I am new and want advice

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you Theresa for the input I really appreciate the advice from someone really doing it. You said maybe I should think about duplexes and I have..I was thinking about duplexes. then I heard on a podcast someone saying renters would rather a house than a duplex because it’s more like an apartment with the sharing walls. To stay away from over/under duplex’s because it’s harder to rent the bottom unit because people do not like having others living above them with the noise. What are your thoughts? thank you so much for your time and advice

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you, Hamp Lee III

I really appreciate your advice. I have not thought about the fb group I am going to do that thanks again

Alecia LovelessPro Member

Member since 2019 · 3k+ posts · 2k+ votes

2y

@Trent Stevens Keep working on your credit score. Make sure to pay your bills on time and if you have large amounts of bad debt work on the snowball method to pay it down. This is where you pay off the smallest debt first while paying the minimum on the rest and then focus on the next smallest while the minimum on the rest and so on and so forth. The continued victories of paying off progressively larger debts will fuel your desire to keep paying them off and you will have increased success.

I know you can do it!

Id gotten into $40,000 worth of credit card debt twice and paid it off so I know you can succeed with yours too. You’ve got this! Little by little! Then if you have to just figure out how NOT to do it again and follow it. If it’s cutting up the cards DO IT! If it’s something else YOU CAN DO IT!!

But I’d recommend trying to get some of your low credit score raised up first before you take on your real estate investment journey because unless you can afford to pay cash for deals you’ll need to finance them and you just won’t get the best interest rates with a lower credit score.

Low credit scores are nothing to be ashamed of. Keeping a low credit score is a problem when you can do things easily to improve them over a 6-18 month timeframe. If you have to you can get a secured credit card with a $500 limit and you charge 1 tank of gas per month and then refurbish the card. That will work towards raising your credit score. Paying your cell phone bill on time each month will help raise your credit score. Signing up for something like Experian Boost can help raise your credit score.

If you haven’t Googled it definitely Google how to improve your credit score. I’m not sure paying a service is the best bet. But it is an option. I think you can do just as much on your own for free.

2 Reply

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you, Alecia Loveless

I am familiar with the snowball effect I think it is a great strategy I did recently find out about it listening to podcast. Thank you for the info about Experian boost I will look into that.

John Mocker

Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes

2y

Trent,

From an insurance standpoint, Brick construction vs Frame construction:

1. Fire rate for brick that the company uses will probably be less

2. The rebuilding cost will be higher for Brick vs Frame. Sometimes much higher.

The higher limits needed to rebuild with Brick may outweigh the lower fire insurance rates.

When you are shopping the insurance on a brick construction home see if any of the companies will insure it based on "Functional Replacement Cost". That limit would be the cost to rebuild to the same function but not the same materials.

3 Reply

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you, John Mocker

That is great advice I appreciate the info, I will keep the functional replacement cost in mind went talking to my insurance agent.

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

1. If you have or have had a financial mess to clean up that makes you part of the human race. Welcome to the club. We've all been there. I walked into the first year of my marriage with student loans for college that I did not finish and a large business loan for a business that failed and no longer existed. And there was credit card debt, too. That was fun to explain to my new wife. For richer or poorer...here we go!

2. Montgomery is rough...doesn't mean you can't make money there, but time/appreciation won't bail you out of a bad investment for a while. It may seem counterintuitive, but look at properties at or above the median home price in a market like that. The cheapest ones stay cheap forever. Those that are average or above average are the desirable places to live.

3. I don't know anything about your financial situation, but do not start investing in real estate - especially from a distance - unless you are in a position of financial strength. Year 1 returns are often negative and the only guarantee when you buy a house is that you are about to spend a pile of money.

4 Reply

Taryn Cuen

Member since 2023 · 4 posts · 0 votes

2y

Quote from @Hamp Lee III:

I have rentals about 20 min from one of the military bases in Montgomery.

What I find is that the appreciation for homes is like watching yeast rise in an oven at low heat. 😂

There are cheap homes, but a lot of C-D class neighborhoods, so you’ll need to be careful about what you select unless that’s your strategy. Mine are in a B neighborhood that attracts military.

I recommend joining a Facebook group for Montgomery investors or REIA that do more than post about homes for sale. Maybe you can connect with someone that can help identify areas that suit what you would like to do.

I agree with Theresa as well. REI is a long game. Keep educating yourself on the area so you'll be ready when the time comes.

I hope this helps.

I wish you all the best.

Hamp how you you figure out neighborhood classes? Is there a database? thanks!

https://www.biggerpockets.com/blog/real-estate-property-clas...

Hamp Lee IIIPro Member

Real Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes

2y

Quote from @Taryn Cuen:

Quote from @Hamp Lee III:

I have rentals about 20 min from one of the military bases in Montgomery.

What I find is that the appreciation for homes is like watching yeast rise in an oven at low heat. 😂

There are cheap homes, but a lot of C-D class neighborhoods, so you’ll need to be careful about what you select unless that’s your strategy. Mine are in a B neighborhood that attracts military.

I recommend joining a Facebook group for Montgomery investors or REIA that do more than post about homes for sale. Maybe you can connect with someone that can help identify areas that suit what you would like to do.

I agree with Theresa as well. REI is a long game. Keep educating yourself on the area so you'll be ready when the time comes.

I hope this helps.

I wish you all the best.

Hamp how you you figure out neighborhood classes? Is there a database? thanks!

There is not an "official" guide from HUD, but BiggerPockets has a great article here on the differences:

https://www.biggerpockets.com/blog/real-estate-property-clas...

Taryn Cuen

Member since 2023 · 4 posts · 0 votes

2y

Quote from @Hamp Lee III:

Quote from @Taryn Cuen:

Quote from @Hamp Lee III:

I have rentals about 20 min from one of the military bases in Montgomery.

What I find is that the appreciation for homes is like watching yeast rise in an oven at low heat. 😂

There are cheap homes, but a lot of C-D class neighborhoods, so you’ll need to be careful about what you select unless that’s your strategy. Mine are in a B neighborhood that attracts military.

I recommend joining a Facebook group for Montgomery investors or REIA that do more than post about homes for sale. Maybe you can connect with someone that can help identify areas that suit what you would like to do.

I agree with Theresa as well. REI is a long game. Keep educating yourself on the area so you'll be ready when the time comes.

I hope this helps.

I wish you all the best.

Hamp how you you figure out neighborhood classes? Is there a database? thanks!

There is not an "official" guide from HUD, but BiggerPockets has a great article here on the differences:

thank you!!

Sandra Morrison

Investor · Cincinnati/Fort Thomas, KY · Member since 2015 · 207 posts · 183 votes

2y

@Trent Stevens

Look in Huntsville and Madison- fast growing with NASA Marshall Flight Center, Redstone Arsenal, SpaceX, Blue Origin, new Mazda plant. My son has been living there the last 4 years and I have been watching the appreciation.

There are also some chapters of National Real Estate Investors Association in the area so great for contractor recommendations, networking, etc. DM and I will see if I can get you more info.

Mathew Pezon

Rental Property Investor · Allentown, PA · Member since 2014 · 67 posts · 38 votes

2y

Hi @Trent Stevens,

Welcome!

Getting into real estate investing can be intimidating at first, but with the right mindset and patience, there is no greater investment. It's great that you're doing research and seeking advice early on.

Your credit score isn’t a show stopper. These days, it’s harder to find deals than get money. If you find a good deal, you will find the money. It might be more expensive, but the money will be there. Many investors (including myself) start out with less than perfect credit. My first car loan interest rate was 17% back when rates were under 4%! Focus on continuing to pay down debt where possible. Over time, responsible financial habits will repair your credit.

Your goal of 20 paid off homes by 55 is ambitious but doable if you start now, educate yourself, repair your credit, and stay disciplined. Be patient, don't overleverage, and continually reinvest profits. It's a marathon, not a sprint. Over time, compounding returns from even modest investments make the goal realistic.

Best of luck! Feel free to ask any other questions as they come up.

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you @Travis Timmons

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you @Sandra Morrison

I will do some research on Huntsville as well thank you for the advice!

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you!! @Mathew Pezon

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

2y

Why Alabama? I mean yeah, it's a neat state and all but there are 49 others.

I would hang out here on BP for a while and soak up the knowledge. Ask people why they are in a certain state.

And like @Theresa Harris said, the number of homes is irrelevant. It's how much money it will take to allow you to retire.....

Timothy Howdeshell

Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes

2y

Quote from @Trent Stevens:

Hey everyone I am brand new to investing. I want to get into single family buy and hold. I have been listening to B.P podcast and others for about 6 months, I am really excited to start my hand in it.
A little about me I am in my late 30’s happily married with two wonderful kids. We live on my family ranch that is paid for just have to pay property tax and insurance in California. So house hacking is not a thing for us. One of my cons. is I have poor credit and am a little embarrassed to talk about it online. I have been working on paying down my debit but the damage Has been done and all I can do is keep working on it.

I have been focusing my time at looking at Alabama. I really like the landlord friendly and low property tax and price but can’t decide between Montgomery and Birmingham. I have been leaning more Montgomery because of the military base and would like to rent to military with the better up keep and responsibilities they have. I also have been looking at brick houses because I heard Insurance companies insure lower on brick homes and I really like how they look. I know I’m not going to live in it, I just prefer it. I am looking at investing for my future not right now but I am wanting to make around 250 in cash flow. My goal is 20 homes in my portfolio before I retire at 55. If anyone has any advice or strategies I should be looking at I would greatly appreciate it.

Hey Trent,

Welcome to REI and BP! First off, don't feel bad about your financial situation. Admitting it (to yourself really) is the first step and so many people choose the ostrich method instead of sticking their head in the sand and waiting for things to improve around them. As you know, they never do. So I think that you should be proud of yourself!

The good news is that bad credit is not a character defect or unfixable. I would work with a credit repair company to speed up this process. Having good credit will make your investing journey so much easier! Yes, there are methods to buy and deal in real estate without stellar credit, but as a beginner I would start there. Real estate can be punishing for people without a solid financial house in order first. Many times in my journey I've hit a "cash crunch" where, despite a high savings rate and income, I've run out of money to finish a project. I've then needed to rely on additional debt to get me through to stabilizing the property on the back end, pulling out the money via refinance, and paying everything off. This would've been much harder or impossible without good credit.

Most of the "no credit" methods are more like full time jobs as well.

While you're working on your personal credit, I would keep underwriting deals so that you know what success looks like when you get the money together. Also, depending on your risk tolerance, you may want to get a mortgage on your ranch and use that cash to put 50% down on a couple of rentals.

To get to 20 houses you're going to have to learn more advanced strategies, but to get started just get 1 rental to see if you even like it.

Best of luck!

Jennifer StevensonPro Member

Realtor · Millsboro, DE · Member since 2018 · 30 posts · 14 votes

2y

You've already gotten some great advice! I'll echo and elaborate a little bit on what some others have said regarding C-D class properties. My husband and I bought our second property in what's at best a C class neighborhood. It was what we could afford and we felt the price was worthy of the risk. It ended up turning out well for us but it was not without some serious sweat equity and frustrations. It's important to educate yourself on the neighborhood that you're considering. Also be aware that if you decide it's not the property for you it may not appreciate at the same rate as other neighborhoods, making it difficult to recoup your costs. In our case it was also a much longer listing period when we decided to sell.

Gary Mascitis

Member since 2024 · 53 posts · 11 votes

2y

Hi @Trent Stevens,

While your credit situation may not be ideal for starting your investment journey, there are still some options out there you can use!

Private money- will be more expensive but can get your foot in the door while you are working to solve your credit situation.

DSCR Loans- focuses on your Principal, Interest, Taxes, and Insurance vs the rent you receive. Lower credit requirements (ex. Our programs min is 680 but can go as low as 660 with a LTV haircut) plus looks at liquidity position rather than tax returns or W2's.

Fix and Flip Loans- Low barrier to entry (ex. program min is 680 FICO but we can go as low as 650 with a 5% LTV haircut). If this is an issue, possibly partnering with someone or using your wifes credit could be the answer. Our guidelines allow us to go off the higher of the borrowers mid score as long as the borrower with the lower credit score does not have over 50% ownership of the LLC in the operating agreement. This would make your wife or partner the sole guarantor for the loan.

Happy to discuss further and answer any other questions you may have!

Best,

https://www.biggerpockets.com/forums/48/topics/1159104-overl...

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@Trent Stevens

i want to second what @Travis Timmons said.

it's just a tough market to get started in right now with prices and interest rates high. and i think OOS investing is more difficult than it has been made out to be.

IF you go that route prepare to invest for several years. as in, not make any money.

for a really thoughtful thread about investing OOS from CA - see this:

Salvatore Lentini

Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes

2y

@Trent Stevens - I'm not a huge fan of the super cheap homes. I know because I did it in the beginning. As @Hamp Lee III - mentioned, the area you mentioned is C/D and your tenants will treat your property as such. Lots of turnover, evictions, repairs and much slower appreciation if any (adjusted for inflation) than better areas. Is there anywhere within a 2 hour drive of your house where you can find a cashflowing property? Doesn't even need to cashflow much if it's in a decent area. If your goal is to own 20 properties, the real payoff down the line is going to be the principal paydown (using your tenants' money), tax benefits and appreciation.

Kyle BakerPro Member

Contractor · Templeton CA · Member since 2021 · 2 posts · 3 votes

2y

Hi there Trent,

Where the heck is Lockwood, CA? Just kidding I have been there before. Used to spend some time at Lake San Antonio not too far away (remember going into Lockwood in search of 2 stroke oil one time)

I think you are on the right path with the snowball effect (my wife and I used that same method to pay down and off our debt)

As far as investing out of state I would highly encourage you to do your research on the area and try and find someone more familiar with the market and the nuances of the market to help you in the beginning.

I have some investments here in California nearby me and I know the nuances. I know the market. I can check on the properties regularly and perform the little maintenance tasks that come up.

That being said after having some success here in California I decided to sell a property here and invest the proceeds in Georgia (bought 8 different properties). That California money sure does go further out of state. This has been a huge learning curve. I have owned these properties now for a little over 2 years. They have different nuances and I am not there to put eyes on everything and apply common sense in my opinion. I am always relying on someone else and for me this has been very difficult. Where I invested in Georgia everyone gets termite bonds(added cost) water heaters cost almost the same as they do here in California, rent growth is very slow (in the last 10 years here my rents have more than doubled), "qualified professionals" are harder to find.

As others have stated I would definitely have a hefty reserve and be prepared to travel there periodically to put your eyes on things. Check the ages of major appliances. When you are only making $200-$300 a month passive on a deal and a $6,000 HVAC comes up you aren't getting your money back for years (now I purposefully try to buy units with wall heaters and window AC).

I don't want to sound discouraging. I think real estate is the best investment. Do your research and know your market as best as you can and be prepared to have some failures to get successes.

If I were out in Lockwood I would think about doing an RV pad and renting it out, a hip camp site or two, or maybe even try to make it a destination like the Twisselmans did in California Valley with their yurts to get started with some passive income.

Kyle

OP

Lockwood. CA · Member since 2024 · 13 posts · 6 votes

2y

Thank you! @Kyle Baker

The hip camp has been a thing popping up a few people around Lockwood are doing it. I will look into it thanks for the advice