Just started a new business. What are best investment options?

Sacramento, California
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Just started a new business. What are best investment options?

Steve B.
Member since 2023 · 6 posts · 4 votes

After getting laid off from another job about a year ago, I opened a music lesson school. I’m already profitable with a monthly cash flow of $6k to $8k. Since my time is flexible, I want to get into real estate investing. I live in a single-family home that Zillow has valued at almost $700K and at least $550 of that is equity (I bought this in 1999.) I also have about $800K in savings, of which about $250K is non-retirement cash investments. I am 57 years old married with two kids graduated from college. I have no other debt other than my mortgage balance of about $130k.

So the questions I am trying to answer are, what is the best way for me to finance a real estate investment (especially considering I just started a new business and don’t have long-term verifiable income)? How much money should I invest? And what types of properties should I be looking at and where? My ideas are all over the map, literally. I just got back from Puerto Rico where my friend has an Airbnb rental that’s doing fantastic. I also have a daughter at home who would like to move out so thinking maybe I could buy a place she could live in. I’m also very interested in having a rental in Hawaii.

I know that’s a lot of information, but hoping someone can give me some ideas!

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Alex Turner
Lender · Denver · Member since 2022 · 22 posts · 25 votes
3y

Hey Steve, 

Sounds like you are in a very strong financial position to start investing. 

Your biggest hurdle is qualifying with self-employed income with only one year of history. There are loan options for 1 year self employed that require around 20% down payment. 

Another option would be to look into DSCR loans. These are investor specific loan where the property is what qualifies the loan rather than your income itself. Again these product will require 20% down payment.

Finally, there is a loan product out there called the community mortgage, this requires 20% down payment and does not require income verification. With this program you have to purchase a primary residence, so this may be a good option to help get your daughter in Hawaii into a home that you can eventually convert into an investment property. 

So bottom line, you should look to have 20% down payment saved but more is always better ;) 

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  • Alex Turner
    Lender · Denver · Member since 2022 · 22 posts · 25 votes
    3y

    Hey Steve, 

    Sounds like you are in a very strong financial position to start investing. 

    Your biggest hurdle is qualifying with self-employed income with only one year of history. There are loan options for 1 year self employed that require around 20% down payment. 

    Another option would be to look into DSCR loans. These are investor specific loan where the property is what qualifies the loan rather than your income itself. Again these product will require 20% down payment.

    Finally, there is a loan product out there called the community mortgage, this requires 20% down payment and does not require income verification. With this program you have to purchase a primary residence, so this may be a good option to help get your daughter in Hawaii into a home that you can eventually convert into an investment property. 

    So bottom line, you should look to have 20% down payment saved but more is always better ;) 

    2Reply
  • Steve B.
    OP
    Member since 2023 · 6 posts · 4 votes
    3y

    Thanks Alex!  I have a friend doing an interest only loan on a property in Puerto Rico. Would interest only be an option for me?

    0Reply
  • Kathryn Morea
    Developer · Member since 2010 · 188 posts · 104 votes
    3y

    Hi Steve,

    I'm not sure about interest only.  If you are a homeowner and intend to live in the house, your options are more broad that if you are an investor.  And if you have W-2 income, better still.  The loan products in PR are much more limited than in mainland.

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Alex Turner:

    Hey Steve, 

    Sounds like you are in a very strong financial position to start investing. 

    Your biggest hurdle is qualifying with self-employed income with only one year of history. There are loan options for 1 year self employed that require around 20% down payment. 

    Another option would be to look into DSCR loans. These are investor specific loan where the property is what qualifies the loan rather than your income itself. Again these product will require 20% down payment.

    Finally, there is a loan product out there called the community mortgage, this requires 20% down payment and does not require income verification. With this program you have to purchase a primary residence, so this may be a good option to help get your daughter in Hawaii into a home that you can eventually convert into an investment property. 

    So bottom line, you should look to have 20% down payment saved but more is always better ;) 

     This is really good stuff from @Alex Turner. Emphasize on the DSCR option is great, especially if you are looking to invest in short term rentals (airbnb).

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    1Reply
  • Carini Rochester
    Investor · Rochester, NY · Member since 2016 · 576 posts · 358 votes
    3y

    If you like PR, and your friend there is willing to offer advice, share his team, coach you, I'd be looking seriously at PR.

    1Reply
  • Frank Patalano
    Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    Hey Steve,

    Great ideas and great financial position to start. 
    Like you said, your ideas are all over the map.

    Hawaii is a little closer to you by air but would be considered a more mature market. Probably with less cashflow.
    Puerto Rico being a US territory is a different animal. Some different rules and different lending options. At the same point, I feel that the investments in PR would be less expensive and less buyer competition.
     
    If I were you, I would research and partner on the first one especially when both are at least 6 hours from your house.

    I'm assuming that PR is culturally similar to Dominican Republic. I own a small hotel there and wow was it quite different that I expected. A huge learning curve. Good luck. 

    0Reply
  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    3y
    All great ideas given already, so I'll add my two cents. You might want to invest locally to start. Smaller towns are generally more accessible, even in California.
    Start by talking to a community bank. Find their commercial lender and bring them your financial portfolio and have a conversation about what you can do. This will give you a lot of confidence going forward. Find a smaller property with which to get started and use that to determine if you enjoy investing directly in real estate.
    There are other ways to invest as well. You can join others in joint ventures, you can be a limited partner in syndications, or you can invest in REITs. Each of those carries less work for you but reward may be less. Let us know what you decide.
    0Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    3y
    Quote from @Steve B.:

    After getting laid off from another job about a year ago, I opened a music lesson school. I’m already profitable with a monthly cash flow of $6k to $8k. Since my time is flexible, I want to get into real estate investing. I live in a single-family home that Zillow has valued at almost $700K and at least $550 of that is equity (I bought this in 1999.) I also have about $800K in savings, of which about $250K is non-retirement cash investments. I am 57 years old married with two kids graduated from college. I have no other debt other than my mortgage balance of about $130k.

    So the questions I am trying to answer are, what is the best way for me to finance a real estate investment (especially considering I just started a new business and don’t have long-term verifiable income)? How much money should I invest? And what types of properties should I be looking at and where? My ideas are all over the map, literally. I just got back from Puerto Rico where my friend has an Airbnb rental that’s doing fantastic. I also have a daughter at home who would like to move out so thinking maybe I could buy a place she could live in. I’m also very interested in having a rental in Hawaii.

    I know that’s a lot of information, but hoping someone can give me some ideas!


     HI Steve,

    What kind of music do you teach?

    0Reply
  • Steve B.
    OP
    Member since 2023 · 6 posts · 4 votes
    3y

    we teach just about everything. Guitar, Bass, UK, piano, vocals, Flute, Drums sax

    2Reply
  • Steve B.
    OP
    Member since 2023 · 6 posts · 4 votes
    3y

    I just ran some numbers on a short term rent condo property in Maui. The numbers make it look like it’s an absolute no brainer in terms of cash flow. What am I missing? 

    0Reply
  • JooYung Choi
    Realtor · NJ · Member since 2023 · 215 posts · 99 votes
    3y

    Will you be managing your Airbnb yourself or hiring property management? Vacation rentals are a hospitality business and need to be ran efficiently to capture that glorious cashflow. 

    0Reply
  • Noah Laker
    Real Estate Broker · Sacramento, CA · Member since 2021 · 518 posts · 410 votes
    3y

    Hi Steve, reviving this old post just in case you haven't yet made a move. I'm a real estate broker and investor here in Sacramento, and I actually manage over 100 STR properties.

    STR is very regional. Vacation markets have been hit really hard this year, but my properties in Sacramento are still doing very well. If you're interested, I'd be happy to get on a call and discuss our strategies as of late.

    0Reply
  • Antonio Olazabal
    Member since 2023 · 6 posts · 1 vote
    3y

    Hi Steve,

    I read your post and thought I’d reach out.

    I'm a 44yo architect working/living in Puerto Rico.

    I’m interested in getting into RE investing via Flipping and STRs but don't know how to get started, so I am looking to team up with someone from whom I can learn how this whole thing works with minimal risk, while also helping them in any way that I can.

    What I can bring to the table are my 20 years experience as an architect, the fact that I was born and raised here in the island, and the local resources/contacts with whom I work on a regular basis.

    The ultimate goal is to start a RE investing business of my own, and although I’ve been reading a lot, I’m hoping to learn by doing.

    So, feel free to reach out, if you think we can possibly help echo other out.

    Best of luck!

    1Reply
  • Kathryn Morea
    Developer · Member since 2010 · 188 posts · 104 votes
    3y

    Antonio,

    I also live in Puerto Rico (San Juan area) and have a lot of resources for real estate investors.  I'd love to connect.

    1Reply
  • Antonio Olazabal
    Member since 2023 · 6 posts · 1 vote
    3y
    Quote from @Kathryn Morea:

    Antonio,

    I also live in Puerto Rico (San Juan area) and have a lot of resources for real estate investors.  I'd love to connect.


    Let’s get in touch. 

    0Reply
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