How to have the guts and $ to start
I am looking at a duplex in northwest GA just a little south of Chattanooga, TN
I would need about $55 down. I have 20K from savings from an on line business that I will need to get out of and find a new way to bring in cash flow (hopefully rental property) I can take 17K from a Roth IRA. I have about 7K saved for real estate investment. My son may go in with me and contribute 10K.....so I think we can come up with the 55K. However, then I'd have no cash reserves for disasters. I would have mortgage taxes and insurance and no renters immediately. Mortgage taxes insurance would be about $1400 (I think) Zillow estimates top part of house could get $1500 for rent. Then I could rent the basement apartment for I am guessing about $900? I would also use the garage personally for my storage unit and save myself $300 monthly that I am paying for a storage unit for my inventory for my other on line selling business.
Am I crazy......or do I just start and advertise and hope I get renters and that it works?
I am reading the Bigger Pockets How to manage rental properties book and my son has experience co-hosting STRs.
I am not sure whether to go for making this duplex an STR, or a MTR (both of which would need furniture....but both of which my son has experience with and both of which could bring in more money than LTR, but one would never know) or a LTR. My mom has some LTRs but has a property manager. I know a little of what to do from my reading, but if I got too scared (or unsuccessful) is there anyone in the area who would want to manage it as an LTR and what would you charge while following bigger pockets tenant screening, application, and management processes?
Or better yet is there someone who would want to look at just helping me get it set up for the first time and then be there as a consultant to help in times of need....and what would that charge be?
Quote from @Sandy Keller:
Every investment has risk, but it should be calculated risk. You're going to scrape together everything you've got to make this deal fly, leaving you with no reserves, no experience, and no tenants. I would also point out that property values are still high and may continue to drop. You could be over-leveraged, get hit with a major repair and no cash to pay for it, a vacancy for 2-3 months, or even a bad tenant that causes your life to be miserable while costing you thousands in losses . . . and the market price drops 10% on the property and takes some of your equity.
As you gain experience, you can afford to take more risk. For a first-time investment, I think you should have money saved up for the purchase and for a reserve.
kind of what I was thinking, but also so hard to know when to jump and take the risk. I am not sure how I will ever save enough money or find some investor who wants to get me started . :) But in an ideal world....or at least a less risky one, how much cash reserves would you recommend having before starting this great journey? I keep praying God will give wisdom and let me know when the right deal comes a long. Aside from taking all I have, this deal is just what I want... multi family and detached garage for me to use. But I don't want to buy too soon or get my family in financial trouble. :)
Thanks for your advice.
Is this a personal residence? If so could you not do just 3.5% down?
personally I keep lots and lots of personal reserves, whether it be cash or a heloc.
Quote from @Sandy Keller:
Instead of saying, "I can't..." you should be saying, "How can I?"
Brandon has an entire book on creative ways to purchase property with less money down. Owner financing is one I've used several times to purchase property with 10% down and rates lower than the bank was offering. You can find a partner. You can get a second job working part-time and earn another $20,000+ this year.
If you really want it, you'll find a way.
This would be an investment property and not a personal residence hence the need for 25% down.
Yes I have read the No money down book. Better read it again. Yes I want to figure out how I can and when I can. :) I should check and see if this house I want will go with owner financing and 10% down... That would be so much more reasonable and still give me some cash reserves to keep.
Quote from @Nathan Gesner:
Quote from @Sandy Keller:
Every investment has risk, but it should be calculated risk. You're going to scrape together everything you've got to make this deal fly, leaving you with no reserves, no experience, and no tenants. I would also point out that property values are still high and may continue to drop. You could be over-leveraged, get hit with a major repair and no cash to pay for it, a vacancy for 2-3 months, or even a bad tenant that causes your life to be miserable while costing you thousands in losses . . . and the market price drops 10% on the property and takes some of your equity.
As you gain experience, you can afford to take more risk. For a first-time investment, I think you should have money saved up for the purchase and for a reserve.
Thank you for responding to this post. I gathered valuable information through your words.
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
You do a deal once, and you will be hooked. No one I know just does one deal in real estate. Take the initial leap and you will be rollin
I would also be cautious about putting all of your savings down and having no reserves. The deal sounds ok on paper, but if anything goes wrong (with the property or life in general) you would be in a tough position, unless you make a solid income with money to spare every month. You might be better off focusing on how to grow your current income/savings, as it will probably take you 7-10 years to make back your down payment on cashflow alone. The Brrrr strategy would be a better bet, but you'd need to find a property where it would work, that way you get most or all of your money back when the process is completed and can use that same cash for another property right away.
Your ROTH IRA can invest in property. When I first started out, I bought a mobile home on land for 10K and sold it for 19K and owner financed it. I think the buyer put 5K down, so I was only out of pocket for 5K. All the payments went back into my IRA. Wash, rinse and repeat!
