Newbie From Utah with a Plan

[McKenna Garcia]

Hello Bigger Pockets! I'm McKenna Garcia from Layton, Utah. I'm a tech at a lab in Salt Lake, and I'm most of the way through school for microbiology. My husband is an electrical engineer weeks away from finishing his MBA. Our goal is financial freedom through real estate, and we have no background whatsoever. My husband has been thinking about real estate for a long time, and he asked me to look into it for my opinion. He recommended Rich Dad Poor Dad which changed my mindset and then I came across Bigger Pockets. I've been a lurker for a while but it's time to up the ante and rev the engines. 

I'm motivated towards financial freedom for the stability and flexibility it offers. Every day I read more articles about the doom and gloom of the economy, the housing market, the retirement woes of the elderly, the middle class disappearing, etc. I don't want to be a part of that. I don't want to be under the control of employers, the government, or rich people. I don't want to rely on a wage that is dragging behind living expenses year after year. I don't want to retire when I'm too old to have fun because I had to keep working to save enough for retirement. I don't want to be part of a disappearing middle class. Most of all, I don't want to be in the middle of these situations and complain that its the government's fault, or the wealthy's fault, and wait for someone else to fix my problems. 

My husband and I (no kids) plan to obtain financial freedom by using real estate investing. We make about 93K together annually. We are renting at the moment. We save all of my paychecks and a good chunk of his. Credit scores are both above 760. Only about 14k of car loans, no other debt.

I’ve been lurking on Bigger Pockets for a while, and he has been doing his own research. We’ve sat down and come up with this plan with our longer term view and our short term attack plan. I would welcome any advice. Is there anything we’ve missed? Should it be shorter and more aggressive, or a longer timeline, or is the approach wrong, etc. I’ve also added some questions in bold.

I think Bigger Pockets is an amazing community and it’s been teaching me so much! I need to be more active on it.

Thank you so much for any and all feedback!

Goal- Earn at least $5,000 a month in passive income.

Strategy- buy and hold rental properties. Mostly multi-families, only single family if we find really good deals. Wholesaling after gaining experience to help finance more properties.

Timeline- Reach 5,000 a month in passive income ten years from when we buy our first property.

Market- Middle- income small multi-families. We are also okay with low-income properties depending on the property, but still only properties and areas that we would want to live in.

Criteria- $100 per door minimum cash flow.

$450,000 max purchase price for a three or four plex multi-family in Weber, Davis, Salt Lake counties in Utah.

Maximum rehab budget- $5,000. Once we have more cash reserves, BRRRR strategy is a great tool, so maximum rehab budget will be raised at later point.

Cash on cash ROI- 8% minimum

Marketing Plan- We'll use the MLS, but do not expect to get many if any deals from it. We will network through Bigger Pockets and investor meetups, and build connections with agents. We will use direct mail to find off market deals.

Financing- Owner occupied conventional 5% loans or 3.5% FHA. We do not qualify for Home Possible with our income.

Financials- 27, almost 28k + 2,200/month.

• -6.3k of the 27k is in ETFs. Should we utilize that or leave it alone? We also decided to stop contributing to them in order to save for a down payment faster. We used to be contributing 500 a month. Should we continue that if we can take the money out? Or maybe even accelerate our contributions?

In order to reach $5,000 a month in passive income in at least 100/door, then we need 50 doors. In order to reach this in 10 years from our first property then we need to acquire at least five doors a year. The first three or so years will be using house hacking, which can only be done a year at a time and the max is four doors, so we will be behind after the first three years. After three years of fourplexes there are still 38 doors needed to reach the goal in the remaining seven years, which equals to 5.42 doors a year. We’ll set the goal at year three to six doors a year to allow some margin of room if we buy a duplex or triplex in the first couple years.

Plan:

• -Buy first house hack by December 2019 or January 2020. By doing so we can save a better cushion and hopefully take advantage of any market softening.
  • Goals to meet objective
    • July-
      • practice analyzing deals
        • Call local property management companies for market Rents?
          • This would probably affect our analysis..
      • choose real estate agent.
      • choose lender.
      • Get estimate on how much we can qualify for.
        • Should we get a preapproval this soon? I know they expire. Can a lender run the numbers to estimate instead? Kind of like a fake approval.
      • Educate educate educate!
      • Become more active on Biggerpockets to build relationships and understand our market better.
      • Attend at least one investor meetup.
    • August
      • Attend as many meetups as possible, including the first free meetings of the local REIAs.
      • Choose one and stick with it.
      • Analyze
      • Educate
      • Network
    • September
      • Choose properties that are for sale to drive around and get a feel for areas and the properties themselves.
      • Talk to my dad (who is experienced in construction and repairs) to get a feel for how much upkeep/repairs would cost and/or go to Home Depot or other hardware stores to scope around and talk to people.
      • Get a preapproval for a loan in September or October, depending on the lender. I know they expire in 60-90 days usually.
      • Continue to network, attend meetups, and educate
    • October
      • Honestly not sure what else I need to do at this point other than what I would be doing already to continue preparing before we pull the trigger. Any ideas? Anything I’ve missed?
    • December
      • Find a deal and pull the trigger!