Newbie looking for the right path to go down...

[Brian Mcloughlin]

Hi everyone, I am so glad I found this forum. It has been a wealth of information. I am now comfortable asking for advice as I have read so much in the last four months and attended a few seminars. I feel though since we are all strangers on the same mind set here I am more likely to get truthful answers from strangers than someone with an agenda.

Brief overview. I came into a little bit of money at the end of last year (roughly 1.2 million) and I do not want to invest into any more mutual funds or stocks... Ive had it with the heart ache of the market. My wife and I have great jobs, we own our current home outright and live a life we are very happy with right now. I live in northern NJ where real estate tends to be a bit pricey but recently has shown some great "deals". I noticed some of the best properties are multifamily units in terms of pricing to similar singe family homes. I have scoped out a few units around town in great areas and even looked at some lots.

I am considering purchasing three multi-family units in the area (within 30 miles of my home). I own a contracting business so I have a billing office and maintenance isnt something I am worried about. I would assume I should just buy them all cash since at least property is going to grow or outpace inflation and maybe in the next few years the value will go up 5-7%. A typical two bedroom in my area goes for $1500 a month. 3 bedrooms go for close to $2000 a month. Each property I am looking at atleast two units. Minus ridiculous NJ taxes, each property IF rented would net about $24000 (before any repairs) after taxes. Which is a decent and better return than any of my investments lol in this horrible market. I was thinking I would then save the rents for the following year and then purchase more units with that cash and show the bank I have now established a history of being a landlord and hopefully have positive cashflow... Except this time I would borrow against my original investments and use the rents from other units cover the three new mortgages. I would hope to continue to do this every other year after.

My eventual goal is to obtain 12 rental properties so in like ten years I can slow down and use the rent plus investment dividends to fund a much simpler life...

Does this sounds rational, am I looking at is all wrong? Also if I found property and just built 3 , two unit buildings on one lot which will be just under 1 million from the home plans and land cost should I do that??? Building would take about 9 months, the houses I am looking at right now are for sale - my assumption is for my long term goal building may make more sense because of the lack of repair costs other than labor. I can take 5 or ten year warrantys on the home threw my broker to cover large repairs and just send my guys over small things and painting etc...

Every day I wake up with a different approach as I want to be precise but also enjoy this. Its all about my ten year goal of building a nice monthly income stream that investing 1.2 million will never produce in that same time frame.

Any thought - suggestions - blueprints of what you have done???

Thanks Guys,
Brian