All Forum Posts by: Jason Stratman

Hi all - I just got my first buy & hold rental property under contract yesterday.  Since it is my first deal I wanted to run my numbers by the community to make sure I'm did my due diligence properly.  Probably should have posted this before yesterday, but better late than never.

Here is the link to the Rental Property Calculator report on the property

Numbers on First Investment Property

The ARV is a conservative estimate from our Realtor, states it will probably appraise for a little more for the bank appraisal.

I will be self managing the property, so the $75.60/mo for management will be added to the monthly cashflow.  Down the road as my portfolio grows I will consider moving to property management.

The Cash of Cash ROI is a little lower than most probably want to see, but my criteria was 8% or higher that I had set to get myself in the game.

Anything I'm missing, or is this a deal to keep moving forward on to closing?

Thanks to everyone in advance for reading this... this opportunity wouldn't have been possible without the BP community!

Actual clickable link... I hope!  Still learning the BP Forums.

The Wisconsin Way - A Guide for Landlords and Tenants

Thanks for posting Andrew! 

The Wisconsin Department of Agriculture, Trade, and Consumer Protection also puts out The Wisconsin Way - A Guide to Landlords and Tenants.  That is the more detailed version of the link Andrew provided, but is also a great link for any Wisconsin landlords to know about and bookmark for future use if needed.

http://datcp.wi.gov/uploads/Consumer/pdf/WisconsinWayWEB.pdf 

@Scott Schultz Thanks for the suggestion!  The banks I worked with for pre-approval were local credit unions that offer portfolio loans when that time comes around.  They did say at that point they would have to get me in touch with their Commercial Lenders, and when I get to that point I will have built a relationship with them on the conventional loans.  At least that is my plan.

Thanks @Scott Schultz!  Great info and outlook.

One question... you mention a Line of Credit once you have a free and clear asset.  I was told by two loan officers at different banks that lines of credit are not allowed on investment property.  Have you found a way around that, or do I have the wrong information?  Is it lender specific maybe?

Thanks @Kevin Fox!  

Since we're starting out we figured this strategy would be best to initially grow the business, albeit slowly to not over-extend ourselves.  Once we have a couple properties under our belt, we will certainly be fluid, move with the market, and definitely feel more confident in our process.

Thanks for the feedback @Cole Swartz! I totally agree that estimating the ARV properly is one of the most key components, which is why my first call was to a very established, investor friendly, real estate agent that has been in the business locally for almost 20 years. She understands the numbers investors are looking for vs owner occupants, and has already been a huge help to us.

Thanks for verifying the strategy is sound!

Thanks for the reply... we have talked about flipping properties as well in the future, and actually to start we were going to look for properties to flip first.  Complete a couple of those, and take the profits to roll over into buy and hold properties.  

The reason why we changed our strategy to buy & hold first was due to the risk... if we end up trying to flip a property and fail, our cash flow could be gone and we would be stopped in our tracks for quite some time.  If we fail on a rental, it hurts, but having a negative cash-flow of a couple hundred dollars a month wouldn't stop us as we could cover that as we both work full time as well.

We live in SE Wisconsin, and in our market 50%+ of the properties are current rentals, so it's dependent on what are of town we find a potential deal, because there is a definitive line of areas for rentals and areas for owner-occupied.

The biggest part now is finding that first deal, because with strict criteria like this I think it might take a little longer, but in the long run would be worth it to be able to have a business model that can expand.

Thanks again for the idea and feedback!

My partner and I have recently started looking at Buy & Hold properties.  We currently don't own any properties, but our goal is to build a rental portfolio by acquiring 1 to 2 properties per year.

We have spoke with our realtor, and have our financing lined up, etc, but I want to confirm that the strategy I want to use is viable... We have enough starting capital to cover the down payment and repair costs for only 1 or 2 properties. Since we want to expand our rental portfolio past 1 or 2 properties, we are looking for a properties that we can acquire using the 70% rule (70% ARV minus Repair Cost). Our goal is to refinance these properties within 6 months with a 70% LTV cashout, to pull our initial capital back out and repeat the process, either by buying at a great deal, forced appreciation, or loan pay-down.

What I don't want to happen, at least at the start, is to have all of our capital locked into a single property, even if it cash flows well, because then we can't expand.  Even if a property cash flows at $200/mo, but we need $20,000 in capital to purchase our 2nd property, I don't want to have to wait for 8+ years to do our next deal.

I've been educating myself on the site for the last few months, so I'm fairly certain that my strategy is sound as it is essentially the BRRR strategy... But since we are just starting out I think it just puts me at ease to put it down in my own words and have others that are in the business confirm that we are thinking this through correctly.

Thank you very much for your time and feedback, we greatly appreciate it!

Regards,
Jason

Awesome Cody!  These are the stories that keep my fire going to get into Real Estate myself... just getting started in looking for properties.

How did you finance this purchase? If you used conventional financing are you going to look at the BRRR strategy to get your initial capital back out?