My real estate plan is simple … buy one new rental property a year for the next seven years. Doing so will giving me 9 rental properties by 2026, when I plan to be financially independent.
I began my real estate journey in 2014 when I purchased my first property, but I had to put my ambitions on hold in the same year due to starting law school. Fortunately I recently completed my formal education, and I can’t wait to get back to buying more properties!
Real estate in Washington, DC, is incredibly expensive, and it’s nearly impossible to find a property here that cash flows. Additionally, DC and its surrounding areas are so expensive that coming up with 20% for a down payment would be a significant challenge.
As a result, I’m planning on purchasing my future rental investments out of state, likely in Atlanta or Memphis. Or even maybe in the Baltimore suburbs. I hope to partner with a local investor in these areas to buy and fix up a property, but I’m not confident I’ll find a competent local whom I can trust.
Alternatively I’ve considered buying through a turnkey provider who specializes in selling rent ready, cash flowing properties to investors. After the initial sale, these providers typically act as a management company as well. Turnkey companies sell their properties at market value, so it’s tough to get a “deal” with any value-add potential. But the advantage of going turnkey is the property should be rent ready, or better yet already have a tenant in place, when you close the deal. This is very appealing for someone like me with more cash than time at the moment.
When searching for properties, I focus on ensuring they have strong cash flow potential. Appreciation is great, but I don’t believe you can plan on having your properties significantly appreciate over time. There are way too many factors out of an individuals control in this regard. A cash flowing property is one that churns out a profit each month after all costs are accounted for – including mortgage, tax, insurance, and other long term costs such as maintenance, CapEx, vacancy, and management fees. Many properties will generate enough income to pay the monthly mortgage/tax/insurance bill, but you have to look a LOT harder to find a cash flowing property after adding in these other factors.
Having 9 investment properties by 2026 will significantly contribute to my plan for financial independence. If each property cash-flows at an inflation-adjusted $200/month, these properties would provide $1,800/month in income. This isn’t enough to retire on, but it’s a strong start, and combined with my stock portfolio, should be enough to become financially independent by 2026.
How am I going to pay for these rentals you ask? Good question…
I was planning on taking out a HELOC on my primary residence to get this party started, but I recently learned this isn’t possible. Getting a HELOC on a condo is tough and it turns out my building has too many units rented out (over 30 percent) to qualify. Oh well, I guess I’ll have to come up with a down payment the old fashion way.
Completing Operation Crush Student Debt in 2019 will free up $3,000+ a month, more than enough to start buying properties quickly. As I begin to build my real estate empire I’ll also be leverage the income generated by my rental portfolio to assist in purchasing additional properties. I haven’t run the numbers yet, but I imagine this will snowball at a rapid pace.
I realize my goal of acquiring only one property each year isn’t very ambitious, but I thought it best to set a reasonable goal to get the ball rolling, and revise my vision in the future if needed as my plan unfolds.
As I begin to buy new properties I plan to share all the property specifics, such as their location, the financial numbers, any renovations, etc. Stay tuned for all the juicy details!