Hi everyone. I’ve been reading these forums for a little while now and there seems to be a lot of great advice, so thanks for that!
A quick bit about myself… I’m 26 and currently make about $66k/yr, but I live on, at most, half that. I already max out my Roth IRA, have another index fund, and have some money in a brokerage account, so I’ve been thinking about real estate as being the next step in investing and just wanted to get a little advice on how to go about it. I ran my credit a few months ago and it was 767. I have no debt and pay all my bills on time. Feel free to tell me if any of my ideas or assumptions are way off.
What I’ve been mostly looking at is purchasing a duplex/triplex/fourplex and renting it out. The biggest concern here is location. I live in Orange County, CA, so nothing here is within my budget. I’ve been looking at the metro Atlanta area since prices are much much lower there, and that’s also where I’m originally from, so I’m quite familiar with the area. I also travel there usually at least once a year to visit friends and family.
While we’re on the subject of budget, I’ve seen a lot of multifamily homes in the Atlanta area for around $50-$80k that need some substantial work, and a good number in the $100-$150k area that seem like they’ll be good to go with minimal work. For finding these properties I’ve mostly been using the MLS search at realtor.com, or Craigslist. Depending on the area, the rents for the individual units seem to be around $600-$750 (I discovered rentometer.com and it’s an amazing tool!) I’m leaning to purchasing a building that needs minimal work since I won’t be there to physical do work on it myself, or to oversee a contractor and make sure I’m not getting ripped off.
This goes back to the location problem. How practical is it to buy a home on the other side of the country? I do have friends and family in the area that could check out the place and verify its physical condition. My mother is an accountant at a home builder, so I’m sure she could help a bit. Would I be working with a mortgage lender here in CA, or one in GA?
I don’t have the money for a down payment now (which is good, so I can’t do anything stupid), but I figure that in about a year I should be able to save up a solid 30k or so. I’d like to make as large a down payment as possible in order to minimize my mortgage. I’d like to have positive cash flow from the start. I’d like to not finance any more than $100k. Doing some quick numbers on that, a 30 year loan at 6.5% would be $630/mo, add taxes and insurance, maybe $800 a month, which would allow me to have positive cash flow right away, assuming I get renters. These are just very rough numbers, so please tell me if I’m way off base.
What are your opinions on property management companies? I can see the pros and cons. It’d be nice so I don’t have to worry about phone calls in the middle of the night or dealing with nightmare tenants myself. On the other hand, is it really necessary if I’m only going to have one building with 2-4 units? I would purchase a home warranty on the building which seems like it would take care of a majority of common small maintenance things that pop up. Also, I’ve been reading up on eviction law in GA and it seems pretty straight forward. Oh, that’s another question, if I do eventually need to evict someone, can all of these forms that have to be filed with the court be done so electronically? If not, could I call my mother my authorized agent and have her do it in person? I’m not as well versed in this area as I’d like to be, but I’m still doing research.
One last thing: do any of you have any thoughts on incorporating myself as an LLC? It’d be nice to have to worry about someone tripping on my doorstep and sueing me for everything under the sun, but from what research I’ve done, common opinion seems to be that it’s not really worth it until I start owning several properties.
Thanks a ton for your advice and reccomendations!