This is my first (long overdue) post on BP after finding it about a month ago while reading everything I could find on real estate. First off I want to thank everyone who posts here. I have already learned so much and love how people with so much experience are willing to teach what they know and still be open to learning more themselves.
I have so many questions to ask but I’ll start with one at a time. I’ll try to be as concise as possible.
I currently live in Northern VA (the DC area) and am trying to get started in real estate in addition to my full time job. To start off I am looking into purchasing a property to live in while renting out the rest of the rooms to cover expenses. I'm trying to evaluate these places as an investor (e.g. factor what my room would rent for into the equation) to ensure the deals make sense.
With DC being so expensive I am looking to put 10% down on a 3 or 4 bedroom townhouse in the 300-400k range (since a multifamily here under $500k is unheard of). Also I am fairly young (24) and don’t mind living with my target rental demographic (young professionals out of college). I plan on going with a 10/80 piggyback mortgage unless there are better options.
I’m hoping my status as an owner-occupant buyer might make finding a deal easier since this market is so saturated with RE investors who I can’t compete with. But even sites such as homepath have a very limited inventory in this area.
I guess my biggest question is “What should my next steps be?” I’m thinking I should find a RE agent with rental property experience to help me get started. A 3 bedroom townhouse I really liked just went under contract and I’m kicking myself for not acting on that one sooner. I know I wrote this post terribly and it will probably get me more questions than answers, but thanks in advance for anyone who takes the time to read and reply.
If anyone is interested I could post an example of one the few properties I am looking at. I could also make a new thread in the Analysis forum section if that would be more appropriate.
Welcome to Biggerpockets!!
Your idea is exactly what we did when we got started 3 years ago. We bought a personal property with no money down. It is was a cosmetic gutter. We than fixed it up and rented it out when we were transferred. we had done roomies prior and had a really good go of it. If you check out my website I have two great articles in roommates. What to expect with them and than how to write a great lease.
Here's some thoughts on your post
*have you looked into one of those large older townhouses that you can rent out the basement and upstairs?
*if you are hoping to do roommates making sure t is in a great area is very important that appeals to the young scene.
*4 bedrooms are going to be better than 3 for a roommate situation. Because you will be living in room. So a 3 bedroom means you have to cover the mortgage and expenses over 2 people. 4 bedroom means you can do it over 3 bedroom.
*downpayment- check put the 5 or so mortgage articles on my website. I talk about all the different options. Personally I like as little down as possible because I like my tenant paying off my mortgage not me!
*when buying don't buy a fully upgrades totally "nice" as you are paying a huge premium for perfect! We buy the ugliest house in the nicest area and than make it nice
*lastly make sure you have an exit strategy. Our exit strategy is to make sure we can rent the house to a normal couple with a $200 difference from mortgage and rent. This isn't a huge margin but we self manage cutting out the fee and vacancy.
These are just some thought! Good luck! Pm me if I can help! This is a great strategy and we used it to be our catalyst for success. Once you get on your feet your can start buying pure rentals too.
Hey @Elizabeth C
Thanks so much for the information. To respond to your suggestions:
- I am currently looking for a place with as many bedrooms as I can afford, so townhouses are definitely the best option in the DC area. The one I'm looking at now is a 4/3.5 where I would live in basement/ first level with a walk out to the backyard.
- Definitely looking to get the nicest area possible, but unfortunately that means close to DC and in a metro area which means very high prices. Anything remotely "walkable" to shops/restaurats in northern VA is giong to fetch 150k per bedroom and have terrible numbers. Trying to stay as close as possible though.
- Definitely trying for 4 bedroom although keeping it below 360k or so will be challenging.
- I like to put down as little as possible as well but am not a fan of the up front and then 11 year insurance premium that the FHA requires. I plan on looking into conventional 5 or 10% down.
- I am looking for something that will need 5k or less of planned rennovations to hopefully keep the purchase price on the low side. My exit strategy is pretty simple, live there until I can buy a new place and then rent the room I was in out and do it all over again with owner financing.
Thanks again for the encouragement. Excited about getting started once I can nail down an action plan.
Your idea is a great way to get started in real estate. If you buy the right place, you could easily have your mortgage covered by your tenants. The key, however, is buying the right place. My suggestion to you is to buy something as close to metro/shops/restaurants as you can afford. That will enable you to minimize your tenant turnover and maximize your rents. Anytime you're evaluating a possible property, make sure you know exactly how much you would get in rent for each bedroom. There's several good sites that let you check rental rates like padmapper and zilpy.
Finally, yes, you should totally work with a real estate agent. It doesn't cost you anything to do so as a buyer and you'll benefit from their knowledge of the local real estate market.
@Jon M. You are definitely on the right track, and I think you are ready to find an agent. Your idea of finding one who know rentals is spot on. If you need a recommendation, I have a few people in mind you could interview. Let me know.
You should also go ahead and get preapproved by your lender and get a letter in hand. That way, if you find a good deal, you are prepared to make an offer immediately.
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