Starting out: Best Rental Property Strategy

[Account Closed]

Hey guys, first ever post on here. Let me start with my age: 25. Have a steady job and live with parents saving every dime. Haven’t had time to invest as grad school has taken most of my time (graduation in June). My target range is $180-$250k. I have a few questions as I would like to own multiple properties and generate passive income:

1. I have saved ~$35k for a down payment for a duplex/SFH which wouldn't be owner-occupied; should I put most my equity into it, thereby lowering monthly pmts or leave a little for possible renovations? Aware of the 203k loan but would rather be certain of renovation costs.

2. How do you guys deal with the legal aspect of setting up liability, llc or umbrella? My take is multiple properties warrants an llc but for only one, an umbrella would suffice.

3. I love excel and have created a cash flow model with sensitivities showing multiple properties and all financial metrics/ROE/IRRs and wouldn’t mind constructive criticism on it (DM me)

4. Market agnostic of public health concerns, I’m wondering what my leverage situation would be; should I allow first property to yield a few years of cash flows before putting all of that into another mortgage or save first few years as reserves. Just wondering how this waterfall of cash flow would look to boost other properties (all theoretical).

I know this is a lot but if anyone has an answer to at least one of these it’s greatly appreciated!

[Craig Curelop]

@Account Closed - Welcome to BiggerPockets! You found the right community here. To answer your questions:

1. The debate on how much you should put down will be debated from now until the end of time. Personally, I like to go for the highest cash on cash return. You obtain that by putting the least amount down. So personally, I would put the least amount down as possible so that you can have money in reserves and save up for number 2. 

2. Having an LLC for house hacking actually hurts you more than helps you. By having an LLC, you need to get a commercial loan which have higher rates, more points, etc. Otherwise, you have to purchase in your name and then transfer to an LLC. At this point, banks could call the due on sale clause and call the loan due. Not great for you especially in these uncertain times. I would recommend just getting an umbrella policy.

3. N/A

4. I always think it's best to get that first property and then stack up your reserves. The first property will allow you to save much faster because you will have been saving what you were already saving PLUS the rental income from your property.