I'm new to BP and plan on moving to Tucson in June for my first full-time job. I'm using the next two months to educate myself before putting boots on the ground. My plan is to acquire a 2-4 unit multi-family home, live in one unit and rent out the remaining ones. I plan on being pre-approved for an FHA loan to acquire the property. Long-term, I see myself being a buy-and-hold investor. That being said, I do have the following questions:
1. What should I be looking for in an REI group? Some are asking for monthly or attendance fees to join their meetings. Granted, these have more professional looking websites than free ones through meetup.com. Are fees a red flag? I understand I need to avoid groups that are trying to sell me things, but other than that, what do I seek to avoid? I'm going to attend these groups to gain connections to wholesalers and rehabbers in my local market as well as see what the market conditions are like. What else should I be looking to get from these local meetings?
2. I plan on buying my first property with an FHA loan. The low downpayment is enticing, but I am worried about how it will affect the monthly payments. Additionally, will interest rates on such a loan be significantly higher than a more traditional loan? Any resources for getting ballpark figures on these numbers?
3. Speaking of FHA loans, how long do I legally need to live there? I might not have the same job three years from now and want to know how this subsidized loan will affect my future plans?
4. A good RE accountant and lawyer are vital to successfully starting in REI. What can I expect to be paying them? I would expect to be charged for actual paperwork (such as lease contracts or doing my books) but how do consultations typically work? If I want them to walk me through paperwork or a series of questions I have, can I expect to pay by the hour?
5. For some of the more experienced people here, what is the advantage of investing in real estate instead of the market? I understand using leverage helps you gain better returns, but otherwise, is it possible to beat the market by putting money into real estate? Overtime, I'm sure I will become better at finding deals and managing properties; however, if I'm only squeeking out 2-3% more, it might not be worth it to invest my time and money in RE. If people who have been doing this for a while could give me their experience with returns in RE, that would be much appreciated.
Answers to any of the above would be greatly appreciated. Thanks BP! I'm excited to be joining such a great community.
1. AZREIA is in your area, and I learned a lot while there. Attendees wear tags such as Hard Money Lender, Wholesaler, Rehabber, etc. so I could see people immediately to network with, shake their hand and ask about their aspect of the business. They offered more complicated "guru" training at a price.
2. FHA is primarily for owner occupants, but you could buy a 4 plex and occupy one unit, for example. Other lenders in town will lend to investors...I have 2 Wells Fargo investor loans, but they aren't the best in town. You need to research investor lending and find experienced lenders in Tucson. Search for "portfolio lender."
3. I would use other products than FHA loans. From the FHA site:
The main FHA rule to satisfy the owner occupancy requirement is that the borrower make the property his principal residence, meaning he will regularly live there for the majority of the year. A seasonal or vacation property would not meet this requirement. The borrower must physically take occupancy within 60 days after the mortgage loan closes. The borrower must maintain this occupancy on a continuous basis for at least one year. FHA will allow some exceptions to this rule only for reasons of hardship.
4. I have paid between $200-250 for my real estate and personal tax return, with annual planning "free" over a lunch. The lawyer fees will vary depending on what you want them to do. Go to AZREIA, meet one and ask him. :D
5. Equity for improvements, debt pay-down by tenants, tax benefits for you, depreciation, equity and rent inflation over time (which I've received, but do not count on having when I run numbers). I have mine managed and I pay for improvements to be done. It is much easier to put money in a mutual fund.
You'll get better responses if you don't write crazy long questions~ :D Use the search function, as I did to answer your questions. I did many of my deals in Tucson and it is a great city for investors...but you need to make it work. You have to find the people to work with, from Realtors, lenders, lawyers, handymen, title agent, to property managers.
(I used direct mail and bandit signs, door knocked foreclosures, took over houses in default, rehabbed them to sell, wholesaled a few, and had long term rentals in your area. I did it on my own, with small children in tow...you can do it, too.)
Thanks for the answers. I am realizing I should have split this up a little more. Didn't know about the search function so I look forward to using that.
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