Finally getting started

[Steven Phillips]

Hello,  I am finally getting started.  I have $300,000 in cash to invest.  I am also a real estate agent so my main income is brokerage but I would like to start acquiring property on the side.  I know there is so much info on here you could read for a life-time without ever making a post.  But I've wanted to make a commitment that if this is how I am going to invest the money then I know I need to make an effort to be part of this community. 

So I have to jump in some where! My plan (and I'm sure i'm not the first) is to start and LLC and acquire a property for $250,000, make $50,000 in improvements, and hope between getting a good deal, some improvements and appreciation, that I can do a cash out re-finance for $350,000. I would assume on an investment loan like this the max refi LTV would be around 75%. So I would be able to take $262,500 out for the next project and keep $87,500 in equity.

Over the course of the year, I would try to come up with an additional $37,500 from brokerage to be able to reinvest with the refinanced amount.  So $262,500 + $37,500 = $300,000 where I am back to square one and can try to rinse and repeat.  My goal is to do this every year (I am 35 now), and try to pay them off in 20 years. I know (or will learn) that I will need to factor in other things such as repairs, vacancies, management fees, down markets, insurance etc.  Part of the plan would be to update the place, enough to hopefully last for 20 years, at which point I could start over.

I have partially chose this route over flipping because I think with a longer term outlook, I worry slightly less about the upfront costs, extensive rehabilitation and fees with short term flips.  With a longer term plan I hope instead of needing to make short terms gains I reduce my risk by assuming I might buy for market value, do an average rehab, get average rents, average appreciation or possibly exit 20 years later by flipping one a year or continuing to rent them free and clear and pass them down to the next generation.

Thank you for reading and I appreciate any thoughts or advice you might have!