Residential Buy & Hold Strategy - Need Feedback

[Matthew Rembish]

I've been flipping properties for a few years now and have recently taken the plunge to do so full time. As much as I like it, I do miss the constant income stream and was looking to start purchasing some rental properties. Being recently self-employed, I know that it's going to be hard to get approved for a conventional mortgage so I started looking at cheaper properties to buy all-cash. After thinking about it for a bit, I realized that if I could purchase one rental property each year for between $80,000 and $100,000, I could potentially add $1,000 of cash flow each month for every year that I bought a property. In other words, if I completely paid cash for one of these properties each year for 10 years, I would be making around $10,000 a month in cash flow. Now, being as young of an investor as I am, I know that I'm probably not thinking of something. I know I won't be getting the "debt service pay-down" benefit but are there any other major pitfalls to employing this plan? I'm also missing out on tax benefits too, right? 

Any feedback is very much appreciated. Thanks!

[Alexander Flores]

@Matthew Rembish

Yeah, I think your plan can work in our area but any home that cheap we have found needs more than 10k of work. We bought one rental for 72k and it needed 25k in work. The second one we bought for 99k and it needed 20k in work. 

Your plan is a good strategy if you don't want to carry mortgages. I know of a couple people in our area who bought 10 or so properties over 10-15 years conventionally and then just started using all their cash flow to pay off each mortgage. I think there are a lot of different scenarios you can run.

Both homes we bought for under 100k in Ocean County have yearly taxes around 3k and insurance around 1k. So without a mortgage, you're looking at $350 expenses, not including vacancy or anything. Our 72k property rented easily for $1450 a month, our 99k property will be lower since we are renting it out to a family member.

I would say your plan is doable.