A Buy and Hold Basic Business Plan

[James Glasgow Sr]

I gave a talk at the Alamo REIA landlord group meeting a few weeks ago. I have gotten several request for that handout. I am posting the handout I used at that talk encase it will be of value for Bigger Pocket members. Working through writing the detail of a business plan helps you focus on what is important as you build your business and on what obstacle will need to be overcome.

This business plan outline shows you that you do not need to do something great to become a very successful real estate investor. Make a plan and work the plan, persistence and consistency will win the day.

Landlords Business Plan

Cash Flow Goals

Year One:

Buy 2 houses or duplexes.

Each with a minimum of $200 clear cash flow (cash flow per door).

Annual cash flow $4,800

Set up your business, Tax payer ID number, checking account, lease contract, set up cash reserve savings acct, prepare personal financial statement, start creditability file, build your team of experts. etc.

Year Two:

Buy 3 houses: New cash flow $7,200 plus $4,800 Total for year $12,000

Prepare, a business cash flow statement, update your personal fin. Statement, update your resume.

Year Three:

Buy 3 houses: New cash flow $7,200 plus $12,000, Total for year $19,200

Year Four:

Buy 4 houses: New cash flow $9,600 plus 19,200, Total for year $28,800

Year Five:

Buy 12 front doors: Three 4-plexes.( $150 cash flow per door)

New cash flow $21,600 plus $28,800, Total for year $50,400

Plus:

• $10,000 equity when you purchased each property. Total Equity $240,000
• Plus increases in rent 12 X $50.00 extra cash flow $600 per month. $7,200 a year. (Raise the rent on ½ of the doors every other year.)
• Equity increase from inflation: 12 houses X average of $80,000 value X 4% per year increase = $38,400 in equity gain per year.

By Year 6 you should have:

• Yearly cash flow of $50,400 (Plus income from any new doors added.)
• Debt pay down on $1,500,000 of loans, of $75,000 per year
• Equity increase from inflation of $ $73,400 per year
• Your net worth should be close to $500,000, increasing at a rate of $150K per year.

[Joe Villeneuve]

So you're saying you are going to get 15 loans for 15 properties, totalling $1.5M in debt?

Who loans that?  Also, assuming 20% down payments, that's $300k in cash needed over that same 5 year period?  Where does that come from?

I'm not saying this doesn't work, I'm just trying to figure out the important details that usually stop REI from doing this type of thing.