Best Use of Personal Resources

12 Replies

So I am stuck with a dilemma,

I want to get into buy and hold investments but I feel as if my resources for that market is very limited. I worked hard to pay for my college without taking a loan because I thought that was the "financially responsible" route and long story short I can now only get a 3/1 ARM owner occupant loan. I am currently building my credit score so I can get decent conventional loan terms by next year.

I am very mechanically inclined, have a brother in construction management, and a father that gen. contracted/built his home. My future father in-law is a realtor and deals with flippers often.

So this is the "stuck between a rock and a hard place" dilemma:
My plan for lifestyle design is passive buy and hold investments but am I better off fix and flipping?

Thanks in advance for your comments and opinions!

Side note: I live in midwest Ohio but am relocating to Columbus Ohio this year.

Originally posted by @Samuel Larger :
So I am stuck with a dilemma,

I want to get into buy and hold investments but I feel as if my resources for that market is very limited. I worked hard to pay for my college without taking a loan because I thought that was the "financially responsible" route and long story short I can now only get a 3/1 ARM owner occupant loan. I am currently building my credit score so I can get decent conventional loan terms by next year.

I am very mechanically inclined, have a brother in construction management, and a father that gen. contracted/built his home. My future father in-law is a realtor and deals with flippers often.

So this is the "stuck between a rock and a hard place" dilemma:
My plan for lifestyle design is passive buy and hold investments but am I better off fix and flipping?

Thanks in advance for your comments and opinions!

Side note: I live in midwest Ohio but am relocating to Columbus Ohio this year.

I'd suggest flipping some houses and occasionally keeping one for renting. Maybe one in four.

Samuel, I don't know if you listen to the BP Podcast, but in it you will often hear Brandon Turner talk about how he is a big advocate of beginning investors buying a duplex as their first investment, living in one side and renting the other. Assuming you can find a property that needs some work and are willing and able to make the updates while you're living there, this could be advantageous to you in several ways:

  1. You get your first property.
  2. You can take full advantage of the loan you currently qualify for.
  3. You'll get someone else (i.e., your tenant) to subsidize your mortgage, if not cover it completely.
  4. You'll continue to build your credit as you make your monthly mortgage payment.
  5. You can capitalize on the strengths you listed.
  6. You will build equity in the property by increasing its value through the capital improvements you make.

This assumes, of course, that you and your future wife are willing to do the work and have a tenant living next door in your first house. But as you can see there are lots of up sides to this approach when you're starting out.

When you get to Columbus, stop by a COREE meeting and meet lots of other local investors. It's a great place to learn and network. I hope to see you there.

Medium cpr logo facebookCorey Liepelt, Capital Property Renovation | [email protected] | 614‑526‑4131

I agree wholeheartedly with @Corey Liepelt . He has outlined the advantages very well. Also, there are tons of duplexes in Columbus (this isn't the case in a lot of cities) They are available in lots of different neighborhoods and at all sorts of price points. You are fortunate to not have the student loan debt, and if you find a good deal I don't think you have to be afraid of the 3/1 ARM.

I started with an owner occupied duplex myself and am glad I did.

Medium team zen logo vJean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com

Our first ever house was a va loan fixer upper. We spent the first year fixing it up. Than we moved out an rented it. We have done that mixed with ire investments to get our 5 houses.

Samuel, I always encourage the buy a duplex and rent out half and live in the other idea. It is a great way to get your feet wet. I would also say that you do not need to feel pigeonholed into a fix and flip path with your skillset. You can buy properties on the financial guidelines that you would for a flip (70% of value minus repairs) and keep them as a buy and hold. Thus has been my path for some time now. I have not sold a house yet but if I took on additional projects and did some flips along the way it would really accelerate things. The beauty is that if you buy a property for $50,000, put $20,000 into it and it is now worth $100,000, you can refinance and have the full $70,000 financed giving you your working capital back to do it again.

Good luck.

I agree with the others, on the duplex idea, but why limit yourself to a duplex? Residential financing can be had on properties with up to 4 units. I am personally trying to buy a 4-plex right now to owner occupy.

[email protected] | 402‑965‑1853

I definitely agree on the owner occupant and planned on doing that for acquiring some rentals. I'm turning 23 soon and came up with a six year plan for W-2 retirement which requires 44 units in six years.

There is a 4 unit property that I am in verbal negotiations with but doesn't look promising.

@Corey Liepelt , I have just listened to all the podcasts in the last four weeks ( It takes me an hour to get to work )

Thanks @James Wise for that information.

@Cal C. ,you were the first to reply and the only one to suggest the flipping route. I'd really like to hear more from you on why I should go with flipping, thanks!

You said you are very mechanically inclined and you said you have lots of RE/Construction connections. You are already at a strong advantage over most people wanting to flip. As you build wealth from flipping and a regular job, then start investing into buy and hold properties. Flipping is a good way to make money in the short term, while buying and holding (the right cash flowing properties) is a good way to make money over the long term.

With the 3/1 arm you also have a way of funding your first flip already as long as you are willing (it can be very tough) to live in a house you are planning to sell after a year. Even short term capital gains will not eat up a lot of your profits.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you