New to investing and finally about to take the first step - need a hand

General Real Estate Investing
1

Ok, first off let me say that I made a newbie post a couple of months ago regarding low income land lording and though I strayed from these forums for a bit (lost my nerve and needed to regroup), allow me to apologize for appearing to have dropped off the face of the planet in which case your advice was wasted. I GREATLY appreciate all those who jumped in and advised me to the best of their ability.

Now, this may get a bit complicated as I have some investing questions as well as personal preference/recommendation questions so bear with me and I will try to organize this as best I can.

I’m 30 years old and my goal is to be at least living off real estate in 5 years. To me, “living off real estate” equates to making a reliable 100k or so per year. So, that having been said, let me give you some facts and figures.

my fiance and I have a joint income of about 70k gross per year. We currently reside in a nice apartment outside of Baltimore, MD. We’d like to buy a house when the lease is up. I am open to any sort of real estate ventures that would work out best for me.(i.e. commercial/residential “flipping”/section 8 landlording, etc.)

My situation has changed slightly since I last posted in that I have come into a sum of nearly 30k cash which is available to me if need be. I don’t want to blow all of that in one place so to speak. I want to turn that 30k into 60k, into 80k, etc…

I have a great family friend mortgage guy and his mother, a great family friend residential real estate agent of about 40 years experience in the area. I also have befriended a seemingly successful commercial real estate broker. My father is an attorney. So, I feel like I have some decent resources to start with. Anyhow, I was talking to my mortgage guy about buying properties to rent out. I told him I had little cash to work with AND I want to buy a house for my family and I to live in, somehow doing all of this in a perfect order. Here is what he told me… “investment mortgages require roughly 30% down, and seeing as how you don’t have that, we will have to be clever to make this work. Here is the only way I can see this working out and you’re first two deals will have to be PERFECT, netting you enough cash to make the down payment on the third deal and this is why. Since you live in an apartment, you will have no problem getting a loan to buy your first house. obviously you want to move into a house so there will be no questions. so, you will get a loan (not investment loan with 30% down but a typical mortgage loan), buy a house, rehab it and sell it for profit. then when you go to get your next conventional mortgage, you could likely argue that the first house you bought was nice but by the time you got moved in, you found another house that was a better deal so you sold the first one and now you need finance for the second” He told me that that scenario would likely be accurate but after the second house sold, the underwriters would never believe that I was not investing so I would be bound to conventional 30% down payment loans.

So… That’s what he told me. So let’s run down my facts for a recap before I ask my questions…

  1. joint income of 70k gross
  2. 30k cash available

My questions are as follows:

  1. did the above scenario seem likely?
  2. how does buying a personal house fit into all of this?
  3. most importantly, what EXACTLY should I do to begin all of this taking my goals into consideration. I mean, exactly what? “flip” a few houses to get my cash up, do the section 8 rental route, pass go and move directly to commercial and buy an apartment building? I’m truly clueless and quite honestly a bit nervous. I have the will and nerve to jump into this as I truly see real estate as a great investment but I’m sort of looking to have my hand held.

Thanks to ALL who have taken the time to read this.

2

If it were me, I would go talk with a local long-time Realtor about buying a duplex or multi-family home. A single family home sucks up money like you won’t believe!

I would try to use the $8,000 free downpayment stimulus money if possible (as long as you know you have to live there three years or refund some of the money).

A duplex can be a great start because your tenant helps pay that monthly mortgage and you get to write off 1/2 of lawn care, etc.

Your friend is correct that you should look good for qualifying for a loan. People move every 2 years or so, that is normal. Keeping that first house for a rental is how a lot of investors got started.

Just plug into this site and start doing a lot of reading. Your fiancee, too. If you have a joint plan for real estate wealth you have a much greater chance of success.

Good luck and get at it.

Furnishedowner

3

If your mortgage person told you to have 30% down for deals, SHOP AROUND!!! See what else is available. We put down 25% on our first deal. The next five were 15% down with a different bank. Everything since then has been no money down as well as getting boot for repairs.
If you don’t have enough down for a couple SFHs, you’re not going to have nearly enough for an apartment building unless you bring someone else in. Remember, 5 units and up means you’ll fall under commercial lending standards which are different than buying 4 units or less.
If you’re talking about making 100k net in 5 yrs, you’re going to have to be incredibly aggressive and wise with your decisions. If you just try to buy straight rentals with your savings, income, and 30% down (until you find something better), you’re going to become cash poor pretty quickly and you won’t be able to buy enough houses, duplexes, etc to make the kind of money you’re wanting.
Once you buy a few places and do well with them, some doors will open up for you. There are tons of people who call themselves “new investors” but have never done a deal. Once a banker sees you have done well for yourself and you’re making wise decisions, you’ll have an easier time getting money than a newbie trying for his first venture.
The houses we’re doing the best on are the ones that need the most work. They’re obviously discounted for that reason. We’re getting in them cheap. I’m fixing as much as I can on my own and hiring out what’s necessary. The rent we get vs. our investment is working out well. I’m on a 10 yr plan and the majority of our loans are 10 yr amort.
There are a lot of different strategies to get from point A to point B. All of them will involve varying amounts of sacrifice…sacrifice of your finances, time, standard of living, etc. The more serious you are, the more you’ll be willing to sacrifice. You’ll see things in a new light. You’ll realize that $1000 flat screen tv you want could be $1000 toward your down payment of your next property.

4

This is so true… you see things in a new light!

My friends just got 70K for insurance claim from death of family member.

They went out this week and bought boat, swimming pool, and hot tub.

I would of bought property! I am like… you are crazy because now you have all the extra monthly expenses and they just were getting by before!

:banghead

5

30% down. RUN

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Moveright

The others seem to be suggesting a buy and hold strategy giving you a place to live at the same time.
That is ok but I would just stay where you are and learn to wholesale which provides the foundation for your investing career. You will add to your money pile and along the way you will find some keepers.

The first keeper will likely be a home that needs rehabbing that you and your honey like. You move in and rehab at your pace and then in two years you can sell it tax free and do it again. From experience I can tell you living with your tenants can be a pain in the rear and I don’t recommend it.

7

Bay Area Brian says that living with tenants can be a pain in the rear.

I agree. But it can also be lucrative. It can also make your mortgage payment for you so that you live rent-free.

Young, with a lot of energy and time…Buy multi-family housing. Use an owner-occupied loan and the $8,000 free money to do it. Live in the worst unit. Furnish the others and rent them out. Continue upgrading and refurbishing until you have a really nice, beautifully landscaped multi-family home.

Now formulate your next plan. Which could be repeat above scenario. You should be able to get there in 5 years.

I have.

Furnishedowner

8

I would never use an agent to find a piece of property to buy… It isnt cost effective