I have been studying REI on and off for the last 10 years. I am not a complete beginner, I have owned some houses and built a house.
My situation is I have 100K equity in my condo that I live in with my family. Very little debt. I have an 800 credit score and a job bringing home around 70k. I have a VA certificate also. I am wanting to make money and the goal is to get enough cash flow so I can take a break from my job and sail with my family for a year or two or longer. I will work at least 2 more years.
Question for experienced investors is what would you do if you were in my situation?
How much money do you have saved? I would start saving as much as possible, then think about your condo. Do you want to live there or rent it out? With VA you have to be an owner occupant, but you could buy with virtually nothing down. You could rent out the condo, buy another place that could be a good rental in the future and rent out the new place in a year.
Hello there! I hear you! I love to sail as well, and one day soon (I have an 11 year old in school still,) I hope to be gone extensively as well.
One of my business partners, who sails 8 months out of the year, lives off rental income from 16 duplexes he has bought over the years. With your credit score and income, your best bet would be to approach smaller banks (portfolio lenders), establish a relationship with one or two of them, do a loan on an investment property, and progressively add to the portfolio.
These lenders are much more lenient on guidelines and loan to value - if they see you as a good risk, they can go up to 90% on investment property. In the mean time, do some wholesale deals so you can pull out some fast cash to use on downpayment and closing costs in building your residual income investments.
Other venues are Lease Options, Subject To, Contract for Deeds, etc.
Good luck! :biggrin
Right now I would focus on putting more money in savings. Even if you go VA with no money down, having an emergency fund is essential.
An option with VA would be to rent out the condo and buy a 2 - 4 family investment property. All you would need to do is to live in one of the units with your family for a period of time. When you are ready to sale, you move out and rent that unit out. Put your stuff in storage and buy your dream home when you return.
The best thing to do in my opinion is save your money, pay off your debts then stay out of debt. Buy your investments with your savings, not with your credit. You can not make substantial yeilds(enough to be financially independent) with debt. If you want rentals for cash flow, this is the only realistic way. If you flip, you can make money with debt but it is very risky in todays market. Ive done this for many years and can tell you the key to success is staying out of debt and saving your money.
Leveraging debt can be a good model…after all, most of us have done so for years. One of the most brilliant investors I’ve met over the past 25 years, who invested in many of my debt instruments, told me NEVER take the equity out of your personal residence to invest!!! I agree! Do not take your condo equity to invest…there are way too many options with an 800 beacon score and savings…in fact, of the nearly 400 homes I’ve flipped over the years, it was rare that I laid out any cash at closing.
Yes, you need cash…yes, you need credit…but it does not necessarily need to be yours.
I personally invest in debt instruments…there are many books written on the topic for example Invest in Debt by Jimmy Napier (one of the most influential books ever read by me), and Deals on Wheels by Lonnie Scruggs. In fact, feel free to request my free e-book entitled Debt for Profit.
You can buy a mobile home for $4k, sell it owner financing with $500 down and $200/month for 5 years. Check your calculator…that is a yield of 65.78% on the $3500 you left in the deal after receiving the down payment.
If you want to move your retirement date closer, beef up your yields!! It doesn’t have to be a mobile home…it can be anything like a car, truck, trailer, storage shed, tool box, home improvements, new roofs, and on and on.