So here is a watered down summary of my plan, let me know if this is a viable idea. I am open to any suggestions from experienced investors.
By March of next year I will have 40k. I plan on using 20K to secure my first home. Something in the 100 to 120k range that needs some TLC (I live in DFW btw). Putting the minimum down and using the rest to renovate. This will be my live in project for a year or so until I finish and save up the money to move and turn it into my first rental.
As for the other 20k. I will be partnering with a friend who has 20k ready to match me as soon as im ready to go. With a combined 40k we plan on getting another rental in the area and splitting it 50/50.
What do you think? Am I on my way to my own HGTV show....or should I just spend this cash on lottery tickets? lol
Thanks for the feedback!
You're on the right path! If you can find a duplex, even better, because you can get part of your mortgage covered. Also, since you're going to live in the property, why not look into the FHA 3.5% down, which will free up more cash for your next investment?
Thanks @Hattie Dizmond
I'm definitely thinking about an FHA. Although all the major banks have been trying to talk me out of it. (meaning its probably actually a good deal) Are there stipulations as to how long the house has to be owner occupied for FHA?
@Nick Bitz 1 year. That's it.
ps...I would stay away from the big banks directly, especially for your first loan. Use an online matching service like Lending Tree or Quicken Loans. You're going to get the best and broadest view going that direction. If you decide to do FHA, there is going to be little difference in the loan from one lender to the next. However, get all the quotes from the online lenders, then take those rates & terms to small, local banks &/or credit unions. You're shopping, just like when you're buying a car. And, just like buying a car, it's all about price & terms, and the lenders - like the car dealers - need you to buy their product.
That's how we got started. We bought a personal property that was a foreclosure and fixed it up. When my husband was transferred (active duty navy)we rented the house out. We have accumulated 5 houses through personal properties turned rentals and pure investments. This has been or strategy and we have done very well. The only thing I would really shy away from is your partnership. Real estate is stressful enough without "extra" thoughts. That's my personal opinion.
I'm all about buy and hold, so yes, I think you're on the right track for sure!
Good job on executing your strategy! Please tell you husband thank you for his service, and thank you to you and your family for your sacrifice!
Thank you !
When first starting out did you run into any trouble getting financing for the second home? Is the mortgage process the same because you are living in the house first as opposed to buying it strictly for a rental? Thanks for the input!
@Nick Bitz There can be issue with your debt to income ratio and having them count your current lease income. In my website I wrote about different methods to requlaifying for a second loan.
It is possible because we bought our 5th house on one income making 80kish a year.
One thing to keep in mind with the 3.5% down FHA loan though (someone correct my please if I'm wrong, and I apologize if I am) is that you will have to pay PMI for the life of the loan. I was able to buy my personal residence with a conventional loan for just 5% down. Sure it's a little more out of pocket, but once I get to 20% equity I no longer have to pay PMI every month.
Elizabeth Colegrove My thoughts exactly. Like you, I feel like it would make sense if I could do 5% and then drop the insurance after I build equity. Also if I understand correctly there are more strict inspection processes for an FHA. I'm looking for something that needs a little work so I may run into some problems from that aspect.
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