Hello,
I am a first time homebuyer/ investor and i am currently trying to decide my
best rout to take to start a good real estate investment career.
I was hoping i could find some advice on this forum. I currently stationed in the Virginia Beach
area of Virginia(my wife and i currently reside with her mother to save up money) but
I am in the military and have traveled around alot. I recently
stopped in Florida, where I realized how low the prices were in many areas
(Cape coral for instance, where I have found many almost new houses in good neiborhoods for around 50000 dollars.)
This sounds like a great buy and hold investment opportunity so
I have been talking with a friend of mine about investing in a house down here, and splitting the mortgage.(we have about 20k between us)
but i am worried that if we do, I will not be able to recieve good financing on a multi-unit in Norfolk.
Could anyone tell me if:
they think it is a good idea to invest with a partner in an area where i will not be staying
I will still be able to recieve another(larger) mortgage for a home to live in.(multi-unit)
i have a pretty good credit score(above 700) and have an income of about 2500 a month.
Any help and inputs would be much appreciated, Thank you very much.
It’s hard to start out investing in an area far away from you. In that situation, you are entirely dependent on other people. You will have to have someone to manage the property. Even if you don’t pay a property management company and try to do it yourself from a distance, you will still need someone locally who can show the unit while it’s vacant, let in repair people, etc. If you have some family or friends in Cape Coral or any other area you plan to invest in, you might have an easier time. There are many other areas of the country you can find good houses for 50k too. Always consider what your rental income would be for the price of the house you’re purchasing.
Starting out investing with a partner may sound like a good idea, but it could become very difficult a few years down the road if either of you change your priorities in life and want out. I would proceed VERY carefully if you plan on investing with one of your friends.
Having a mortgage on another rental property will definitely be a factor when applying for another mortgage later for your personal residence. If your rental has been bringing in money for awhile, the bank will probably consider part of the rental income when looking at your overall creditworthiness. I think I’ve seen people post on here that you have to own the property for 2 years and then they’ll count 75% of the rental income. Our properties are all financed under commercial loans so we don’t fall under those rules.
I’m in the military as well. We’ve owned a small multi-unit building for a few years now and it’s done really well. It’s located about 20 miles from where I grew up. My parents still live in the house where they raised me so they’re close to the apartments. It’s not been unmanageable from a distance, but I’m glad the property is close to someone I know rather than some random town around the country where prices are good. Most people are going to recommend you start investing where you live rather than at a distance.
Military life definitely makes REI more challenging, but it’s possible. At least you have a stable job with steady income. I don’t know what your future military plans are, but I have known some military people to basically stay in the same location for most of their careers. They usually sacrifice moving up another couple ranks in order to stay put.
the mortgage companies I work with will give you 75% of rental income as credit toward the PITI of that property after you have a tenant and a signed lease. If there is money left over (which would normally be not much if any) it helps your DTI, if it is short then that amount is charged against your DTI.
After you have held the property for 2 years on your tax return they go by actual numbers,they want you to have the 2 years to have a better idea what maintenance, vacancy rate, etc will be
What Justin0419 says about out of town investing for a newby is something you should really think about,I know I won’t buy anything that more than about 15 minutes from my house,and in this market there are still plenty of great deals to be found within that area
I agree with the good advice from Justin. Long distance ownership and management can be difficult, moreso for the new investor. True, prices are less expensive in some areas than in others, but there’s more to successful real estate investing than the purchase price. In your situation, MH, are you prepared to deal with any vacancies, a fallout with your partner, etc.
My suggestion is to look local, at least for now while you gain some experience and smarts. And you also need to consider how you plan on financing your real estate deals. Using your cash or depending upon banks usually presents a stumbling block. Find one strategy to start with and get good at it. In my opinion, the best fit for most newbies are lease options. Get good at that, and then expand your tool chest from there. Good luck!
As a new investor, I would suggest that you invest in the area where you are located for a while. You need to get a feel for what it takes to own and operate an investment property.
Partnerships are good once you understand more the business so that you can have more of a saying in it.
Also try to buy no money down (lease option, owner financing) on your first deals, so you can keep a cash reserve for unforseen problems. Build your reserve a little more before using your money to tie up properties.
Start with caution and you can go far in your real estate career.