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A question arose last night when I friend and I were discussing plans with each other. I thought this would be the perfect forum to post the basis of the debate and see what everyone here thinks.
A few assumptions we decided on for arguments sake:
1) Money is tight on a day-to-day basis; lots of credit card debt and day job barely covers all life expenses for the family.
2) You own no real estate (live in apartment), but have worked for several (4-7) years for apartment developers and investors, so you understand real estate more than someone just starting to think about investing in real estate and have already worked on several big deals, just on behalf of someone else.
3) The ultimate goal is to own 500 units of apartments, spread out in 2-3 buildings in 10 years time.
4) You would leave your day job the day you were financially able.
Option 1: Partner with financial backer and buy ~6-10 unit apartment complex. You are responsible for everything – the acquisition, closing, management of the building. Partner just puts up the money and is the balance sheet the bank needs to see. Build up from there. We assumed would take 2-3 years before you have any meaningful cash flow. Means money would be tight until then and it is sometimes tough to think big when dealing with daily cash flow issues.
Option 2: Start with smaller deals – flipping homes, rehabs (like JScott), etc. Benefits of this option include if successful, would see profits sooner and could potentially leave day job sooner. Once you have saved some lump sum capital, you can then buy a 6-10 unit apartment building (or larger) and not necessarily need financial partner (i.e. could qualify for the comm. Loan yourself).
Which route would you choose and why? Which route would you argue would get you to your ultimate goal sooner?
A few assumptions we decided on for arguments sake:
1) Money is tight on a day-to-day basis; lots of credit card debt and day job barely covers all life expenses for the family.
2) You own no real estate (live in apartment), but have worked for several (4-7) years for apartment developers and investors, so you understand real estate more than someone just starting to think about investing in real estate and have already worked on several big deals, just on behalf of someone else.
3) The ultimate goal is to own 500 units of apartments, spread out in 2-3 buildings in 10 years time.
4) You would leave your day job the day you were financially able.
Option 1: Partner with financial backer and buy ~6-10 unit apartment complex. You are responsible for everything – the acquisition, closing, management of the building. Partner just puts up the money and is the balance sheet the bank needs to see. Build up from there. We assumed would take 2-3 years before you have any meaningful cash flow. Means money would be tight until then and it is sometimes tough to think big when dealing with daily cash flow issues.
Option 2: Start with smaller deals – flipping homes, rehabs (like JScott), etc. Benefits of this option include if successful, would see profits sooner and could potentially leave day job sooner. Once you have saved some lump sum capital, you can then buy a 6-10 unit apartment building (or larger) and not necessarily need financial partner (i.e. could qualify for the comm. Loan yourself).
Which route would you choose and why? Which route would you argue would get you to your ultimate goal sooner?
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