How can I start a rental property company?

[James Peterson]

Newbie here. I want to start a rental property company but would like it to be self sustaining. I would like a company in which it can buy properties based on its own credit and not mine. Is this possible? I have 200k as seed money and looking for some guidance. 

[Account Closed]

Keep your money in your pocket and add to it for a few more years. Don't be anxious to get into the game. You can do a lot with $200,000, or maybe a little more if you are patient look at the listings for thousands of properties. Learn to do the math and do the calculations that show how much profit you can earn over 5, 10, 20 and 30 years when you raise rents and the rent increases increase the value of the property due to the Gross Multiplier. Get the book ' 50 Real Estate Investing Calculations' and don't invest in real estate until you master all the calculations in that book, but the book does not teach how to stretch out your profits over the 5 to 30 years.

The biggest problem I see with new investors is they don't know how to do the math and if you can't do the math then you cannot understand what or how to invest.

$200,000 could get you some profits like this, but then banks want you to have a little more money for a cushion for vacancies and unexpected repairs. I've seen a lot of people with less than $200,000 do some amazing things by having relatives or friends put temporary money like $50,000 or $100,000 into a buyer's bank account so the bank would approve the loan, but you need to put the money in a few months before you apply for the loan, or the banks will catch onto your scheme.

The following image shows only one of the types of calculations you need to do to project your profits. I developed this spreadsheet-style form with MS Access 2003, but you can do it with MS Excel or some other spreadsheet. 

This form shows that at the end of the 5th year your will earn a profit of $285,000 when you increase the rents only $50 per year. The reason you earn so much money is because the sale value for multi-unit properties is based on the rental income multiplied times the specific Gross Multiplier for your property. If the property is in a desirable neighborhood the Gross Multiplier is higher. At the end of 30 years you would earn about $1,725,000. Maybe more,or maybe less, but this is just a general idea of what you want and what the profit potential is.