Decided to share my plan to get started investing to get feedback from the BP community to make sure it is a sound strategy. Appreciate the feedback in advance.
- Family of 3 will be family of 6 in a month (getting married...not having triplets!)
- Currently living in apartment
- Working full time as a management consultant and also in grad school
- Living below our means and currently building savings for emergency funds
- Blessed with a promotion that will allow us to build savings at a faster rate
- Estimate to have $30k in savings in 12 months time (depending on how well I control my Chipotle cravings :) )
Plan for first property acquisition
- first property will be primary residence
- Find distressed / REO property (4/2/2)
- use FHA 203k loan to roll in rehab cost and put 5% down (heard doing 5% instead of 3% means no PMI, need to verify that)
Plan for investment property acquisitions
- Assume rehab yields 25% ARV
- Use HELOC and savings to purchase first and subsequent investment properties as soon as possible.
Overall I'm looking to force equity in a primary residence and use HELOC and savings to start acquiring properties. Below you'll find a spreadsheet snapshot where put numbers to the scenario. Please note that the numbers need to be validated as it is all assumptions. I have a realtor who can give me access to the MLS, so next steps will be to run analysis on actual properties.
I believe you need 20% equity in the property in order to avoid paying PMI, but it looks like if you hit your estimated ARV, you should be able to get the property reappraised and eliminate the PMI assuming you have 20% equity!
Is the primary residence going to be a single family or will your "house hack" a multifamily?
It looks like you know how you are going to finance the first two purchases. The only other things that I would encourage you to think about, if you haven't already, is how you are going to manage and scale your operations.
@Theo Hicks the primary will be a SFR, with 6 people in the home I'm not sure a MFR would work.
I am thinking about using a combination of savings and cash out refinance on subsequent properties. Eventually I'll like to move into MFR at which I'll be looking for other creative financing methods.
Thanks for the feedback.
@John Oyedele I personally do not think moving into a personal SFR is the route to go, especially if you plan on using cash out refinances because that is going to negatively affect your debt-to-income ratio and the personal home is a liability, not an asset. I actually just rent right now and plan on continuing to rent until I have reached my RE goals.
Just a thought
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