First post and ready to buy! What do you think of my strategy?

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First post and ready to buy! What do you think of my strategy?

Paul Tan
Member since 2022 · 4 posts · 49 votes

Finally got my headshot uploaded so I no longer have to lurk around the forums! XD

What are your thoughts on Starting Small (Cashflow) vs Going Big (Equity)?

Since I will invest in the Augusta, GA, I'm trying to figure out what strategy to take for the next 3-5 years. Here's the facts:
- I'm pre-approved for $330K but I can push it to $450K if I really need
- $10K-$20K Saved for down payment. $10K Saved for renovations
- Saving $800-$1400 every month
- I have access to the VA loan

(*preferred) Strategy #1: $100K-$200K purchase. ~$1000 Mortgage. Rent for ~$1000. Rinse/repeat once I can ReFi for 75% ARV. 1031 in 5 years.
Strategy #2: Buy a SFH in a subdivision for $300K+, waiting until I have enough cash/equity and buy again. HODL.

Here are my pros and cons for each:

### $100K-200K ### <-- More Active Investment
Pros
- Higher Price to Rent Ratio
- Fast turnaround to purchasing next property (6 month before ReFi)
- Value Add repairs can improve house value a lot
- 3-4+ purchases in 5 years = More Learning Opportunities/Networking

Cons
- Higher Risk of Bad Tenant
- Maintenance Repairs
- Lemon Purchases

### $300K+ ### <-- More Passive Investment
Pros
- More equity to draw from down the road
- Good Neighborhood
- Family Tenants are safer

Cons
- Higher Operational expenses (Taxes, Insurance)
- HOA Limitations
- Typically recent builds/renovations so not much room for Rehab
- 1-2 purchases in 5 years = Fewer Learning Opportunities

I know that there is no one solution. Also, specific advice depends on me providing more details. But I always like to hear more new perspectives! So hit me with everything you've got!

51Reply
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Richard Capers Jr
Investor · Grovetown, GA · Member since 2015 · 100 posts · 67 votes
3y
Quote from @Paul Tan:
Finally got my headshot uploaded so I no longer have to lurk around the forums! XD

What are your thoughts on Starting Small (Cashflow) vs Going Big (Equity)?

Since I will invest in the Augusta, GA, I'm trying to figure out what strategy to take for the next 3-5 years. Here's the facts:
- I'm pre-approved for $330K but I can push it to $450K if I really need
- $10K-$20K Saved for down payment. $10K Saved for renovations
- Saving $800-$1400 every month
- I have access to the VA loan

(*preferred) Strategy #1: $100K-$200K purchase. ~$1000 Mortgage. Rent for ~$1000. Rinse/repeat once I can ReFi for 75% ARV. 1031 in 5 years.
Strategy #2: Buy a SFH in a subdivision for $300K+, waiting until I have enough cash/equity and buy again. HODL.

Here are my pros and cons for each:

### $100K-200K ### <-- More Active Investment
Pros
- Higher Price to Rent Ratio
- Fast turnaround to purchasing next property (6 month before ReFi)
- Value Add repairs can improve house value a lot
- 3-4+ purchases in 5 years = More Learning Opportunities/Networking

Cons
- Higher Risk of Bad Tenant
- Maintenance Repairs
- Lemon Purchases

### $300K+ ### <-- More Passive Investment
Pros
- More equity to draw from down the road
- Good Neighborhood
- Family Tenants are safer

Cons
- Higher Operational expenses (Taxes, Insurance)
- HOA Limitations
- Typically recent builds/renovations so not much room for Rehab
- 1-2 purchases in 5 years = Fewer Learning Opportunities

I know that there is no one solution. Also, specific advice depends on me providing more details. But I always like to hear more new perspectives! So hit me with everything you've got!

I'm in the Augusta market as well. Why don't you put nothing down with your VA loan? Then in a year or so use the loan again for another purchase? There's a potential to use the maximum eligibility with these 2 purchases but you can House Hack them and increase the cash flow vs market rates in the area.

Save your cashflow and your down payment money then with the 3rd purchase go for a FHA loan 3.5% down with the amount you made. Move every 12-18 months until you are tired of doing it.

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  • Richard Capers Jr
    Investor · Grovetown, GA · Member since 2015 · 100 posts · 67 votes
    3y
    Quote from @Paul Tan:
    Finally got my headshot uploaded so I no longer have to lurk around the forums! XD

    What are your thoughts on Starting Small (Cashflow) vs Going Big (Equity)?

    Since I will invest in the Augusta, GA, I'm trying to figure out what strategy to take for the next 3-5 years. Here's the facts:
    - I'm pre-approved for $330K but I can push it to $450K if I really need
    - $10K-$20K Saved for down payment. $10K Saved for renovations
    - Saving $800-$1400 every month
    - I have access to the VA loan

    (*preferred) Strategy #1: $100K-$200K purchase. ~$1000 Mortgage. Rent for ~$1000. Rinse/repeat once I can ReFi for 75% ARV. 1031 in 5 years.
    Strategy #2:     Buy a SFH in a subdivision for $300K+, waiting until I have enough cash/equity and buy again. HODL.

    Here are my pros and cons for each:

    ### $100K-200K ### <-- More Active Investment
    Pros
    - Higher Price to Rent Ratio
    - Fast turnaround to purchasing next property (6 month before ReFi)
    - Value Add repairs can improve house value a lot
    - 3-4+ purchases in 5 years = More Learning Opportunities/Networking

    Cons
    - Higher Risk of Bad Tenant
    - Maintenance Repairs
    - Lemon Purchases

    ### $300K+ ### <-- More Passive Investment
    Pros
    - More equity to draw from down the road
    - Good Neighborhood
    - Family Tenants are safer

    Cons
    - Higher Operational expenses (Taxes, Insurance)
    - HOA Limitations
    - Typically recent builds/renovations so not much room for Rehab
    - 1-2 purchases in 5 years = Fewer Learning Opportunities

    I know that there is no one solution. Also, specific advice depends on me providing more details. But I always like to hear more new perspectives! So hit me with everything you've got!

    I'm in the Augusta market as well. Why don't you put nothing down with your VA loan? Then in a year or so use the loan again for another purchase? There's a potential to use the maximum eligibility with these 2 purchases but you can House Hack them and increase the cash flow vs market rates in the area.

    Save your cashflow and your down payment money then with the 3rd purchase go for a FHA loan 3.5% down with the amount you made. Move every 12-18 months until you are tired of doing it.

    23Reply
  • Erin ChurchPro Member
    Real Estate Agent · North Augusta, SC · Member since 2017 · 254 posts · 233 votes
    3y

    I agree with a lot of what Richard said (he's a pretty smart dude!). :) 

    For me, the largest chunks of money I've made are doing live-in flips. So, I'd consider buying a very dated house that is a great price in a great area, then fix it up while you live there and sell after 2 years. The money you make is tax-free if it's your primary 2 out of the last 5 years (if you rent it for a while, I believe there are some taxes, but it's prorated on time based on what I remember - not tax advice). A single person can profit $250k without paying taxes. 

    If it didn't appreciate enough/you won't make enough to be worth selling, it will likey make a pretty good rental. (Again, if you bought well and did the work over time, should be a pretty good value.)

    You mentioned, "Family tenants are safer". Unless you are house hacking, please don't rent to family... or friends... or friends of family... or family of friends. This goes sideways sooooo often - professional lines are easily blurred (or erased) and bad things for the property owner can happen. It can still be risky when living under the same roof as the owner but seems to be terrible less frequently. :)

    I would also suggest avoiding an HOA - it's an extra expense obviously, but their rules can change (like rental restrictions).

    18Reply
  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    3y

    I love the idea of a live-in-flip like Erin presented. 

    Have you looked into house hacking? You could benefit from low money down (or you could use your VA eligibility) and live in the property while renting out rooms or other units.

    You can do value adds while you live in the property and when you're ready to move out, you can either sell it or continue to rent it. Like a live-in-flip combined with a house hack. 

    9Reply
  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    3y

    I'm a fan of creating equity, it the fastest way for new investor to move on to their next deal. Cash flow alone does not kick out enough cash for the next one.

    In your cash with a VA loan, I'd find a cosmetic duplex-fourplex and househack it. Best of both worlds.

    12Reply
  • Gerald Harris
    Investor · Atlanta, GA · Member since 2013 · 922 posts · 336 votes
    3y

    @Julien J. duplex - fourplex is a great idea.   rent to traveling nurses for higher then normal rents in order to rent those units is great for stronger cashflow.   

    2Reply
  • Travis Rogers
    Rental Property Investor · Orlando, FL · Member since 2019 · 109 posts · 49 votes
    3y

    Already some great ideas here. What I would caution against is being a landlord in an area with a high risk of bad tenants. In those areas, regardless of what your cash flow appears to be, nonpayment, vacancies and damage to the property can ruin any cash flow, I've seen it happen to people. Plus, it can be a headache. 

    Maybe find a mid-tier neighborhood, with working families and a good school district. This has been one of my approaches. When rentals are hard to come by due to demand for a school or area, it's easier to rent them quickly when vacant, and typically you'll get a good family in who wants to be there for a bit. House hacking is huge if you can do that as mentioned, live there 2 years and then you can move and sell to avoid any capital gains tax (or move and hold as a rental if rents appreciate). Value add properties would be huge here since you could do the work yourself to increase the value, while living there, and learning the fix-up process, etc.

    You're on the right track, looking at pros and cons and analyzing. Keep in mind it's a long term game and if you keep playing in the end it pays off. Personally I focused on SFR's initially, and used that eventual appreciation to help scale into commercial. Great post, all the best to you Paul!

    12Reply
  • Brendan Natuzzi
    Member since 2023 · 9 posts · 6 votes
    3y

    I've run into a few agents looking specifically for VA buyers (this is in AZ, not GA) however, this is because VA loans are assumable - you would be able to take over the current owner's mortgage, and therefore their (much lower) interest rate. Depending on how the specific property pencils out, this could be a good opportunity to maximize monthly spread.

    0Reply
  • Sebastian Malanchuk
    Rental Property Investor · Downingtown PA · Member since 2016 · 1 post · 1 vote
    3y

    i dont know if you had a chance to look into a subto deal but i would take that route. you get a ready to move in house and can imediately put in a renter. i got more info on that if youre interested. im working to close one in pennsylvania right now. 

    1Reply
  • Christopher Jason LloydBusiness Member
    Real Estate Broker · Newport News, VA · Member since 2020 · 95 posts · 83 votes
    3y

    VA loan - househack or live and flip. I like to "sandwich" my properties. I look in neighborhoods that currently have a lot of flips, older homes, near a chick-fil-a and "sandwiched" on both side by neighborhoods typically double in value. I have two of these that have appreciated well above the average city rates and the rents are increasing more than other areas in this market as a result.

    Axiom Property Group4.934 Reviews
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    3Reply
  • Yu Liu
    Investor · Tallahassee · Member since 2019 · 249 posts · 93 votes
    3y

    Agree with what everyone is saying here. Ideally a live in flip that you can house hack, something  that you can drive up in equity and then rent out per room to make some cash flow. 

    On top of that, adding furniture to those rooms and doing MTR rooms will increase that even more but does require more work. But the combination of all these strategies will help. 

    Avoid bad areas if you can as the headache from lower quality tenants is not worth an extra $100-$200 in cash flow.

    3Reply
  • Mag Ma
    Member since 2023 · 5 posts · 1 vote
    3y
    Quote from @Erin Church:

    I agree with a lot of what Richard said (he's a pretty smart dude!). :) 

    For me, the largest chunks of money I've made are doing live-in flips. So, I'd consider buying a very dated house that is a great price in a great area, then fix it up while you live there and sell after 2 years. The money you make is tax-free if it's your primary 2 out of the last 5 years (if you rent it for a while, I believe there are some taxes, but it's prorated on time based on what I remember - not tax advice). A single person can profit $250k without paying taxes. 

    If it didn't appreciate enough/you won't make enough to be worth selling, it will likey make a pretty good rental. (Again, if you bought well and did the work over time, should be a pretty good value.)

    You mentioned, "Family tenants are safer". Unless you are house hacking, please don't rent to family... or friends... or friends of family... or family of friends. This goes sideways sooooo often - professional lines are easily blurred (or erased) and bad things for the property owner can happen. It can still be risky when living under the same roof as the owner but seems to be terrible less frequently. :)

    I would also suggest avoiding an HOA - it's an extra expense obviously, but their rules can change (like rental restrictions).


    Erin ~ this is SAGE advice! I am just starting out and yesterday just flowed out the interest on a deal (my first as a solo). Will keep you posted.
    0Reply
  • Malachi Weary
    Investor · FL · Member since 2022 · 47 posts · 31 votes
    2y

    Awesome Paul, action is achieving!

    0Reply
  • Mark Berge
    Rental Property Investor · NJ · Member since 2020 · 60 posts · 16 votes
    2y

    Have you any experience of renting out rooms or the entire house? You have to find a good area, screen the tenants, do repairs, collect the rent, if they don't pay have to go after them, etc.

    I would start with one rental property and see how it goes from there, that's what I did and it has worked out. I used to advertise and screen roomates with an application for many years. It's all about getting the right tenant in there, a bad apple can cause you trouble but it goes with the territory, that's how you learn, by doing.

    2Reply
  • Darrell Essex
    Chicago, IL · Member since 2016 · 27 posts · 11 votes
    2y

    Looks like to me you need to do a turn key or almost turn key. You can get preapproved for a lot but your starting capital is a little small. At least for anything that involves anything more than a very small cosmetic rehab. Like paint, maybe some new countertops, minor wall repairs.

    im a huge fan of the brrrr method but with like 30k to start it’s just not feasible because you will need about 40-50k in cash to pull it off. 

    what I’d really recommend is house hacking with what you have. If you can va loan even better. But some type of refi strategy probably won’t work. Especially if you want some type of conventional loan product which right now is 12 months seasoning on a cash out refi. You can find a 3-6 month dscr but they are expensive loans and again you are running on a small actual cash budget. 

    So I’d say either house hack or save up some more and brrrr. 


    3Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y

    For most everyone, starting small should be the way to go - experience/learning from mistakes much more important than making $ on the first deal.   Especially in a challenging market like the current one

    [email protected]
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    4Reply
  • Vinny NA
    Member since 2023 · 11 posts · 4 votes
    2y

    Option A appeals to me more. Good luck!

    0Reply
  • Mark Berge
    Rental Property Investor · NJ · Member since 2020 · 60 posts · 16 votes
    2y

    I agree with Robin, my first deal was a single family house in a good area with blue tarp over the roof and a noisy but working oil boiler. It was a reo for a good price. I was able to buy it, move into it when I closed and cleaned it up and got room mates and airbnb guests. After about 6 months one of my agents found another fixer upper about ten minutes away for a really good price. The owner haden't paid their sewer bill for two years and every room that had water had mold and slow water leaks. Was able to buy it, clean it up and move into it and rent my first house out on a one year lease. The tenant paid on time, took care of the place and moved out after three years when he bought a condo.

    Fast forward three years, have been looking for two plus years for more fixer uppers and haven't had any luck. Good deals come on the mls and are under contract in a day or two. Sigh. May have to look further out.

    0Reply
  • Mark Berge
    Rental Property Investor · NJ · Member since 2020 · 60 posts · 16 votes
    2y

    Find a bad house in a good area, better than a bad area with guns and drugs. Fyi.

    1Reply
  • Jason Allen
    Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
    2y

    I would invest in the Columbus, Ohio. I just walked a turnkey property that beats the 1% here in town. This property should collect at least 1800 - 2100 a month in rent. There are plenty of opportunities like this in Columbus currently, both on and off the market. With $150k, you could easily pick up 2 or 3 cash flowing properties. 

    3Reply
  • Account Closed
    Member since 2023 · 25 posts · 74 votes
    2y

    I would use that capital to invest in a landlord friendly state, find a good deal with 2 - 4 units as a starter and manage it remotely if you can’t live in the area or state. Overtime red states experience more growth, offer better returns, tax benefits, plus landlord friendly. You just need to have the right systems in place.

    3Reply
  • Alexander Seeley
    Member since 2023 · 2 posts · 1 vote
    2y

    I’m in a similar boat for the Denver/boulder metro area and a lot of these comments are great for me to read. Trying to find a house hack situation I can move out of after 2 years and have as a rental property. 

    1Reply
  • Caden Thompson
    New to Real Estate · Santa Clara CA · Member since 2023 · 10 posts · 5 votes
    2y

    Personally I would move into strategy 1. I think for investors early on in their journey it makes sense to start on a smaller scale. It will allow you to make mistakes without facing significant repercussions. I also think it makes sense to get into strategy one because you don't need immediate cash flow and as you said you can refinance out of the deal after 6 months with the value added from renovations. One question I have is how much equity do you anticipate adding with only 10k for renovations? I wouldn't expect a significant change in equity with a renovation budget that small, but I am only familiar with costs of renovations in the Northern California/ Bay Area. 

    0Reply
  • Salvatore Lentini
    Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
    2y

    @Paul Tan - Cashflow is SLOW.  It's great once you've built up enough of it but in the beginning it is almost nothing.  I'm a big proponent of having an "Escape Plan for Your Money".  If the biggest hurdle to real estate investing is making the leap, the 2nd biggest hurdle is getting your money out to buy investment property #2.  Feel free to message me for more details on this.  A little planning can make the difference between buying 1 property every 5 years (if you're lucky) to buying multiple properties per year.  I'm closing in on 200 rentals and am financially free.  I thought I'd retire once I got to this point but I love it so much, I can't stop :)

    4Reply
  • Sumbul Aslam
    Member since 2024 · 1 post · 0 votes
    2y
    Quote from @Julien J.:

    I'm a fan of creating equity, it the fastest way for new investor to move on to their next deal. Cash flow alone does not kick out enough cash for the next one.

    In your cash with a VA loan, I'd find a cosmetic duplex-fourplex and househack it. Best of both worlds.


     Great idea! 💡 

    0Reply
  • Deb S.
    Investor · Punta Gorda, FL · Member since 2010 · 154 posts · 128 votes
    2y

    I agree with what @Richard Capers Jr suggests. If you have access to VA benefits, use them!! The only other suggestion I would make is to buy a property subject to the existing mortgage so you can benefit from an existing low rate mortgage (ideally less than 5%). The entry fee on these is typically about 10% of the purchase price + closing costs.

    Alternatively, you could try to find a property on seller finance and work out terms that benefit both you and the seller. You may need to offer a higher purchase price to get the terms you need but if those terms make you cash flow at a higher purchase price with a lower interest rate than what you'd get conventionally, then it may be worth pursuing.   

    1Reply
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