I’m a first time homebuyer. Can you help me outline some strategies for starting RE investing?
I’ve saved 10K for a down-payment, and also have 15K in IRA.
How should I finance my first home?
100% financing so I have money left to invest in a 2nd property?
Withdraw some money from my IRA, however I’d prefer to keep that as reserves?
Wait some time to build some equity, and then use a HELOC as downpayment on the 2nd?
A decent home in Chicago area runs for about 200K.
I recently just purchased my first home for myself and I would suggest pursuing 100% financing for YOUR OWN HOME. I hired a realtor that works primarily with investors and explained that I am a “REI-in-training” (not told to them like that) but am looking to purchase a house for myself. I told them about the 70% rule I followed for investment properties and submitted approx 50+ low-ball offers throughout about 7 months. I ended up with a 3000 sq ft 3/3 double, aluminum sided, 2 car garage with a double lot for $20,000 with a $40,000.00 ARV. $3000 needed for repairs. I obtained a 100% financed 30 yr draw loan ($16k Mortgage with a $4k second line of credit for repairs) and rehabbed the house. It’s funny because i won’t EVER pay for the house and maintain a positive cash flow. Point blank, go all out for your personal residence with 100% financing but try to make sure you can minimize the payment to $0.00. If you can do it with tenants then GREAT! If not then you need to be more conservative on how you can spend. Figure out a comfortable limit before you buy.
As for your second home, I would attempt to utilize any of the “no-money down” strategies. Lease-Option,Option,Wholesaling, etc. Whichever is comfortable for you in your area to create cash income and then begin to acquire properties to hold (still using the "no-money-down theory). I’m still not sure how comparible my property values are to yours, but as a small example your $200K house there is about $70K-80K in Buffalo New York. Hope this helps.
DISCLAIMER: I am currently performing/finishing my FIRST REI DEAL so take my information for what its worth. Good Luck to you and make sure you read,read, and READ into whatever field of REI you want to pursue!
Before you start investing in homes you have to know whether you want to hold it or flip it – I recommend holding. Then you must decide how you want to hold it to get a positive cash flow and for how long, and how you intend to eventually dispose of it (exit strategy).
Here’s my advice for you. Place an ad in a small local paper which reads: Wanted house that needs work. Will buy as is, quick closing, private party. 555-555-5555
Run this in a paper in areas you would like to live in. Around here it costs about $50 a month. Leave it in. It’s going to take months for people to start calling you. But they will. Be polite and honest with them, look at every house you get called on and LEAVE A PHONE NUMBER AND A OFFER. This is a numbers game, the more you look at the more opportunity will come your way. Change the ad up occasionally until you find what works best for you. BE PATIENT, save more money while you wait and you’ll be rewarded with a great deal that you can walk into on day one with equity. And you did what 90% of people will never even try… Doing it!
Best advice i ever heard for a newcomer to real estate, which i have been looking into real estate investing for the last month. I personally own a house, and am looking into creative financing for rehabbing. I’ve been reading this forum for a few weeks now and have learned alot, i certainly see the value of petemfa’s advice.