New to Real Estate: My Plan So Far

[Chris Roush]

I would like to officially come out of the weeds as a BP lurker and say hello to the investor community! I have been listening to the BP podcast for months, as well as absorbing as much audio book content around BRRRR as I can find. I no longer listen to music in my car or on walks. On the treadmill, I get sucked into the Youtube channels for BP, Clayton Morris, as well as a few local investors here in Kansas City. I have even attended a few local meetups on the topic and will be joining the local investor club here in KC (MAREI)

TL;DR - I'm hooked, I'm pumped, I'm....terrified!

It is time for me to take action. I have setup a budget which provides me with $1000+/mo in investable cash. I have cash reserves of $10,000+, I am sitting on a HELOC worth $25,000 at a zero-balance, I have my deal funnel coming through in the form of an MLS portal, I'm chatting with my local hard money lenders to get an idea of how placing quick offers works. I'm looking to get pre-qualified for conventional loans with my local banks (still in process). I feel like I'm setup to begin my journey.

Here's my current plan, and I am open to suggestions on improving it:

I want to:

1. Invest in single-family properties
2. Aim for 10%-12% cash-on-cash returns
3. Learn how to properly rehab properties and estimate costs without breaking the budget
4. Reach 10-15 properties. My goal is 1-2 properties per year at a linear rate, but I would be happy if I could figure out how to compound that acquisition rate.

I like the strategy of buying properties with a HELOC, paying the HELOC down with investable cash, as well as cash flow from the rentals, opening a second HELOC on the rental, and repeating. I want to blend this strategy with BRRRR.

Does it make sense to buy turnkey properties, or properties that require $5000 or less in repairs using a HELOC? My thought is to use this strategy as my slow play to attain higher cash flowing properties at a slower acquisition rate, while keeping an eye out for BRRRR deals that can be done with hard money and low/no money down. Even if the cash-on-cash return is lower for my first deal, I feel like it would be a nice confidence boost since I still have to tackle other tasks like properly setting up my business entity and dealing with taxes. I don't want to ignore the fact that BRRRR is probably the best way to break out of a linear growth pattern. Not to mention the flipping skills can be used for multiple strategies and fast cash when done right.

I look forward to chatting with the community, and am very excited (and scared) to start!

[Marlon Fong]

Hey @Chris Roush! Welcome to the site! It's great to have you here. Feel free to ask any questions in the forums.

[Brian M.]

@Chris Roush Welcome, Chris!  A quick piece of advice - in the upper-right hand corner of the page, there is a magnifying glass icon for searching the forums.  I am not sure if you are thinking about investing with Morris Invest but before you do, use the search function to see what has been written about people's experiences.  I have yet to read a positive one.

For your situation, my advice is to zero in on a market where you want to invest, find a good agent, and start looking at properties.  Get recommendations for Property Managers in the area and vet them out.  When you feel comfortable on a property, jump in!

[Lee Ripma]

@Chris Roush

You're in a great market for rental properties. I don't think you'll be able to take out a HELOC on rental properties, but check with you bank, my understanding is that is only for owner occupied props.

What price point are you buying at? If you can acquire cash, add-value, and refi, you'll be able to scale up quicker. 12k a year in investible cash sounds low to me. What price point are these target homes at? Listen to the podcast with @Alexander Felice and see if you can copy his method for SFH acquisition. Seems like a good way to go.

[Chris Roush]

@Brian M. - yes, I do not plan to purchase from Morris Invest' since I have seen similar bad reviews. I do think the advice he provides on his youtube channel is still sound and very similar to what is suggested on BP.

@Lee Ripma - I agree that $12k/year is less than ideal, but it is my starting point. I do not include cash bonuses from my full-time job in my numbers, but I plan to invest that as well. Bonuses can be high (upwards of 10% of total annual salary). I plan to re-invest the cashflow from rentals as well.

[Dmitriy Fomichenko]

@Chris Roush

Welcome to the BP family! Glad you joined the best real estate investing website! Here are some recommendations for you:

Find and connect with other BP members that are in your area: https://www.biggerpockets.com/search/users

Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/alerts

Read Beginner’s Guide: http://www.biggerpockets.com/real-estate-investing

Check out BP Podcasts: https://www.biggerpockets.com/podcast

Wishing you the best!

[Nathan Brooks]

@Chris Roush welcome man! Keep it as simple as possible in the beginning. Everything is new. Have a clear buy box what you want to acquire. Don't be afraid of NO for the wrong property. Say YES to the right properties. Build your team (even if its just you ... and vendors etc).

Good luck. Come hang at our upcoming Bridge Real Estate Meetup here in KC as well!

[Chris Roush]

Thanks @Nathan Brooks! I've been lurking on the Bridge site for properties as well. Where is the meetup located? I couldn't find any information on it. I would love to meet more investors.

[Lee Ripma]

@Chris Roush

I'm sure you'll be able to get a cash-flow snowball going once you get started. You might also move into at least duplexes. SFH just don't generate much cash and there are a lot of duplexes in the KC market.

[Brian Ellis]

Welcome @Chris Roush !

I have found often that my initial plans almost never work out the way I intend them too. But they work out none the less. Once you do your homework (which you've done) and get yourself that first deal, youll have a better idea of what path to take for the next one. 

[Annie Zhao]

Nice to meet you @Chris Roush

I am also looking to buy my first out of state TK property! Super exciting and a little scared. I have similar plan as you, take out HELOC on my other rentals to buy new investment. My goal is not to use any of my cash on any of the new properties. All the rental income will feed directly back to those investments.

Have you decided on the location yet? I have been looking through many turnkey posts here and a little overwhelmed with all the information. Some people said TK is good, some other people just doing the work themselves (buy+rehab+rent). What have you learned so far?

Anybody else have any suggestions on which location or evaluate strategy to start would be super helpful!!

[Chris Roush]

@Annie Zhao

I have no properties under my belt yet, so take what I know with a grain of salt.

I am looking to invest in my home town of Kansas City. From my research so far, and from what I've seen on the BP forums, it is a good place to start. It's convenient that it's in my backyard. From what I know so far, the biggest downside to purchasing a turnkey property is that you get a smaller cash-on-cash return. The turnkey provider has already done the heavy lifting of finding a good deal, rehabbing, and reselling to you, the investor. You won't make instant equity on the deal, meaning you won't be able to refinance right away and reuse the money for another deal. You will have to wait a significant amount of time (4-5 years) in order to pull any sort of money out of the property with a refinance.

My rationale for including turnkey property or 2 in my plan at the start is that it removes some of the stress of getting started. As a new investor, I still need to make sure my business entity (LLC) is setup properly, ensure my bank accounts are setup, find a property manager, vet contractors, open a business line of credit etc... It's a lot to think about on top of trying to acquire a property.

For the first investment, I care more about building relationships with local businesses and lenders than the actual return coming from the property. In my mind, that's just icing on the cake. With that said, I still want the property to perform within the criteria I laid out above.

[James Wise]

Originally posted by @Chris Roush:

I would like to officially come out of the weeds as a BP lurker and say hello to the investor community! I have been listening to the BP podcast for months, as well as absorbing as much audio book content around BRRRR as I can find. I no longer listen to music in my car or on walks. On the treadmill, I get sucked into the Youtube channels for BP, Clayton Morris, as well as a few local investors here in Kansas City. I have even attended a few local meetups on the topic and will be joining the local investor club here in KC (MAREI)

TL;DR - I'm hooked, I'm pumped, I'm....terrified!

It is time for me to take action. I have setup a budget which provides me with $1000+/mo in investable cash. I have cash reserves of $10,000+, I am sitting on a HELOC worth $25,000 at a zero-balance, I have my deal funnel coming through in the form of an MLS portal, I'm chatting with my local hard money lenders to get an idea of how placing quick offers works. I'm looking to get pre-qualified for conventional loans with my local banks (still in process). I feel like I'm setup to begin my journey.

Here's my current plan, and I am open to suggestions on improving it:

I want to:

1. Invest in single-family properties
2. Aim for 10%-12% cash-on-cash returns
3. Learn how to properly rehab properties and estimate costs without breaking the budget
4. Reach 10-15 properties. My goal is 1-2 properties per year at a linear rate, but I would be happy if I could figure out how to compound that acquisition rate.

I like the strategy of buying properties with a HELOC, paying the HELOC down with investable cash, as well as cash flow from the rentals, opening a second HELOC on the rental, and repeating. I want to blend this strategy with BRRRR.

Does it make sense to buy turnkey properties, or properties that require $5000 or less in repairs using a HELOC? My thought is to use this strategy as my slow play to attain higher cash flowing properties at a slower acquisition rate, while keeping an eye out for BRRRR deals that can be done with hard money and low/no money down. Even if the cash-on-cash return is lower for my first deal, I feel like it would be a nice confidence boost since I still have to tackle other tasks like properly setting up my business entity and dealing with taxes. I don't want to ignore the fact that BRRRR is probably the best way to break out of a linear growth pattern. Not to mention the flipping skills can be used for multiple strategies and fast cash when done right.

I look forward to chatting with the community, and am very excited (and scared) to start!

Welcome to the site Chris. Sounds like you've got a decent chunk of money to start. No reason to go to HML. I'd recommend you pickup a few properties using 30 year fixed interest loans. Best type of financing one can get. The financing is the whole key to the rental business.

[Brian Charles]

Welcome, @Chris Roush .  Just getting started on taking action, myself.  I completely agree with your view on Turnkey for the first, especially since I'll be an OOO buyer.  

[Annie Zhao]

@Chris Roush Thanks for sharing. 

One question about the HELOC, how fast are you planning to pay those off? Say if I take out $50,000 HELOC to use as downpayment to buy my investment property. Is it better to refinance and pay off the HELOC after 1 year or keep the HELOC loan and pay it off as a regular mortgage payment?

BTW, do you have any good TK company to share?

[George Blower]

@Chris Roush

Welcome to Bigger Pockets. This is a great place to network.

[Chris Roush]

Originally posted by @Annie Zhao:

@Chris Roush Thanks for sharing. 

One question about the HELOC, how fast are you planning to pay those off? Say if I take out $50,000 HELOC to use as downpayment to buy my investment property. Is it better to refinance and pay off the HELOC after 1 year or keep the HELOC loan and pay it off as a regular mortgage payment?

BTW, do you have any good TK company to share?

Because the HELOC is a revolving line of credit with variable interests rates, I would want to pay it off as soon as possible. For rentals, my understanding is that banks are going to want you to have 20% or more as a down payment anyway, so a refinance won't help you much unless you drastically improved the value of the property. I can't really recommend a specific turnkey company yet since I have not closed on a property yet.

[Brandon L.]

Hello! @Chris Roush

Welcome to BP, and congratulations on making the decision to invest in your future via real estate.

I have written a few blog posts that may help you get started here on BP, and with your investing. Please click on the links, give them a read, and share your thoughts in the comments.

First is a post that I feel will help not get overwhelmed with the amount of info that is here on BP:

https://www.biggerpockets.com/blogs/5868/52761-the-simple-guide-to-getting-started-on-bp

The second is a post that will help get you focused with your real estate investing goals:

https://www.biggerpockets.com/blogs/5868/52743-im-new-to-bp-any-advice-would-be-appriciated

The last one is a post that will help you choose an “investor friendly” real estate agent.

There are many agents out there, but it’s important to choose the right one.

https://www.biggerpockets.com/blogs/5868/52724-im-new-to-investing-how-do-i-find-an-investor-friendly-agent

I love answering questions if you have any! Good Luck :)

[Ramon Vazquez]

Hi Chris, I'm a buy and hold invest in KC looking to transition into BRRRR investing in KC as well. Let me know if I can help! I'm thinking of create a mastermind of new BRRRR investors. If you are interested, feel free to message me. Good luck!

[Mike D'Arrigo]

Originally posted by @Annie Zhao:

Nice to meet you @Chris Roush

I am also looking to buy my first out of state TK property! Super exciting and a little scared. I have similar plan as you, take out HELOC on my other rentals to buy new investment. My goal is not to use any of my cash on any of the new properties. All the rental income will feed directly back to those investments.

Have you decided on the location yet? I have been looking through many turnkey posts here and a little overwhelmed with all the information. Some people said TK is good, some other people just doing the work themselves (buy+rehab+rent). What have you learned so far?

Anybody else have any suggestions on which location or evaluate strategy to start would be super helpful!!

Turn key is a low risk way to get started when you are working with a reliable, experienced turn key provider. It's very difficult and risky an inexperienced and out of state investor to do it themselves. Even experienced turn key companies can lose money. The risk is much higher from someone with no experience.