First deal | seeking assistance

[Pierre Toussaint]

Hi all!

My wife and I are under contract on the following property. We're approaching it as an investment property. This is our first deal and could use as much input as possible.

Rental Calculator analysis: https://www.biggerpockets.com/calculators/shared/6...

Address 1751 Concord Dr, Marietta GA

Purchase price: 120,000

ARV: 135,000 (we're assuming this based off of the original offer price. There aren't many duplexes recently sold in the area. There are two literally next door but those were purchased at 30K in 2009 and renovated like this one)

Closing: 2,500 (assuming a 5,500 closing since the seller is contributing 3000)

Repair: 5,000. The property seems in good shape with some cosmetic work needed. On this deal the seller asked that we made an offer prior to seeing it because it's tenant occupied. I guess they were looking for serious buyers. This seemed backwards to me, but we went ahead and made an offer site unseen with an inspection contingency.

Monthly

Rent: Both units currently rented at 700 each

PITI: 680 (assuming $100 home insurance)

Other expenses considered: Vacancy 75, PM (even through self managing) 135, CapEx 135, Repairs 75

Total: 1100

Assumed cash flow: 400

The biggest thing I'm worried about is the cash needed to do this. We originally budged 25K, but we will need 39K out of pocket since we learned that on this investment, the minimum down payment is 25% and not 20% as we anticipated.  This is cutting into our emergency fund but we're willing to do it if it's a stellar deal. 

Thank you

[Joel Owens]

Pierre it depends on what your goals are.

Do you want to eventually quit your job and do real estate full time OR do you enjoy your job and this is a retirement play with hopefully rent increases over time and principal build up?

Say you make 80k a year as an example and it took you four years to save up 39,000. Putting 39,000 down for a 200 monthly cash flow is a tiny return.

If the goal is to quit the job then you need to regenerate capital at a much faster clip. Equity growth is where the big jumps are at and not stabilized existing cash flow.

Now I have clients that already make a ton of money a year 500k to 1,000,000 so the goal is different in that if they invest 1,000,000 and get a cash on cash of 10% that is 100,000 a year. You can live off of 100,000 but not 2,400 cash flow etc.

So what some investors do starting out with more limited capital is do value add projects and refinance out their original down payment. They then take some money as they build up and then buy a long term rental while still doing the rehabs for the equity upside pops. Eventually they might be able to quit their jobs.

There is tax lien investing, short term crowdfunding investing, hard money lending, flips,etc. where you are not typically trapping the money on a stabilized property long term. Even if you create say another 10% of equity upside because of LTV buying stabilized it is still trapped in the property while you own it.

Now if you make 300k or 400k a year and putting down 39k to buy a property then through saving that money can quickly regenerate again in under about 6 months.