he first step towards my goal for of purchasing 5 cashflow properties is to determine my target property areas and types. I ran purchase and lease comps in several areas and decided to focus on newer properties (< 7 years old) in the NE Fort Worth/Keller area. These are close to my home and it has seen a ton of building over the past 7 years so there are plenty of foreclosures and motivated sellers.
I created a spreadhsheet to evaluate the income and expenses (mortgage, taxes, insurance, HOA, PMI, etc..) for properties from 100k-150k and determined I’d need roughly 30%-40% equity (from retail) in order to cashflow these properties at $200/mo. I’m optimistic I’ll find properties at 20%-30% discounts from retail (or original purchase price) in this depressed market then put down 10%-20% to reach my goal.
I plan to use a conventional 30 year mortgage. While I may sell the properties at full retail when the market turns positive in 3-5 years, I want the option to hold on and pay them off. Also, I am not assuming any appreciation on these properties since there is still a ton of room to build so I need to make my money on the discounted purchase price.
I plan to focus on properties that have been on the market for quite some time and have already dropped the price by 10-15% then make a low-ball offer at another 10-15% discount. I suspect I’ll make 10 offers for every one I close. Fortuantely, I am a highly qualified buyer, can close quickly, require no contengencies, no buyers agent and I am willing to take properties as-is for a discount.