pull off a 12.9% CAGR over five years. Not a crazy return, but given market uncertainty I'll take 13% right now.

Would love to have you all poke some holes in my plan! I'm looking to pull the trigger in the next 4-6 weeks depending on what kind of deals/inventory can be found. Looking forward to collaborating with this community as I jump in.