Investing in Townhomes

[Connor]

Alright, Fastlane Forum. Quick introduction here, and then we'll get to the fun part. First read TMF back in 2012, and I realized that I wouldn't achieve my goals by slowly climbing up the corporate ladder. Action faked for a while, and then I fell into the corporate trap for a few years, as I started to get comfortable with the regular raises, nice dinners I could expense, and the relief of the weekends. Finally realized in late 2016 that I was not going where I wanted to at all, and I decided that it was better to start slowly than continue to not start and wait for some inspiration to strike. I decided to start investing in real estate with my brother, as there will always be a need for places for people to live, and we have some past experience in it.

We bought our first townhouse in March of last year, and we've recently acquired another two of them. We are working to find value-ad properties that we can improve with cosmetic upgrades and then lease out- focusing on cash flow with any appreciation/equity as a happy byproduct. While townhomes come with HOAs, we've found some well-run developments with relatively low monthly costs, and it reduces volatility by not having to worry about landscaping, unkempt yards next door, etc. We also try to put in materials that will last longer than the lower-end materials used by other townhomes for rent in those developments, which allows us to not only rent our properties for more, but it will also help reduce turn costs, since they should last longer.

I'll keep track of my progress on this thread, and I'm happy to answer any questions anyone might have. Hopefully can provide some value here after years of (mostly) lurking. Thanks!

 

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[Dunkafelics]

Welcome to the forum @Connor, thanks for the great introduction and an inside look into some great strategies for investing into townhouse investment properties.

Can you give any more insight into the amount of money that you had to put down for these townhouses and what your long-term vision is?

I ask as my family is looking to buy a property this year and am interested to hear more about your mindset in comparison.

 

[Connor]

Can you give any more insight into the amount of money that you had to put down for these townhouses and what your long-term vision is?

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Thanks @Dunkafelics - hopefully people will find this to be of value, whether investing in RE or not. I'll answer your question with a question- what are you looking to accomplish with the property? And what is your risk tolerance? If you're investing for pure cash on cash return, it may make sense to lever up a bit more, thought that cranks up the risk. But if you want to make sure you have a good bit of equity and may not want to take on the risk, makes sense to put down a good bit of down payment.

Right now, we're using private money, so we've got a lot more flexibility than a standard bank would give you. We put more than 20% down on our first two properties, but we then took out the whole purchase price on the 3rd, as we knew the LTV would be great once we rehab it and cash flow well. The goal for us would be to keep iterating this and scale considerably. Once we get to high single-digits or low double-digits, we plan on getting a portfolio loan to pay back the private money and then do it again.

Hope that makes sense- if not, let me know!