I joined BP earlier this year with the goal of learning everything I can about real estate investing and to purchase my first home in 2021. Through reading a few books to listening to a bunch of podcasts (my favorite being the RPOA podcast with Brian Hamrick) I have set my sights on Grand Rapids.

Could someone please review my strategy and Grand Rapids assumptions and let me know if I am on the right track?

Strategy: “Buy and Hold” in a market with good (not excellent) cash flow and good (not excellent) appreciation. I want to reap the benefits of net positive monthly income but want to ensure I have some appreciation potential upside as well as rent increase potential. Too much appreciation and I am priced out of the area, too much cash flow and I risk more capex and higher vacancy rates. I am assuming my biggest risk with Grand Rapids will be competitive and difficult to find the best deal as a new investor. My goal is to become comfortable with my analysis, apply for a letter of pre-approval, and find an agent who will help me find the best deal.

Mortgage and Home Price: I have excellent credit (790+), a good W2 job, no other major debts, and roughly 40K I can use up front. Based on this, and a quick conversation I had with a mortgage lender I will need to put 20% down and will get a 4%-5% rate. Meaning I can likely afford no more than a 200K home with limited rent-ready capital expenditures.

Appreciation Rate: 3.5% to 6% depending on the neighborhood.

Tax Rate: 1.51%

Average YoY rent Increase: 4%

Vacancy Rate/Credit Allowance: 3%

Property Management: 8% to 10% + placement fee of half to all of first month’s rent.

Repairs and Maintenance: 10%

Yearly Insurance: ~ $1200

I hope I am not oversharing, but I want to ultimately receive honest feedback on my specific scenario. From my perspective I feel pretty good about my analysis and overall assumptions, but I have no validation from a seasoned investor. Any feedback is good feedback and would love to connect with anyone willing to help!

Thank you and appreciate your time in reading this!

Grand Rapids, Michigan

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