questions for new investor


I’m Andrew and I live in Abilene, TX. My dream is to become a real estate investor and five or ten years down the road (preferably sooner) have enough passive income to quit working my job and work real estate full time. I’m trying to decide right now the best way to get started and start building a portfolio. I’m 24 and two years away from a biz degree if that helps, but I would like to have started investing before I graduate. I have about 2k saved up and am easily saving 3 or 4 hundred a month. What would you experienced investors suggest as the best way to kick off my RE career.
My plan right now is to either buy a house for myself for 50 to 60k as that is what I can afford, let my credit build, and then begin buying more houses as I save up money for down payments. But what I am currently considering is purchasing a duplex so that I can become an investor right off the bat. The problem is I cant seem to find any duplexes in my area that meet the criteria I have come up with. The one I am currently looking at is 60k with two 2bd 1b units that I am figuring would rent for 450 or so a month. This doesn’t meet my 12% cap rate but is about as close as I can find. Would this be a smart investment for some of you guys, or do I need to find foreclosures or REOs or something along those lines.
Another thing is my financing as a beginner. I have about a 680 c score but not much credit history with just a couple $500 credit cards. How hard is it for someone like me to get financing for inv properties and what is a typical investors interest rate and dp requirement. I have a billion more questions but this post is already way too long, and I’m just rambling.
So if anybody has any modifications on my current plan, or a better idea for a way to get started please let me know. BTW, this is my first post and I look forward to getting to know you guys and hearing your suggestions.


Welcome to REI club! Some things I would recommend doing immediately to get your REI career started- soak up everything you can get your hands on regarding the world of REI. One needs to be versatile in concepts as well as current events, as both impact the biz greatly. You’re off to a good start by posting on these forums, start reading all the other posts as there are some REALLY knowledgeable folks on here. Also, join you’re local REI club and get to know the players in your market, ie network like hell.

Continue to improve/develop your personal credit score/history as it is vital to your long-term survival in the industry. Spend some time studying at to have all your personal/business credit questions answered. 680 is not bad, probably can qualify you for an FHA loan, but still focus on raising your score…

I would recommend getting started in RE by buying a duplex, renting out half and living in the other half while you continue to learn and develop your business. It’s a great way to get into a property (cuz the owner occupied stds are generally looser than the NOO lending stds), have someone pay half your mortgage for you, and gain some skills as a landlord.


For a property you intend to occupy as your primary residence, I think this would be a smart investment. What will it cost you each month to own your own home or to rent a place to live? If you buy your own home for $60K, at todays rates your monthly mortgage payment will probably be around $420 (including taxes and insurance, but could be higher depending upon your location).

For this duplex, renting out only one side at $450 per month, completely covers your mortgage payment. Essentially, this property pays for itself, or rather your renter is buying the property for you and you have little to no out of pocket housing expense. The $30 “income” each month can be banked to cover the cost of repairs and maintenace as they come up.

If you use FHA financing to purchase this property before Dec 1, 2009, putting 3.5% down will cost you $2100 plus closing costs. Let’s estimate the total at about $3000 which you can easily have saved by the time you get to settlement. The $30 “income” from your tenant each month gives you a 12% return on your initial invested capital. This return on your investment is improved dramatically when you get the $6000 first time homebuyer tax credit fully refunded on your tax return. When you add the $6000 refund to your $360 annual income, the first year return on your investment skyrockets to 212%.

Don’t throw this deal away, just because your investment analysis on this property only gives you a 9% cap rate. Over time, you can raise the rent. If you ever decide to turn both units into rentals, the increased rent could raise your cap rate from 9% to 12%. Until then, you have a free place to live.

Welcome Andrew,

I like the way you think. Some very good ideas. Wish I would have started investing sooner. One of the biggest reasons I didn’t was that I didn’t have a solid job and consequently, no way to mortgage properties and deal with the cash flow issues real estate investing requires. If you were a bank, would you lend you money for investment? Maybe getting a degree and a J.O.B. would be a first step. I mean I’m just saying…

the sky’s the limit

You have the chance of a lifetime in that you have $8,000 free downpayment stimulus dollars! You must owner-occupy your residence for 3 years, be a first-time buyer, and hold titile in your name. I believe FHA now allows a bridge-loan using this money.

I recommend confirming that you can buy a duplex with the money. Also you need a local Realtor who can show you the best deals, and help you utilize this special financing.

Go for it. You are ready to buy.


Thanks for all the answers. I’m starting to think the duplex might be the best way for me to go. So I’m going to start looking at more of those. And I’m sure I’ll have 400000 more questions, but thanks for the answers so far.


West Texas is a good place to start investing. With the new oil boom that is going on out there you will find no shortage of renters. As Furnished Owner said you definitely need to take advantage of the $8000 tax credit. That duplex sounds great. I have been looking around the DFW area for properties just like that.