Hello folks, I am thinking of purchasing my first property and get my foot in the door in the world of real estate investment. I am 21 and dropped out of college to start my web business that for the last year has gotten me a fairly solid footing. Lately the real estate plans came as I sought to diversify my holdings from high risk/volatile businesses in tech/computing to something at least material (rather than a whole bunch of code)
I plan to purchase some houses in downtown Omaha near college campuses and job centers. Most houses I am considering purchasing are in the 80-150k range. Taxes in Omaha is ~2.2% of property value, and rents seems to fetch 750 for 1 br to 1100 for 2 br.
Several questions regarding strategy:
- I have a cash reserve in my business of around 140k USD. I plan to keep half of that in the bank for the operations of my business (I can probably manage my biz with 30-40k if necessary)
I also have an American Express card with a 15k credit limit with a 8.25% interest that I am using 100% each month for my business. I pay the entire balance off in full each month however so I have not raked up any interest or anything.
As I own my business many banks are cautious and due to my lack of financial history most banks dismiss the documents I submit to them as insufficient and thus it has been nearly impossible to get any financing thru conventional means.
I can purchase a house in an all cash deal though. Should I seek out any hard money lenders for this? Would any private lenders be willing to offer me a more favorable termed mortgage if I was conservative with structuring my numbers? I am thinking of seeking out mortgage of 50% of purchase price and I wonder if this is realistic, and what sort of interest rate should I expect today?
- My business generates a fair amount of profits in the range of 7-8k a month of disposable income that I intend to place 100% into real estate investments. I figured I can probably buy 3 small houses, all cash in 2 years in this manner. I am however, reluctant to predict my income beyond the next 2 years as I would like to be conservative with my tech business and being overly rosy with things.
Should I purchase rental properties with the Omaha market as described above? Or should I consider buying some foreclosures to flip to start building a bigger cash pile? There are some properties selling at ~50% tax appraised value that I will probably have to put another 20-30% of appraised value to repair.
- I plan to be an active investor as long as I build a portfolio of houses paid out entirely. What are most of ya’lls view on hiring property managers? Is active management of rental houses even as a beginner worth it? Or should I hire someone at the beginning while I get myself more familiarized with the deal making aspects?
Thanks for the insights!
Kav