New investor Business Plan - All feedback is welcome

[Tommy Spijkers]

Hi Everybody,

Have been browsing around on the forum the past couple of weeks and decided to introduce myself. I'm Tommy and I live in the Dayton area in Ohio. I have always been interested in REI and after paying down some student loans my wife and I are ready for shift our focus and resources to REI.

We bought our house this past December and did a decent size renovations (removing walls, coat closets, all new paint, hardwood floor throughout the house, painting trim). My wife works as a financial analyst at the local Air Force base and I own a soccer training company. I am early 30's and she is late 20's. 

We have come up with a short business plan for our REI activities. If anyone is interested in reading it and providing feedback we would be very honored. Please do not hold back on things you feel we miss and should add. As a small business owner I understand there are many moving parts to investing in real estate and we are all open to learn from everybody's experience.

Thank you,

Tommy

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Strategy

We will looking for a buy and hold strategy where we focus on maximizing cashflow. We will off course happily welcome any appreciation of the property, but this is not our initial goal.

For the first 5-7 years we will be focussing on purchasing small multifamily properties (2-4 units) in the Dayton and Cincinnati (Ohio) B and C rated neighborhoods. We are comfortable with a smaller, cosmetic rehab but are not looking at structural renovations at this time. The maximum purchase price plus read costs per unit is $40.000 for 1/1 and $45.000 for a 2/1. The rent will be at least 1.5% of the purchase price. We are looking to have at least $125 monthly cashflow per door while considering the following fixed costs:

• Mortgage payment
• Property tax
• Property insurance
• Utilities (electric, trash, water, etc.)
• 5% vacancy
• 8% maintenance cost
• 8% capital expenditures
• 10% property management fees

We are looking at managing the units ourself for now, but will calculate a 10% property management fee for when we want to step away from this aspect of REI.

After 5-7 years we will be re-evaluating our goals and possibly move into the Small apartment buildings, where we would be looking at properties between 5 and 50 units. We have not set any perimeters rent to purchase price percentage or monthly cashflow, but likely will be looking for something very similar to the perimeters we have set for the small multi family units.

Goals

Our goal is to be able to retire early though rental income. Our goal is to have an income of at least $200.000 annually pre tax. For this income at our perimeters ($125 cashflow per month) we would need around 130 units to realize this income. After retiring from our full-time jobs we want to keep growing our real estate business,

We have set the following goals for the short to mid-long term:

• 2018 - Buy first small multifamily property
• 2023 - Own and manage 50 units in small multi family properties

We have set the following long term goals:

• 2028 - Own 200 units
• 2035 - Own 1.000 units
• 2050 - Own 10.000 units

Acquisition

To find the properties to purchase we will be looking at a couple of different strategies:

• Become active in the local REI group
• Build relationships with Realtors
• Mailing to property owners in areas we want to purchase properties
• MLS Listings

Finance

We budget our personal finances, which will allow us to save roughly $25.000 per year. We will use these saving for down payments, which we expect to be 20% of the purchase price. After purchasing properties we want to keep our personal budgets the same, and save the cashflow to purchase the next properties. We will also use the 10% property management fees for down payments. For our short term goals we want to use as much traditional financing as possible. Looking at our long term goals we want to work with a portfolio lender, private lender and use commercial loans.