Considering a Move Up the Food Chain (& New to BP)

[Devin Wanzor]

Hi, my name is Devin, 28 years old, and I'm from Tulsa, OK. I've been a real estate investor for about 3 years. I've also worked as a commercial banker for about 6 years now and it is that line of work that first exposed me to REI and taught me most of what I have learned.

So far my portfolio consists of 9 condo units. Stats are as follows:
- Total cost of $317,500
- Total market value of $365,000
- Annual rents of $77,280
- Annual net cash flow of $14,000 after debt service
- Annual NOI of $38,696 (12.2% CAP on cost basis)

There are still plenty of these condo deals out there to pick up, but I am a bit leery of the long term value of the units, plus the turnover seems to be fairly high. Lastly, because I also have a "day job" that requires at least 50 hours per week of my time, I am trying to refine my strategy as I move forward to manage my time requirement. I do all property management and plan to always keep it that way (I really enjoy that park of the business).

Right now I am contemplating moving into SFR deals, simply because they produce more cash flow per unit and assuming I want to retire off my portfolio someday, I'll need less SFR's as opposed to condo's to reach my income goals.

The SFR's I am looking at are as follows:
- built from 2008 to 2010
- Cost to build new from $149k to $155k (same cost to build now)
- Target acquisition prices of $133k to $139k (through short sales and FSBO's)
- Monthly rents of $1,200 to $1,350 per house
- Annual taxes of $2,000 per house
- Annual insurance of $900 per house
- Maintenance should be lower than normal for awhile due to age of houses

By my calculation, I am looking at being in these houses at CAP rates between 8% and 8.5%. This is much lower than the CAPs I am currently achieving on my condos, but to me it feels like a good tradeoff given that the houses are in very good areas with potential for appreciation, good school, should attract good longer-term tenants, etc.

I have also kicked around the idea of doing lease options on these houses and trying to sell for $10k to $15k profit within a few years but I am the type of person who really hates to sell anything and my end goal is buy and hold.

I would be curious to her what other experienced investors have to say about my desire to move up the food chain a bit.

Thanks!