Which way to go?

18 Replies

Hello everyone,  I am looking to jump into the real estate game and would like some guidance.  I am a 24yo that works full time as fireman and just recently got married.   When I married, I moved in with my wife and rented my house out.  After seeing $250 of passive income a month I have decided that I want to continue with more properties.  I have about 70k of equity in the rented home and I want to use it to add to my.  I would ideally like to own multiple cash flowing rental properties.  My question is how do I best utilize my equity?  Do I buy and flip a couple houses to generate cash for rental properties?  Do I use my equity to buy several rentals right out of the gate?  I am in Birmingham Alabama, so if anyone knows of any investor friendly lenders feel free to share.  Thank you for your time!

use the equity to buy more rentals, then you will have free and clear properties to leverage to buy more rentals. Repeat many times and you will have an empire. That has been my game for many years. 

Buy cheap houses.

also, be careful about neighborhoods. You really need to understand the market here. It can be different street by street, particularly in East Lake and similar C and D neighborhoods.

Hey Josh,

We are a full service Property Management Company, Real Estate Brokerage and Turn-Key Provider. We purchase 15-20 properties a month to flip and lease. We then either hold, or sell as income producing turn-keys. 

We're in the business that it seems you're trying to break into... I'd be more than happy to help you get your portfolio started - If I were you, I'd use your equity to purchase 2 properties to flip and hold. Once they begin cash flowing you can decide on your next move. 

Let me know how I can help. I have a large portfolio of Turn-Keys that are already producing income that I can show you, or I can help you find the perfect project home.

Good Luck!

jc

Jarrod Cook, Real Estate Agent in AL (#000094489)
(205) 982-5647

Just BC you have $70k in equity doesnt mean you have $70k to buy houses. If you get a HELOC in place they usually go by a % from what your home is appraised for and what you owe, then they might give you a HELOC in the amount of 70% of your equity amount thus only having $49k available. If you can qualify for financing using your HELOC funds then get bank loans.

From the posts above it seems there are no investor friendly lenders in your city, only companies selling investment property. 

Good luck

Curt Davis, Real Estate Agent in TN (#00321765)

How in the world did Barbara Cororan and Donald Trump do what they have done with nothing, and I have something and cant get any help. PLEASE IDEAS

I live in Ohio, but my rentals are in WV. Maybe can get some suggestions on what I am doing wrong. I have done searches of the net and check with local financing. What I am trying to do is keep the finance companies from pulling my credit for on. That will pull the credit you worked so hard for down so fast. I do not see why, because it not that I neglected paying payments.

But here is my issue, last year I stopped working because we bought a small farm and my partner had a really great job, then they closed down. I dont know if you knew of Coldwater Creek, it was a woman's clothing distribution center. He was there for 16 years and I believed the company was here for 20 years. The company seemed to be growing, two years ago, this building doubled, maybe tripled in size. So felt secured with his job, and I am on disability. We also have three rentals that gives us a good income, 99.9% rented.

So our cons is he has been on has been on his new job for 6 months and he is not one to change jobs, he works hard and wants to grow. Before his job at Coldwater, he was employed with the same company for 20 years. We just bought the new house 18 months ago. We do fine financially, but they look at that he has only been employed for 6 months, and this company hires through a temp agency, Then they higher about every 6 months permanent workers from that. His supervisor just advised him he war ready to go to permanent when they start hiring. This is a huge Truck building company is growing wild. It is called HINO.

The pros we have is we have good credit, not perfect, but good. We work on it, no bankruptcy never, no late mortgage payment, but one. This is when we was closing on the house before this, be was told not to pay that month by the lawyers because all had been figured out. We was bought out by FEMA because we lived in a Flood area. Then when closing came, it was postponed for a few weeks, not worried about the payment, was busy with moving and was told all was taken care of. I always paid my payment two weeks or more before it was do. They ding me from being late, I tried to work with them to remove it with letters from me, Fema, The county commissioner, but no Bank One refused to remove it. After the many years I had been with them with perfect payment. They would not forgive one late payment.

The plus with this area is two big companies have been moving in, rental property is hard for people to find, and rent has doubled because of the demands. I had a opening a few weeks ago, friends of mine who has rentals, told me to raise my rent $200.00 to $300.00 more a month, and will not have any problems. I felt like I would try $150.00 more, should have went high and came down. With in a half hour I had over 50 applications, people offering all kinds of promises to rent it and not even seen the inside. One person offered to pay 6 months in advance. But I show it in order the applications came in and was approved. I had to pull the ad from Facebook in a half hour, could not keep up. The first person seen it of course took it, even offered to go in and clean it up, and do painting at their cost.

I show the Banks even with just my income plus the rentals, and the possibility of 3 more. I have even done a business plan. But been denied, mostly they dont want to count the income from the current rentals, and will not look at the 3 units and the income from them. When I bought the 3 I have, interest was high. What I own is it valued at $139,000.00 and owe only $69,000.00 and paying over $600.00 a month. I know with the cheaper rates, I could pay off my current loan, purchase a great deal fast $69,000.00 duplex and a single family home for around $30,000.00 plus would like a extra $10,000.00 for some improvements. I would bet I would be paying the same amount I am paying now, or maybe a little bit more and triple my income profit. I would be set for the rest of my life.

So many advertisement I get with free email accounts I have spent so much time researching and finding so many frauds. I am at a lot, and missing out on a great chance to grow. Make a good life for myself.

I wanted to pick at you mind of any ideas of what I can do to use what I have, plus a financial plan to get a financing. Thank you in advance for any help or assistance. Daniel Bonnell, [email protected]

Thank you all for the time and thoughtful responses. I plan to talk to a few different lenders in the near future and see what kind of numbers we can come up with. I have another question. Would it be a smart move to get a LLC and retitle my current rental to the LLC before I go and talk to said lenders?

Hey @Josh Martin  Welcome to BP!

Turnkey properties is the play here in the BHM market. Educate yourself on what they consist of. I wholesale properties to all the different turnkey companies that are local here. I have been finding a ton of guys just like you who seem to want to do the work them selves and hold on to the property as a rental. 

You actually responded to one of my CL adds, saying "Interested in the house. The ad was fairly vague. Can you email me some more details?" Just give me a call Josh!! 

Originally posted by @Zachary Phelan :

Hey @Josh Martin Welcome to BP!

Turnkey properties is the play here in the BHM market. Educate yourself on what they consist of. I wholesale properties to all the different turnkey companies that are local here. I have been finding a ton of guys just like you who seem to want to do the work them selves and hold on to the property as a rental. 

You actually responded to one of my CL adds, saying "Interested in the house. The ad was fairly vague. Can you email me some more details?" Just give me a call Josh!! 

 Thats pretty crazy about the Craigslist add!  I will most definitely be giving you a call soon!

@Josh Martin  

  Buy a property with anticipation to rent and hold.  Fix it up a bit, raise the rent and then decide if you want to refinance, pull some equity or possibly sell and cash out.


Frank

Frank Romine, Real Estate Agent in CA (#01957844)

Use equity, leverage it and buy more houses and get profit from that.

Originally posted by @Josh Martin :

Hello everyone,  I am looking to jump into the real estate game and would like some guidance.  I am a 24yo that works full time as fireman and just recently got married.   When I married, I moved in with my wife and rented my house out.  After seeing $250 of passive income a month I have decided that I want to continue with more properties.  I have about 70k of equity in the rented home and I want to use it to add to my.  I would ideally like to own multiple cash flowing rental properties.  My question is how do I best utilize my equity?  Do I buy and flip a couple houses to generate cash for rental properties?  Do I use my equity to buy several rentals right out of the gate?  I am in Birmingham Alabama, so if anyone knows of any investor friendly lenders feel free to share.  Thank you for your time!

 I think taking some equity out of your house and investing in more properties is an excellent idea, but there are several things you need to think about.

1) do you have any debt besides you and your wife's mortgages?  Or do you have a big loan on a car/truck?   

2) When you say $250 in passive income, does that include set asides for vacancies and capex? 

3) When you start buying make sure you have significant reserves or at least access to significant reserves. 

4) Don't be in any great hurry.  If you can buy 20 properties in the next ten years and you buy them at a great price (relative to rental income) in a good neighborhood you are probably changing your family tree. 

5) Make dang sure you are able to handle the late night toilet issue phone calls or harassing a tenant for rent.  Also make sure your wife is on board.  

We have one small car loan between the two of us. She is completely on board with this as well. The $250 we bring in from the current rental gross income and not after putting money back for expenses. How ever we have a decent savings that we will use if something were to come up.  I guess I am curious as how exactly I should best use my equity?  After doing some research, turn key rental houses that are rented section 8 and not in the best neighborhoods seems like the easiest thing to get into. How ever, I am not sure I am ready to deal with that class of people yet. 

@Josh Martin   Buying turnkey you will pay a premium.  If you have the bandwidth buy something that needs works and do as much work as you can yourself, hire out the skilled trades.  You will save a lot of money on the purchase and your return will be correspondingly higher.  

@Josh Martin Welcome and best of luck.

My 2 cents: 

1. make sure you have excellent credit (740+).

2. make sure your debt to income ratio will allow the carry of another mortgage without being tapped out (shoot for 42% or preferably less, this will include the added mortgage debt).

3. Providing you have less than four (4) mortgages or less, you will need 20% of the purchase price to put down (Most major commercial banks (BOA, Chase Etc..) will do mortgages 1-4 at 20% down, 25%+ for mortgages 5-10(not typically done by major commercial banks but can be found with investor friendly banks, check your local hard money lenders to see who they deal with since most HM lenders will not lend to you unless you get pre-approved to move the debt to a conventional loan after a pre-determined amount of time)). Pull enough of the equity of your existing rental to purchase multiple properties with cash flow. Keep in mind that you, like most people will probably only qualify for one rental unit at a time (unless you do a 2-4 family property). Why? because each property should bring you income. with every property you buy, your income will increase thus again lowering your debt to income ratio. with that, buy a property and rent it out. get a month or two of rents and repeat.

Good Luck!

@Josh Martin  

Hey Josh, welcome to BP and to REI!!!

I read the whole deal here and I would say to listen to the "pro" members specifically Bob E. and Cal C. with what they had to say. I would recommend to "consider" what the other "pro" members had to say in your post here but I would personally side more with the two I mentioned by name.

You are new to the game so my major piece of advice is to make sure you know what you are doing when you make a purchase, that you can handle it financially and skill wise as well. Just take your time and "know" that you are making  a good decision. Post the deal here and make sure based on others input if need be. Just make sure it's right for you and your wife.

That being said, being new and that you should enter slowly, I got from what you had to say that you would like to purchase as many units as you feel like as long as you can repeat the same results with each property. If you want the ease of using the HELOC money and want to replicate then you should follow Bob and Cal. You can use the equity, find a great deal, do the rehab, refinance, and if you had a great deal you will get all your cash back and probably some extra, effectively making money in the process.

You can use that extra profit to either pay your mortgage down on your own house or add to your investing fund to do more deals. If you just "buy with cash" and wait, it will be a very slow process and I don't get the feeling you want to wait years between purchases.

You are in a very good position for a young guy as far as money is concerned and you have a lot of opportunity in front of you if you handle it correctly, and that is really cool!!!!

If you need any advice just post it up and you will have plenty of help.

Hope this is insightful!

Jeff

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