Hoping to invest in real estate… one day.
I've been following the world of FI for a few years and have been saving in retirement accounts as best as I can. My wife and I bought our home last year and I'm recently started a job that gives a lot more flexibility for saving and I'm hoping for our savings focus to turn toward investing in real estate (while still investing in tax advantaged retirement accounts). I'm very interested to hear what other's thoughts are on saving for your first property, buying your first property, etc. I've been thinking that some sort of multifamily home would be ideal to mitigate at least a little risk but I'm open to other thoughts.
Welcome to the most engaging and rewarding journey we commonly get to walk, @Peter Scrufari!
I'd consider moving.
Move into a new home and keep your existing home as a rental property.
That's usually a cost-effective way to pick up your first rental unit if you currently have a home that could work as a rental (and I don't mean you have to currently live in a 700 sq ft 2/1, but rather that the rental value compared to your costs on the home make it a viable property to continue to own after moving out).
Read The Richest Man in Babylon by George Clason. Save 10%. Consider going to a self-directed IRA to tap into those retirement funds. Use the money for a down payment on a 4-Plex and live in one unit. You can still get an FHA loan with low money down and you can get started in REI quickly. Good luck.
@Peter Scrufari Hey Peter! Welcome to the journey of REI! I will try to give you a little input about each of the things you brought up.
Your primary residence - I know you just bought your house recently. However, like it was stated above, you could move out and rent the residence (ONLY IF IT MAKES FINANCIAL SENSE TO USE IT AS A RENTAL). I personally would love to do this but the market rent in my area doesn't support the expenses to maintain the property.
The second layer to that would also be to follow the direction as stated above by utilizing the power of an FHA loan and pay as little as 3.5% down on a new primary, multi-family residence. Honestly, whether it is a 2,3, or 4 unit home, it will create the power of house hacking and prove to be a viable savings vehicle while you live there, and a powerful investment when you move out and rent your unit. I am actively trying to do this strategy as we speak.
Too many things that are unknown regarding your tax advantaged retirement accounts (I'm guessing ROTH?) to comment much, but there are ways to invest through those accounts that are self-directed to explore (just do the research and the options will open up). Wasn't sure exactly if you were intending to invest with those accounts or keep doing what you're doing while building a REI portfolio alongside?
Saving for your first property - There are a million different tips any person may give you on this, so, here is mine: Literally keep an income statement for your household finances (this is what I do myself) and create budgets for every regular monthly expense type you incur, as well as reserve expenses that come up annually(or some other cycle). This will not only give you concrete data as to where each penny of your $$ is going, but will help you identify opportunity areas to improve. It will optimally help you project how much you should be able to save over 'X' period of time, which will help you determine at what point in time you will have your desired amount of capital to deploy on your first deal. The name of the game is DISCIPLINE.
Buying your first property - Understand your WHY. Then, study and learn with the abundance of resources available to you, such as BP itself. I dedicated my life to learning RE for 7 months and developed the confidence to actively make offers and begin building my portfolio. 5 months later I closed on my first property and had my routine down so well, I was confident enough to buy 3 more shortly after.
It is all about what you put into it...just like any other venture in life.
Best of luck!
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
Why not today? What's holding you back? Take action now
Look to house hack with an FHA loan with 3.5% down
