Starting Out - Organization & Legal

[Sean O'Brien]

Hello BP, this is my first time posting. I'm 29, live in Minneapolis with my young family in a SFR we bought in 2013, and am interested in long-term buy and hold investing. I am thinking of starting at with 4-plexes, triplexes or duplexes - units that will cash flow steadily. Would love to some day get into commercial residential or retail. My dream is to build a buisness where I can eventually outsource most of the day-to-day tasks and generate a passive income stream that allows me to stop trading time for money.

My situation is this: my parents bought the house I grew up in from my grandparents, with a family discount, and are interested in keeping it in the family going forward. It's likely we will move in the next 1-3 years, and wind up with a very nice home (600-700k) with a mortgage at what I can afford on my salary (250-300k). Thank you mom and dad! I'd like to be set up and prepared by that time to use the equity in the home to start investing in other properties. I'm also working on building a nut outside of my retirement accounts (at about 8k right now) to use for this business.

To feel confident, I want to have a solid understanding of how to set up a business, proper insurance coverage, each step in the process of making an offer through closing a deal, and a strategy for managing the property. I've been reading on BP now for about 8 months and have what I would consider a moderate foundation of knowledge, but I know I need to now take some more definite steps to get off the ground. Basically I want to build a business plan and understand all the steps from today to I'm-a-landlord-with-tenants.

Are there any buy and hold investors in south Minneapolis / Richfield that would like to connect and could share some ideas, offer guidance, or refer me to good resources?  Books that you have found helpful?  Tips for the Minneapolis market right now? I know I'm a fast learner and good problem solver and once I'm going I'll be able to grow and expand.

Thanks!

[Pavel U.]

@Sean O'Brien for books I recommend:

Rich Dad Poor Dad (of course)

How to be the smartest renter on your block (a Minnesota tenants' rights guide)

The Landlord’s Guide to Minnesota Law

Multi-Family Millions (loved it)

I have mixed feelings about investing in commercial buildings. I have both - retail, as well as mixed-use (retail on main level and apartment upstairs). With retail be prepared to sit vacant for many months, possibly year(s) - and that's in good locations. Mixed-use is a little better, for example you can rent out an apartment quickly and get some money coming in, but then you'll sit a lot longer looking for a commercial tenant in that same building. 

If you're just starting out, get into a duplex, not a 4-plex, and I recommend doing property management yourself - you'll learn a lot, and no property management company will take care of your building the way you would.

One last tip - buy in great locations only. Do not compromise on location! Get pre-approved first, find an agent to work with, and keep watching MLS every few hours. Once something amazing shows up (great location and price), you have to be there within 30 min to 1 hour, and be ready to submit an offer right away. But there's a very high chance that it'll be too late because @Bruce Runn or I already got it. Just kidding, but not really.

Good luck!