Hello all
Without getting hammered with training seminars or coaching offers…
How did some of you get started, and just how successful have you become? Im seriously considering investing in real estate instead of mutual funds, and managing them as rental properties for cash flow. I ultimately want to leave my job and do it full time… blah blah, you know, all the stuff you’ve heard before
Quick overview of my life and finances:
Im 30, wife’s 24, we have a 15 mo. old and will have another this august :bobble
65k current gross income
32k student loan debt
94k mortgage debt
We are currently aggressively paying off our student loan debt
Original plan is to pay off all debts before serious investing, including current mortgage to become our first rental property. Solid home, great location, but very little current equity
Ive been learning and researching real estate and rental business. Now my plan is to just learn more while I increase cash flow
What suggestions do you all have for me? There is time for second job to learn the industry. Do you think it is unwise to pay off loans of 3% interest when there is money out there to be made? Im trying to analyze risk vs. reward since I support a family of 3
Also, on a side note, what is you all’s opinions on “hood” areas. In the Little Rock area, a lot of rental opportunities in less desirable but well populated areas. I didnt plan on considering them, but there are funds and city plans to improve these areas.
You have $126K in debt and are going to pay that off before investing? Even if 20% of your gross income is going towards your debt, that’s 10 years before you buy an investment property. Ideally, you want to buy investments that will pay your debt off for you.
My advice - find a property where the owner is willing to do owner financing. You should be able to get in for little to no money down and hopefully you can produce an income stream of $100-$500 a month. It will take awhile to find someone willing to do that, but they are out there.
I personally would not be paying aggressively paying down 3% notes if my gross income were $65K and
I were responsible for feeding 3 other people. Find a way to double your income and then aggressively pay off the student debt. For now, just pay the minimum payment ON TIME and use additional funds to buy investment property. It won’t be quick, but save some cash, and look for a property at least once a day. Have a goal to buy your first property within a set time frame.
If you don’t keep your eye on the prize, you will never obtain it.
I appreciate you responding.
We’ve paid 37k off in 2 years. We dont spend a lot, our monthly cushion currently is between 800-1100 a month.
I’ll receive a 10k raise next year and another 10k year after that, then its pretty minimal each year.
So anyway, on paper, debt free is about 5 years from now with a paid-for rental property.
But Im with you, Im thinking theres a faster and more fun way to get there, which is why Im learning things now.
Why owner financing and not bank owned, other than keeping my credit free’d up?
Getting a loan right now from a bank on an investment property right now is difficult if not impossibe on an NOO.
I have a credit rating over 800 and have had three banks turn me down. Everyone like me wanting to get started are having major greif finding a loan,hence,the seller finance. Tough to find,but possible.
Hoosier,
You’re also VERY young. A person with an 800 credit score and decent income would have absolutely no problem getting an NOO loan with 20% down.
OP,
sounds like you’re on the right track regardless of whether you’re investing or not. Keep paying down debt in the meantime, however, you can make MUCH more than that 3% you owe on loans, so it’d be foolish to prioritize paying those debts down versus getting your feet wet with a decent income property. The only advice I can offer is to read read and read. You will find everything you need here, and the pieces will eventually fall into place. I’m 25 and have been reading and researching for 3 years now and finally everything is coming together as planned, but it wasn’t overnight by any stretch. Decide what you want to do and set some REALISTIC goals. Strive to reach those goals, and set new goals as you move forward. Your plan is going to constantly be changing at first, so what you decide to do today will not be what you end up doing years from now.
Chris, I think you confuse me with another hoosier on this board. I am far from young (54)and am trying to get started in real estate.It has been more than a struggle as i refuse to take what i consider highly risky moves such as hard money.There are a ton of good deals to be had,but as a guy at my real estate club told me,cash is king right now.
It bothers me to watch nice homes (REO’s )fill with water and mold as the banks clutch on to these properties as they waste away.I guess it is the nature of the beast at least in my area.
Ha, I thought it was odd that you had 1 post, but I figured maybe it was a glitch. There is another very young member, maybe 18 right now, with a name just like yours.
In that case, I don’t see why you wouldn’t qualify if you had stable employment (not self-employed, they’re weird about this in some cases) and 20% down. That is a killer credit score.
hoosier,
First of all, welcome.
Next… Are you visiting big name banks or smaller ones? If you are only hitting larger banks w/ 10 levels of management, it’s no wonder you can’t get anywhere. Some banks are lending money. Your inexperience might be working against you with the banks. Or it may be that you’re not finding good enough deals.
Some of the banks simply aren’t willing to let their REOs go for what they’re worth in current condition in this market. Just move on from those, but keep watching because sometimes they’ll come around. We worked on getting a house for about 9 or 10 months. The bank went from one price, then doubled it, and worked it back down to the original price where we bought it.
Well,in my area there are few big name banks. I am in a rural area about 70 miles east of Chicago.
Frustration is setting in as i have not been turned down on a loan of any kind since i was 19 years old.
I joined the local real estate club back in March because of reading this board for about the last 6 months.I am not the only one in this area having a hard time getting a loan.
There have been about 4 homes i have really been intrested in and somebody bought all of them and they have all been re-sold.
It has been 4 years since i decided i wanted to try my hand at flipping my first house.i dropped out of looking for the past 2 because of the crash.
I agree my inexperience is a problem. I may be assuming a good credit rating can carry me where i want to go,when today that is not a guarantee of anything.
Joining seminars and other program can help you enhance your knowledge and ideas in real estate marketing and some people surrounds you could also help you.
Nothing wrong with paying off debt, but are you doing any marketing for your real estate adventures. You are here for a reason right? Squeeze that budget and get some leads coming in your way. Focus more on making money instead of the hole that you are in.
Most of the responses you have received so far have discouraged you from paying off 3% debt.
If that debt is your student loan, then I will disagree with the advice already given. Because, student loan debt can not be discharged through bankruptcy, I strongly recommend that you pay off this debt as quickly as you can. All your other debts can be either discharged through bankruptcy or foreclosure.
Don’t pay off your current mortgage loan. If your plan is to turn your current home into a rental, then let your tenants pay off your mortgage for you. Save the amount you would otherwise pay in additional principal to accumulate at least six months reserve for your proposed rental property.
Also, save whatever you will need for a downpayment and closing costs on your replacement residence. FHA loans only require a 3.5% downpayment plus closing costs,
A high credit score is not enough. You have to have a low debt to income ratio and enough cash on hand to pay the downpayment and closing costs. Some lenders are even requiring evidence of cash reserves to cover holding costs for a six month vacancy.
If the lenders are refusing your loan application for an investment property, then the reason may be a high debt to income ratio (greater than 45) and/or insufficient cash on hand for downpayment, closing costs, and holding costs.
All of what you say may be true. I have not gotten an explaination of why,other than NOO property is going to command 25% down.Not a fair deal in my eyes.
I could swing that,but have nothing left for repair,and holding.
Between the wife and i 75k income and a house note at 725 a month,with no other debt besides small credit card obligation.
It is sad state of affairs in my book that i can’t borrow 50k to buy a 100k house.But thats just me.
Since your kids are not in school yet, this is the ideal time to stair-step from your current home to an owner-occupied duplex , triplex or 4-units. Financing will be available as you will OWNER OCCUPY the new purchase.
Crunch the numbers on your current residence becoming a rental. Don’t fall in love with a property, fall in love with the financing and where it will get you. Your wife is home with the babies and she can show units, collect the rent, run the books. You can make a great team. I bought a house for each kid and held it until college funds were needed. That plan worked for me.
You can move into the worst unit, and let your wife help you paint and rehab it. This will all become as adventure as you stair-step up to wealth. Pick a neighborhood that you like and shop for a good deal like crazy.
Keep day job. Dont focus too much on paying off debt as once you write the check the cash is gone. Join your local reia and learn the basics. Then focus on best ways to raise cash thru real estate.