What would you do if you were in our situation?

Question

I purchased my primary home as a foreclosure in 2009, currently sitting on about $100k in equity. Boyfriend/business partner and I have good W2's (200k combined annual) with longevity and 401k's (120k combined) boyfriend has very good DTI and I am working on paying CC debt down. 700+ credit scores with $50k cash in savings. I feel like we are in a unique situation because we have so many options and I am confused where we should go from here. We would like to do several things working towards a goal of building a portfolio including LTR, BRRRR, STR and flips. We are knocking on 40 :( He wants to be more aggressive than I would like, but we both agree 15 year mortgages would make the most sense to meet our goals.

Where do we start??

Alex Fenske · Answer

Hi Jessica, some great advice above! In these conversations I always refer to someone we likely all remember, the Cheshire Cat in Alice in Wonderland. When Alice was lost in the woods and came across him, she asked,

Would you tell me, please, which way I ought to go from here?[The Cheshire Cat]: That depends a good deal on where you want to get to.[Alice]: I don't much care where.[The Cheshire Cat]: Then it doesn't much matter which way you go.[Alice]: ...So long as I get somewhere.[The Cheshire Cat]: Oh, you're sure to do that, if only you walk long enough.”

It's always most effective to begin with the end in mind. Once you clarify your longer-term goals, the path to get from here to there will appear - usually pretty easily. Otherwise it's like showing up to complete some construction work and wondering which tool to use before you've decided what you're building. Feel free to connect if you'd like some guidance on establishing those goals and the path to achieve them!

Nathan Gesner · Answer

Welcome to the BiggerPockets forums!

I bought my first investment at age 46. I now own 33 rentals and 135 storage units and 100% financially free (but I still work). 40 is still young.

Definitely start with paying off the debt. You should have your personal finances completely under control, an emergency fund, and then start saving for investments. Read some books, talk (a lot), and start formulating a plan. Start with the end goal in sight ("We want to make $X annually and be fincancially free by 2035") then start working backwards. How many properties will it take? How many per year? How many in 2023? How much money will we need for that first deal? How will we save that money? Etc.

Here's some basic beginner info.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Garrett Christensen · Answer

It sounds like you and your boyfriend/business partner are in a strong financial position, with good credit scores, a significant amount of equity in your primary home, and a solid savings cushion. Based on the information you've provided, it seems like you have several options for moving forward, and it can be difficult to decide which one is the best fit for your goals and needs.

One potential starting point could be to focus on paying down your credit card debt. This can help to improve your debt-to-income (DTI) ratio and give you more flexibility to take on additional debt in the future. It can also free up more cash for other investments, such as long-term rentals (LTR), buy-rehab-rent-refinance-repeat (BRRRR), short-term rentals (STR), or flips.

Once you've made progress on paying down your credit card debt, you can start exploring the various investment strategies that you mentioned. For example, you could look for properties that would be suitable for LTR, BRRRR, or STR, and analyze the potential returns and risks of each option. You could also consider partnering with other investors to share the costs and risks of these investments, or to gain access to additional expertise and resources.

It's also important to consider your long-term goals and how your investment choices will support them. For instance, if you want to build a portfolio of rental properties, you may want to focus on strategies that will generate consistent cash flow and long-term appreciation, rather than short-term gains from flips. Alternatively, if you want to generate more immediate returns, you may want to focus on flipping properties and using the profits to fund your other investment activities.

Overall, the key is to carefully evaluate your options and make decisions that are aligned with your goals, risk tolerance, and financial resources. A financial advisor or other professional can also provide valuable guidance and support as you navigate this process.