10 Year Plan. Does this make sense to you?

[Curtis H.]

Hello fellow BP members, 

Does this seem like a good plan for someone who invests part time while having good W2 income and excellent credit?

This seems like a very good strategy for building capital over a 10 year period. In my case...

- I bought a beat up home Sub2 in a great area 2 years ago and fixed it up while living in it and built up $200K in equity. I have satisfied the capital gains requirement and can move on to next house.

- I find another beater in a good area and do it again, while renting out the above house for 2-3 years (I still won't have to pay capital gains when I sell). The cashflow would be minimal, but it would cover the PITI which is my main goal while building more equity.

- Sell the first house and probably net $250K-$300K in profit. I now have been in my 2nd home 2 years, and have satisfied the capital gains requirement. I can move from here and rent it out like I did the first. 

- Rinse and repeat. 

Now this house I'm in currently obviously has benefited from the huge appreciation levels we are seeing in CA. So I don't expect those gains on the future homes, but still they will be nice gains. I would expect $100K in equity per home I sell since I will always buy them beat up and add value, as well as capture appreciation for 2 years. 

- Added bonus would be to take a HELOC out on primary residences during that 10 year period to buy rental properties out of state

Am I missing something here? If people don't mind moving, this seems like an awesome way to go.

[Joe Splitrock]

Originally posted by @Ron Gosling:

A wise mentor once told me, if you own 10 SFHs, you have tens sets of different problems.  If you own a 10 unit complex, you've reduced the amount of different problems and made common the other issues.  My plan is to take the equity of my six paid off properties and to work a financing deal to purchase a multi-unit property and ideally double my holdings at one shot.  Still a year away but sounds like we have the same goals.  Good luck.

I have owned both multi-family and single family and I have sold off all my multifamily over the years. 

You are correct that some things are common such as a roof and exterior maintenance, but other things like appliances and number of tenants is the same or more.  Yes, you save time by visiting one location. On the flip side, a problem in one of the ten apartment units affects the other nine. Tenant disputes can be a huge time drain and can cause good tenants to leave your property. A problem in the neighborhood will affect all ten apartments. Single family homes are spread around, so a problem in one neighborhood doesn't affect all your houses. My single family homes rent for a higher value than a typical apartment in town, so I can get twice the gross rents per door. For me that means higher revenue and less doors. Less doors means less problems and less time. Don't get me wrong, I know that many large investors own huge apartment buildings. They do quite well. I am just saying for a smaller, part time investor, you cannot beat the passive aspect of single family homes. Way less problems than multi-family. The icing on the cake is that when you are ready to sell, single family homes sell faster. The reason is because there is a larger buyer base, which means if I need to unload properties I can do it quickly.