Jumping in headfirst... tell me what could go wrong with my plan!

[Brett Matherne]

Hi, everyone. Long-time member, but I believe this may actually be my first post.  I'll try to keep this as short as I can without getting too far into the weeds...

My wife and I have come up with a plan to get our RE investing journey started (long time in the making), but something tells me that my plan isn't quite as simple as I'm making it out to be "in theory." I've spent hours and hours reading and listening to podcasts and am 100% sold on the BRRRR strategy as our way of ultimately acquiring as many rentals as possible to establish passive income... but with me not having much experience starting out (and also lacking a network), I'm not counting on being able to execute this very well. So I've come up with another scheme to get us started in the meantime...

Background:

I'm a full-time engineer and am also a fishing guide and woodworker on the side. Wife works for a non-profit, and we make a pretty decent living but we want to escape the corporate world sooner than later.  We are in the process of selling our first home and should walk away from closing with about $29,000, which we'll add to another portion of savings we've freed up for investing... so we're looking at $40k or so of working capital starting out.

Proposed strategy:

Our plan is to purchase a fixer-upper in an area with a solid rental market in the $80-120k range with a 5% down conventional mortgage... this would require about $15,000 cash for down payment, closing, and rehab (just using easy, round numbers). So after we close on this house, we would have about $25k on hand and would be cash flowing almost $4,000/mo from our jobs by lowering our cost of living (compared to living in a $250k home).

According to our lender, we're 'ok' to move out of our primary residence and begin to rent it out after 6 months, despite only putting 5% down.  After the sixth month, we would plan to move into another similar house and then rinse and repeat... buy a fixer-upper with 5% down and spend ~$15k acquiring, closing, and rehabbing. After the sixth month, repeat and repeat again until we have 4 rental properties over the course of 2 years.

At first glance, are there any holes in this plan?  Would conventional lending eventually dry up if we keep doing this without putting 20% down for an investment property loan?  Even if all 4 properties went vacant at the same time, we would still be able to cover all of the expenses even without tapping into our saved up capital or other savings, so I don't see being over-leveraged as an issue.  But surely I'm missing something here!

We've already put in an offer on our first property, and if it works out, it should eventually cashflow about $550/mo after expenses, capex, repairs, vacancy, etc.  I don't expect the same success for the next 3 properties (if I'm able to execute this plan), but even if they cashflowed ~$200/door, we would be at nearly $1,200/mo pure cashflow after 2 years of living with pretty low expenses. By that point, we should have a substantial amount of capital and sufficient working experience/network to begin to work on BRRRR deals as well as flips, which "could" potentially lead us to becomme full time investors in the years to follow.

Any input/suggestions? And thanks in advance!