In all sincerity, this isn’t particularly helpful for someone with no prior experience. Your advice is to find a property that has a good ROI, buy it, rent it, collect the rent, and make all appropriate tax deductions to maximize the value. You have not provided any advice on how you actually do these things other than having a partner and hiring people that know how to do them (and using “a website” for rent collection).
I understand, but I wrote a book of a post just going quickly over the high points. I'll go a little deeper here. If you want me to expand further, I can. I can't stress enough I'm detailing one way, but there are so many ways to skin this cat. Don't forget to listen to podcasts, you'll learn a lot by hearing specific examples of what people do.
Decide if you want multi-family or single family. I do multifamily, but let's stay single family. How do you find a good rental. First, decide where you want to buy. Let's assume you live in an affordable midwest city already and want to invest there. You can do any or all of these or do more than this, your choice. The more you do, the higher chance you'll find what you want. You're basically just marketing.
- Tell everyone you know or meet that you want to buy a house/fixer/rental house
- Join all the real estate investing facebook groups you can find and let people know what you want and where you want it
- Go to a physical meet-up for real estate investors. Due to covid, many aren't meeting in person, but they will eventually
- Talk to realtor about your buying criteria and let them find one. If they bring you exactly what you ask and you don't buy it, they probably disappear FWIW
- Go to zillow/facebook marketplace/etc and scour the houses. You might do something like look for a house with 2 bedrooms with 1000+ sqft. That will likely have a place you can add a 3rd bedroom. Typically this will add value to that house relatively easy.
You got a lead on a house, now what? Well is it a good deal? HOW THE eff WOULD I KNOW, KITNfury?! Fair enough, let's dig into analyzing. Rehab costs will absolutely vary way too much for me to just tell you what it will cost. Depends on city, material costs, how good your finishes are, etc. So I will stick to something that is essentially rent ready. You'll need to know how much it will rent for. I usually check a couple places to get a good idea. Rentometer.com is a website that tries to give you market rent based on how many bedrooms. It's not perfect, but it's a data point. Then I check out zillow and look for rentals in that area for rent and look at the pics. Base your rent assumption around what you find. If yours is a little shittier than the comps, it will probably rent for a little less and visa versa is the opposite is true. Size of house, garage spaces, etc will matter too. A guideline, but definitely not a rule, is to divide the monthly rent by the purchase price. A lot of people want 1% or more. It's just a sniff test, nothing more.
Ok, so now you know a basic idea of how much income you can generate. You need to know expenses. With single family, you shouldn't have any utility costs, lawn mowing, etc so that makes it simpler. But you will have mortgage, taxes, and insurance plus basic maintenance and random capital expenditures. I created an easy to use spreadsheet for this. Let me know if you want it. It's fairly conservative, but IMO it's smart to be conservative. Decide what return on your money you want and see if this house will meet your criteria. I personally won't buy anything that doesn't at least have double digit ROI on my down payment (cash on cash return) and I'd like to get closer to 15% or more. This neglects equity gain, it's simple cash flow. The spreadsheet will show both, equity gain plus cashflow will show the IRR (internal rate of return). Basically entire amount your networth is growing.
Ok, so assuming it's a good deal. Buy it. If going through realtors, it's easy enough. If it's a house FSBO, you'll need to get a contract together. IIRC, I think some title companies provide them. Once you're under contract, you'll do all your due diligence and buy. Title company will handle most of it.
So you close and it's time to rent or rehab. If you need to rehab and have been on FB groups, looks for referrals for contractors. Get bids, get the work done.
At this point, decide if you want to self manage or have a property manager. PMs aren't cheap, but they can also be worth their weight in gold. I don't personally think managing one house would be too hard for many people, but that's a personal decision. I'll assume you're going to self manage. Time to rent. I personally have good luck just listing on Zillow. Depending on your area, you might have better luck on facebook or whatever. Talk to other investors to try to figure out which avenue to go, or do them all and you decide.
Yay, you got applications. Who to pick? I personally require their pre-tax income to be a minimum of 3x the rent. I don't allow someone with a previous evictions or felonies. Be aware of fair housing laws and state tenant landlord laws. They are pretty much common sense, but there are some things that are trickier. For instance, "familial status" is protected. So I never ask if they have kids or whatever because if I deny, they could claim it was due to that. That would be an innocent mistake that could bite you. I also call previous landlords, sometimes you don't get a hold of them. I basically ask one question: Would you rent to them again? I do background screening. I use mysmartmove.com. The applicant fills out and pays them and I get the results. It gives criminal, eviction, sex offender, and credit scores to me. Ask for paystubs for proof of income. Basically verify everything told you about themselves.
Place the tenant you chose. Prior to moving them in, walk the property and do a move-in checklist. Notate everything that is beyond "normal wear and tear" and have both you and them sign it. If they move out and there's a giant stain in the carpet, they can't claim it was already there unless it's on that checklist. Don't be a scumbag, only charge them for what they did. I give a receipt for first month's rent and deposit because I only take certified income for that (cash or money order). We'd be off to a bad start if the check bounced and they have a legal signed lease. After that, I don't take anything except checks or online payment. If they mail a check and it's lost, cancel and send another. If they send money order or cash or whatever, probably gone forever and they won't have the money to pay twice.
Online payment, I use Cozy.co (not .com). If the tenant links their checking account, it's free for everyone to use.
Finding and placing a tenant is my least favorite thing to say the least. But I only self manage 11 doors and have good tenants (usually), so once I get one they aren't too much a problem.
So if you think that house value has raised in value due to your work, rent increase, or whatever then go to a bank and do a cash out refinance. Just make sure it still cashflows with the new higher mortgage before going this route. Oh, and you'll likely need to wait 6 months from purchase before doing this to allow it to "season".
Repeat this process. It will seem slow at first, but those little streams of income will become larger faster as you keep doing this. I imagine this seems like a crap ton of work, and it can be, but like all things it gets easier the more you do it. If you use a property manager, those streams will be smaller for longer, but then you're just finding deals and doing a quick rehab on them and waiting to refinance. I can almost guarantee the first time you BRRRR anything (single family or multifamily) you'll be hooked when you realize you have a free house/building that gives you infinite ROI (some positive cash each month with zero of your own money in it). Fun times ahead.
Obviously, buying a property in California will be hard to cashflow, but easier in Indianapolis. Lots of variables to consider depending on area.
