ADVICE: First Home Purchase to start my REI career...

So taking into account all the things changing what is my best financing decision for my situation…

I am needing to move to San Antonio, Texas anytime from today to February 1st from Austin, Texas.
I have about $2,500 cash now with family that could offer another $5,000 as a personal loan due in 3 years.
I can get FHA financing for up to $140K, but I really only want to afford $1,000-$1,200 per month including taxes.
I am willing to live in the home as my primary residence once rehab is completed or during, but doubt that helps anyone.
I am knowledgeable in home construction and work with many tradesmen in my work (electricians, painters, plumbers, etc.)
I will be working 4x 10 hours days at my FT job and have Fri-Sun completely open.

My questions really stem from if I buy ‘wrong’ and have say only $10k-$20k equity after rehab will a conventional lender refi my hard money loan later (6mos, 12mos)? If I plan to move in and live there a year before selling?

My goal is to purchase a nice home in a good school district for my son for the school year of 2010. Currently I can’t afford a house ($150k-$160k) in those areas at the moment. I don’t mind living tight or uncomfortable in the near term if it gets my REI life going and/or gets me that house by 2010.

Thanks for any helpful info…

Your situation seems pretty simple to me.

You are moving to San Antonio and will be working full-time.
You need to have good housing in a good school district by Fall, 2010.
You want to start investing in real estate.
You have fix-it skills to improve whatever you buy.

For now, how about renting a budget minimal month-to-month rental near work.
See how your new job works out. Now visit the School Administration headquarters and get all the school maps and info. Start checking out neighborhoods near work and your chosen schools.

Next go to a mortgage broker and to your new bank. Get pre-qualified for an owner-occupied mortgage. Ask specifically about financing a duplex or 3-unit property. Ask about special first-time or special area financing.

Next visit a Realtor near you. Find one who works full-time whom you can relate to and trust. This is a free service! Get his/her opinion on where to invest, now that you know your prequalification.

Stick to your plan for reasonable $1,000/month housing costs. Don’t be sucked into a cash-eating single family McMansion. Look for a nicely-located duplex or tri-plex. It will afford you big tax savings on your earned income. Your tenants will help pay your mortgage.

Don’t borrow money in a personal loan.
Don’t borrow in a hard-money loan.
Pay off debts. Save up for a down-payment. (Dave Ramsey has a good course on financial boot-strapping).

Buy an owner-occupied duplex. Fix it and live in it while you rent out 1 side. You are now a landlord. You can then move up later by trading up to bigger and better units.

This plan is sure and safe. You will be improving your life and being a good role model for your child if you do this. Plus you will be able to sleep at night. Your life will be in your control, not the market’s.
There are some good threads in these forums from people who started investing just like you.

Good luck and keep us informed of your progress.


Furnish, great info, thanks.

I don’t particularly like Dave Ramsey-type thinking, but understand where you are going with it. I make $60k with my work and only have my truck payment and 2 credit cards, both below 50% at about $3k combined. So credit management is good in my situation.

Yes I have thought about a 2-4 unit house to become a landlord/occupant, but my question to that is… After a year of improving the property how hard will it be to leave that property (still owning it) and still get another mortgage on my new primary residence of $150k? or would I then be selling it just to move into my nicer area of town?


Talk to your lenders about their current rules for using rental income as income for another purchase. I have moved several times into new residences using income from rentals as part of my income. Now all my income is rental income and I have no problem getting loans.

Lenders typically have wanted tax returns with the rental income, copies of current rental agreements and a profit and loss statement. I am presuming that you are going to hang on to the new units for a while, as flipping is more difficult on multi-units. This is not the time to sell, this is the time to buy under market property.

If you are leaning more towards single family housing, that is also a path. Buy WAY under market so you can fix it up and sell or swap into a better, bigger single family. Figure out your exit strategy and worst-possible case strategy (can’t sell it, can’t get enough rental income) before you commit to a purchase.

The lenders are more conservative now. Maybe they will need a couple of years tax return showing your rental income before they will allow it as income. You need lender advice on this.

I also don’t like the whole Dave Ramsey shtick, but the basics are very good for a beginner. It sounds like you are past the beginner stage, credit-wise, and just need to do research. These forums are an excellent education and free. Good luck and let us know what you decide.