Investment Strategy, Reality Check
Investment Strategy of a Broke Guy
Intro:
I would like a "reality check" on how actionable my investment strategy is. All direction, incite, or alternatives are very welcome. I have already read a good number of guides on this site as well as government based public information.
My goal is to collect as many income earning assets as possible, as quickly as possible. I am incredibly new to the world if real estate
I have spent the last 4 weeks reading everything I can get my hands on regarding real estate. I have no money, no contacts, and very little knowledge. From this starting point I have formulate an plan to move into my first investment and here it is.
Why Real Estate?
My interest in real estate comes form population demographics provided by the US census. We can see 2 large waves in the age demographics coming into rental ages at the same time. This is coincided with a relatively smaller group at the age of home owner ship.
The baby boomer generation are reaching or are in retirement. Soon, They be moving in to rentals to adjust to a fixed income or to get out of a big empty house. This trend will accelerate over the next 15+ years.
Next is generation "x" who is in their 40's and 30's that makes up a minority of the population demographic. Many are home owners or where home owner before the Housing bubble. Their ability to buy up the homes their parents are moving out of is limited. This may lower the market value of single family homes aiding investors.
Lastly, We have the Eco boomer generation who is 20 and under. Their numbers rival the baby boomers. They are prime for renting with lending practices stiffened up. It is yet to be seen what desire this generation has for home ownership. Home ownership no longer defines a individual's success in live and is viewed less as a status symbol than in years past.
Starting Point:
I am 26 and work form home. I earn just a enough to support me and my partner (relationship) Brody who is 22 and in collage. We have the change to change our lives cumming up in 1.5 years. Brody will graduate and has a job offer from a company he has interned with. We can sent aside a large sum of savings from the added income stream if we keep our current standard of living. Well, large for a 20-ish year old.
Venture:
My partner and I will be hunting for 2 Quadrapleaxes (4plex) to buy as an owner occupants. We are looking for FHA, Home Path, or VA foreclosure to finance for low money down. We each will occupy our units for one year and rent out the other 6 units. We both can get a FHA loan and live apart for one year, seeing how we can't marry in our state.
Capital Resource:
From 2015 (current) until summer of 2017
I am collecting more savings by working overtime for the next 1.5 years while my partner finishes school. In that time I can save up $3,000. Then, after he graduates and begins work, we estimate we can save $900/mo. We should have $13,000 saved for our first investment in just under 2.5 years form now. We aim to have the down payment for a properties and have reserves 3 months for operating cost.
- Current Price of a 4 plex in my market: $150,000 for B/C+ or $85,000 for C-/D+
- Average rent per uint in my market for a 4plex: $600 for B/C or $450 for C-/D+
- PITI: $1,100 for B/C+ or $750 for C-/D+
- Target Down Payment* $5,000
- Closing Fees $3,000
- Legal, Accounting, & Advertising Fund: $1,000 annual
- Maintenance** $3,000 annual
- Emergency Repair Reserve: $3,000
- Management: Self Manage - - - -
- Projected Total start up cost for each Properties: $12,000
* 3.5% FHA for $150,000
** based off FHA guide lines of 2% of the property value in annual maintenance
2018 to 2019
We hope to quickly save for a 2nd property with in one year. We can do this with out the help form equity, hard money, or the rental income from the 1st property.
Options:
I am learning about whole sealing for other cash buyers as a way to build start up capital. I am also open to the Ideal of managing properties under a subject to or lease form sellers.
I can substitute my hours devoted to overtime with my job in exchange for Whole Selling.
Note: I am dyslexic. I would like to thank the creators of spell check for this post.