Newbies looking for some advise/comments on initial strategy

[Robert Loiselle]

Hello, 

My wife and I are actively studying and getting our plan together to get into real estate investing.  I was hoping to pick the brains of the folks on this forum and to get some help and critiques on our initial strategy.  Apologies if this is a little long winded.  

We're in a pretty good position to start.  We currently rent from my wife's aunt in a town just north of Boston (Medford).  Her aunt doesn't want to hang onto the place and is going to sell it to us.  It's a small single-family Cape (currently 4bd, 1ba), right next to the proposed subway extension (planned in the next 5-7 years), and we're getting a great deal.  The market is a little crazy in this part of the Boston suburbs and I'm estimating that we're getting roughly 60-70k in equity in the discounted sales price...maybe a little more.  

Our plan right now is the following. 1) Put a dormer on the back in order to add a 2nd full bath. 2) Redo the 1st bath (old 50's styling). 3) Update kitchen/living area. In the end we're hoping to have a 4bd, 2ba with a small yard and parking for 4 cars in a very desirable area near a college and public transportation. My estimate on the PITI is ~2300/mo. The rent I think we can command initially is around 3300-3500/mo. When the train comes in...4k/mo is very doable.

Our next move is to buy a 3-fam in an down (but poised for growth) area further north of Boston.  We'll live in one apartment and rent the other two.  Assuming decent rents and we get a good deal...we should be living for somewhere between 500-1000/mo in payments.   

In terms of buying the 3-family, we're thinking of using a home-equity loan from the first place and some cash for the down payment.  I've even debated a 401k loan.  

After this...I'm sort of stuck.  I really like the buy and hold strategy...it just takes capital up front or tremendous leveraging.  We're debating flipping to try and generate the cash to purchase the properties we'd like to hold.  

I appreciate you folks taking the time to read this.  Any holes you can poke in the initial first two moves would be great and any suggestions on how to proceed after this would be great.  

Thanks, 

Rob