i'm really interested in learning about financing as well. Like how much down payment is needed and if there any loopholes for low down payments
Congradulations for stepping out and actually doing something about your future. I wish a had my mind straight when I was in college but that's a different story. In today's market lenders are wanting you to put skin in the game and 20% down is the standard unless you find hardmoney or a private lender to finance the whole thing.
Starting out I would invest in my home town. Easier to maintain and to handle tenants. Are you planning to get a management company for your rentals?
Personal story, while in college party too much and wasted a bunch of time. Go Longhorns!
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wow! a youngster with his head screwed on ! Very nice.
Like Bill said, if only we had done this way earlier we all would of been retired by now.
Try going with a broker so they can find the best rate for you. A bank will only have their rate. For a first time buyer, I would stick closer to a location close enough for you to able to manage and learn.
Either use the BP analysis tools or create your own to account for all cost. Find an area that suits your investing style.
I went to Sam Houston but lived in College Station the entire time. One of my good friends there used his brother (who already had a job) to co-sign through a conventional bank (chase bank) on his property. He didn't need any credit or ownership history because his older brother was signing who had already been working in the real world for a while. My friend lived in one room throughout school and rented out the others. It was essentially turn key and did not need much work- which is what made it possible to buy through a conventional bank. If the property had needed a significant amount of work, he would have needed to use hard money. The reason is, if a property has significant enough issues such as major plumbing or foundation or an old leaky roof, a conventional bank wont lend on that because it wont pass inspection.
If you're looking for something to fix up, hard money is your option. Once you fix it up, most hard money companies can refinance you into a conventional loan which will normalize your interest rate.
If you're looking for turn-key, the bank is the way to go and there is no need for hard money because hard money is meant for something that needs a construction escrow. A simple low fixed interest rate through a bank is ideal for a long term rental.
As far as finding a loan that a 19 year old college student will qualify for- you pretty much need a cash loan from family/private lender or you need a co signer who has income history and decent credit. Once you have one property under your belt, it gets easier and you should be able to buy on your own.
I hope this helps.
Much of the appreciation in Houston has already happened but if you can get a 4 bedroom house and have roommates cover the whole mortgage, or get a duplex and do the same, you'll be in a good spot. You can use an FHA loan to put down just 3.5% as the downpayment.
@Jacob Shoesmith I really like the Reno 203K loan for first time buyers, it allows you to have a rehab budget and you can house hack if thats what your plan is.
Down the road when your portfolio grows a Hard Money Lender is a good bet, but for now, conventional financing is your cheapest and best option.
@Jacob Shoesmith - Welcome to BiggerPockets! As you can see by the comments, I think a lot of us wish we were half as smart as you at 19!
BiggerPockets is a great resource for learning from others. There are several different ways to finance the acquisition and capital improvements to a property - Private Money, Hard Money, Bank Debt, Seller Financing.
I would probably hesitate working with a Mortgage Broker at first. Why pay an extra fee or point when you can do it yourself, is my mentality. After you have exhausted all of your resources, then I would lean towards a Mortgage Broker.
Just a little food for thought....best of luck to you!
Congrats on thinking about this at the age of 19!
I'd recommend buying a house in College Station and renting out the rooms; I have no idea what the going rate is, but when I was in school at OSU '04-'08 the going rate was ~ $300 / room. So, you could get $900 / mo. for a 3-bed; $1,200 / mo. for a 4-bed. You could live in one room and rent out the others.
I have a close friend whose family helped him purchase a home in Stillwater when he was in school. He lived in one room and rented out the other two to cover the mortgage payment. You can put the money you'd save on room & board / rent towards saving up to purchase additional investment properties.
You can likely get into a turn-key property using an FHA loan for under $10k out-of-pocket including all closing costs and loan fees. You'll need to have someone who can qualify for the loan if you aren't able to qualify on your own.
Best of luck!
Good job on getting started early. If I could redo my college days in Austin (Hook'em!) I should have bought a 3 or 4 bedroom house, lived in one, and rented out the others.
Make sure you keep some cash reserves. The reserves are what determines whether you make it or (figuratively) break it in this business. The AC unit WILL break in the middle of July. The pipe WILL burst the day before your wedding. You need money to be able to quickly fix these things.
Also, look into asset protection; it's never too early to start thinking about protecting the nest egg you'll be growing.
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