jeffnicolas


My plan is to purchase 5 residential, single family homes a year for 5 years. One of these 5 properties will be sold after one year of ownership to raise capital. The capital made will be reinvested to purchase more properties for the following year. After the 5 years of ownership all 4 remianing properties of that certain year will be sold and the capital made will be used to purchase commercial apartment buildings. Here how it looks:
Year 2009:
January: House A
April: House B
July: House C
Oct: House D
Jan (09): House E.

On January 2009, i’ll sell house A in order to purchase the houses for 2009. And so on and so on.

On January 2013, I’ll sell house b, c, d, and e. With the money made i’ll buy apartment A1 and so on and so on until i’m a multi-millionaire. Does this formula make sense?

6 Responses to “What do you think about this real estatte investing strategy?”

1. Joe L on December 31st, 2008 10:24 pm

   Well, the biggest problem with this formula is that you are assuming that your going to make money on each purchase. So, in theory it sounds great but real-eatate could be depressed for a long time. Good Luck

2. MSAD on January 3rd, 2009 7:17 am

   The plan only works if the property values go up. There is no guarantee that the property values will go up. They can go down.

   And now – the house is 5 years older and you may have to invest money into the house to get it into shape for sale – esp if you expect to get top dollar. In the mean time – you have insurance and carry costs associated with the homes.

3. Serge M on January 3rd, 2009 8:18 pm

   It’s a great plan except that it may not work. You can’t buy and sell houses as you can shares of stock. Your plan is based on the assumption that you will be able to sell each house when you want to sell it, and that you will sell it at a profit. for example, if you had started this plan in 2006, you would not be holding 5 houses that no one wants. Their value would be less than the capital you invested. there are lots of speculators exactly in that position today.

   Are you paying cash for the houses? You would have a hard time financing them. Do you plan to rent them for a year? How much do you plan to spend on fixing them up to sell? What will your vacancy factor be? If you don’t rent them, your capital stays idle in an empty house. Each house has to go up at least 10-15% a year just to break even, because you have selling commissions, closing costs, insurance, property taxes, and other expenses of home ownership. The plan is riddled with flaws.

   If you have enough capital to buy 5 houses in one year, why not invest it in the apartment house instead? Why wait five years? There is no guarantee that your houses will yield more than you paid for them. They might, but you are speculating and taking risks. there is no sure investment, especially not in houses.

   Rework your plan and invest your money much more wisely, and you may yet reach your goal of becoming a multi millionaire. I hope so and wish you luck.

4. DannoREA on January 6th, 2009 3:58 am

   I’m sure it sounds good on paper to you, but there are holes in your logic:

   The amount of appreciation you would need in order to sustain the growth you’re anticipating would likely be unrealistic in today’s market. The fact that you would want to sell after only a year means that you would need to clear the mortgage, realtor commissions, taxes and any other fees associated with a title transfer. Doesn’t work out in any of the models I’ve run.

   Plus, you’re not taking into account the vacancy rate on these properties (presuming you’re going to rent them out.) You need to calculate how long you can sustain yourself without tenants, and how many tenants you need in order to turn a profit out of the original houses.

   If this works out for you, you’re a Realtor’s dream come true.
   I’m also a realtor, so feel free to send me a message if you’re in Pennsylvania!

5. trblmkr30 on January 8th, 2009 12:19 am

   If you have the money to put down on each property, then it might work. But you’ll have to have at least 15% or more appreciation a year for each property, for each year, in order to come up with the rest of the money to buy more properties. Figure that you’ll need at least 20% down on each property to get an investment loan.

   Do you have that kind of cash?

6. Landlord on January 11th, 2009 3:42 am

   I think you will be in the poor house with that plan.

   You are counting on a huge amount of equity, and you can’t count on that.

   Also, the process of buying and selling is expensive, I am not even thinking about selling anything right now.

   You have to have a huge amount of income to qualify to buy the 5 houses in the first place, and at least 20% cash as they are investment properties.

   Why don’t you buy and sell one first and see what is really involved?

   I own almost 30 and while my net worth would give me teh title you seem to think is important, it is not that big a deal . It is only on paper anyway.

   Also, apartment complexes do nto pencil out that well, You should price some and see what I mean.

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