Starting To Plan Out My REI Journey and Asking if I'm Crazy
New to Real Estate · Gurnee, IL · Member since 2022 · 22 posts · 16 votes
Starting To Plan Out My REI Journey and Asking if I'm Crazy
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4yQuote from @Dren Aguado:
My Current Situation:
My main goal in the next few months is to house hack a multifamily property in Chicago.
I am currently interviewing for jobs and hopefully land one as a RE assistant to learn more about the industry aside from books and podcasts.
Questions:
- Should I be searching for properties and working with lenders now? or should I wait until I land a job?
- Would I be shooting too high and crazy to even think of acquiring a $500k property as my first house hack? (Soon will be making $30k-$40k annually with a credit score of 700ish) >_>
You need to speak with a lender. I don't think you'll qualify for anything even close to that, if anything at all. Lenders typically want a solid two years in the same profession before they will consider that income. And $40,000 a year might only qualify you for a $200,000 loan, depending on your credit and your down payment.
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10 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes4y
Quote from @Dren Aguado:
My Current Situation:
My main goal in the next few months is to house hack a multifamily property in Chicago.
I am currently interviewing for jobs and hopefully land one as a RE assistant to learn more about the industry aside from books and podcasts.
Questions:
- Should I be searching for properties and working with lenders now? or should I wait until I land a job?
- Would I be shooting too high and crazy to even think of acquiring a $500k property as my first house hack? (Soon will be making $30k-$40k annually with a credit score of 700ish) >_>
You need to speak with a lender. I don't think you'll qualify for anything even close to that, if anything at all. Lenders typically want a solid two years in the same profession before they will consider that income. And $40,000 a year might only qualify you for a $200,000 loan, depending on your credit and your down payment.
The DIY Landlord Book4.7243 Reviews 1. You should not start searching for properties and working with lenders until you land a job.
2. You should start studying neighborhoods, running numbers on deals, and getting educated now.
3. Yes you're crazy to think of acquiring a $500k property for a house hack if you will only be making $30-$40k. A lender is not going to consider your roommate (boarder) income as qualifying income. This means the absolute MAX you'd qualify for is around $200k if you're making $40k per year and have no other debt. This would put your principal, interest, taxes, insurance, and PMI payment around $1,650 per month.
4. Have you thought about the down payment? With a 700ish credit score you're going to need minimum 3.5% down plus closing costs. That means you'll be about $23k out of pocket on your $500k house example.
- Investor · Berwyn, IL · Member since 2018 · 104 posts · 71 votes4y
That's awesome that you are thinking of getting started, definitely do it!! As I am sure you have heard, house hacking is an amazing way to start and there are a few good areas in Chicago that work well.
First for Jobs- Check with GC Realty, @Mark Ainley would be amazing to learn from (also hosts one of the events below with @Tom Shallcross), here is the link for their jobs:
https://www.gcrealtyinc.com/ca...
My guess is you may be too early on in being able to get something under contract immediately without having an income history but it's not too early to start connecting with lenders, investors, and realtors, and learning about which areas and types of deals would make sense for you.My recommendation is to connect with local investors at meetups, get to know a few people, and get a feel for what they are doing and in what areas. Here are a few places to connect, there are 3 awesome meetups coming up:
- Chicago West Suburban Real Estate Investors Meetup https://www.eventbrite.com/e/f...
- Straight Up Chicago Investor Networking Event: https://www.straightupchicagoi...
- Chicago RE Investor Meetup with @Jonathan Klemm https://www.biggerpockets.com/...
Connect with a local realtor and lender that can help you strategize and see what makes sense for your situation. I use @John Warren as my realtor and couldn't ask for a better team, you'll learn a ton just from one conversation (I certainly have over the last couple years). I use @Zack Karp as my lender and they rock as well, smart, creative, always willing to help, and very professional in loan processing.
If you get set up with a couple of good connections then everything in the process will be smooth from selecting an area and strategy up to closing on your first deal. Good luck! - Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes4y
@Chris Winslow thanks for the shout out. House hacking is definitely a great strategy, and your team makes everything possible in this business. You were fortunate to connect with Zack right out of the gate as well.
@Dren Aguado I think it makes sense to connect with a lender. If you are in Gurnee, then you might be checking out some of the nearby areas like Waukegan if you want to house hack. There aren't as many areas to house hack in Lake County, so I also recommend looking into live in flips as a way to build up capital to invest. I grew up in Zion and Waukegan, so I know those areas fairly well.
- Specialist · Indianapolis, IN · Member since 2021 · 312 posts · 282 votes4y
I think it's a great plan, but I agree with what others have said: it's a bit premature to start looking at properties. When lenders are looking at your history, they check the past two years of income for how stable of a lendee you are. I think shooting for 500k properties is stretching, and I doubt you'd even get approved. Start smaller and build your portfolio with sweat equity first (aka buy a distressed property and work your a** off to update it).
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes4y
Agreed with what others have said: Talk to a lender and see what's possible. Unless you already have 2 years of tax returns you may have wait awhile to get pre approved through a typical lender.
- New to Real Estate · Gurnee, IL · Member since 2022 · 22 posts · 16 votes4y
Quote from @Chris Winslow:
That's awesome that you are thinking of getting started, definitely do it!! As I am sure you have heard, house hacking is an amazing way to start and there are a few good areas in Chicago that work well.
First for Jobs- Check with GC Realty, @Mark Ainley would be amazing to learn from (also hosts one of the events below with @Tom Shallcross), here is the link for their jobs:
https://www.gcrealtyinc.com/ca...
My guess is you may be too early on in being able to get something under contract immediately without having an income history but it's not too early to start connecting with lenders, investors, and realtors, and learning about which areas and types of deals would make sense for you.My recommendation is to connect with local investors at meetups, get to know a few people, and get a feel for what they are doing and in what areas. Here are a few places to connect, there are 3 awesome meetups coming up:
- Chicago West Suburban Real Estate Investors Meetup https://www.eventbrite.com/e/f...
- Straight Up Chicago Investor Networking Event: https://www.straightupchicagoi...
- Chicago RE Investor Meetup with @Jonathan Klemm https://www.biggerpockets.com/...
Connect with a local realtor and lender that can help you strategize and see what makes sense for your situation. I use @John Warren as my realtor and couldn't ask for a better team, you'll learn a ton just from one conversation (I certainly have over the last couple years). I use @Zack Karp as my lender and they rock as well, smart, creative, always willing to help, and very professional in loan processing.
If you get set up with a couple of good connections then everything in the process will be smooth from selecting an area and strategy up to closing on your first deal. Good luck!Thank you so much for all this information! I'm going to start applying to GC Realty right now :D I definitely will be there for @Jonathan Klemm's event! It's great to know who you trust for your team I really appreciate it :D
- New to Real Estate · Gurnee, IL · Member since 2022 · 22 posts · 16 votes4y
Quote from @Zachary Inman:
I think it's a great plan, but I agree with what others have said: it's a bit premature to start looking at properties. When lenders are looking at your history, they check the past two years of income for how stable of a lendee you are. I think shooting for 500k properties is stretching, and I doubt you'd even get approved. Start smaller and build your portfolio with sweat equity first (aka buy a distressed property and work your a** off to update it).
LOL yeah, I now definitely realize I have to start smaller. I was crazy. Sweat equity definitely looks like the route I need to take! Thank You!
- New to Real Estate · Gurnee, IL · Member since 2022 · 22 posts · 16 votes4y
Quote from @John Warren:
@Chris Winslow thanks for the shout out. House hacking is definitely a great strategy, and your team makes everything possible in this business. You were fortunate to connect with Zack right out of the gate as well.
@Dren Aguado I think it makes sense to connect with a lender. If you are in Gurnee, then you might be checking out some of the nearby areas like Waukegan if you want to house hack. There aren't as many areas to house hack in Lake County, so I also recommend looking into live in flips as a way to build up capital to invest. I grew up in Zion and Waukegan, so I know those areas fairly well.
Yeah it's definitely hard to find house hack opportunities in Lake County. I've been looking into Wisconsin Racine and Kenosha areas now. How do you feel about those areas? I'm familiar with the areas but would love a professional's opinion. Live in flips is something I haven't considered so I gotta look into that :D Thank You!
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes4y
@Dren Aguado - Not sure where you are interviewing for a Chicago RE assistant position, but we are always looking for rockstar team members. Shoot me a message if you want to discuss it in more detail. Either way happy to help you along your journey in any way I can.
@Chris Winslow - That may have been the post of the year haha tons of great value. Thanks for sharing all that!
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