Real Estate as long term investment - looking for advice

Real Estate as long term investment - looking for advice

Real Estate Investor · Cleveland, OH · Member since 2016 · 7 posts · 1 vote

Hello fellow BP members,

It's my first post here, but was reading forums for quite a while. 

I have rough strategy defined for me, but it's still hard to see what my exact strategy should be, if you can advise I'll greatly appreciate it.

Background:

  • Never bought a house
  • 798 credit score
  • Good tax report only starting from 2015 (was living in different country for quite a few years)
  • Self-employed, therefore no W2
  • Have $50k in cash right now
  • Can (and want) to invest around $20k on a monthly basis
  • Living in Cleveland, OH
  • Stay at home wife and a small kid

Goals:

  • Have long term investment
  • Spend as less time as possible on each unit (use property management services and contractors)
  • Do the most investment in the following 2 years (will be moving out of country after 2 years)

Ideas:

  • Get single family home via cash (or loan since it's going to be a primary residence ?) in area where a lot of renters live, fix it up over summer and live ourselves there - rent it out after 2 years when we relocate 
  • Build up a portfolio of multi or single family homes - what would be the best way to acquire them ? Loans or cash on foreclosed ones - use BRRR method ? Should I be looking at more expensive houses in better neighborhoods or just focus on multiple houses in average neighborhoods ( I don't want to try my luck in scary neighborhoods)

I know it's very vague, but that's exactly my state of mind right now ... just not sure what path I should follow and I really love having a well defined path, especially when it comes to managing money.

Thank You for the help

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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
10y

Welcome aboard @Anton Rachitskiy

Let me throw a curve ball your way.

Instead of the two options you mentioned why not just purchase a 2-4 unit property with an FHA Loan. You have great credit so there is no reason for you to pay cash when you could get into your home, have your mortgage covered by the other tenants and only be out of pocket 3.5% of the purchase price.

As you know here in Cleveland, you can pick up some multi family properties for pretty cheap so you could use the remaining funds to pick up an additional property with a 25% down payment.

Thoughts? 

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  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    10y

    Welcome aboard @Anton Rachitskiy

    Let me throw a curve ball your way.

    Instead of the two options you mentioned why not just purchase a 2-4 unit property with an FHA Loan. You have great credit so there is no reason for you to pay cash when you could get into your home, have your mortgage covered by the other tenants and only be out of pocket 3.5% of the purchase price.

    As you know here in Cleveland, you can pick up some multi family properties for pretty cheap so you could use the remaining funds to pick up an additional property with a 25% down payment.

    Thoughts? 

  • Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
    10y

    I was just typing what James posted. If I could go back and do it all over in your position I would buy multifamily FHA and live in one unit while I rehabbed the whole building. Adding value and building equity. That's the way to go!

  • Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    10y

    Yep, buy a fourplex, but do it in a A-B+ class neighborhood. And yes to buying a fixer to put in some sweat equity ... it will be hard work at first but finish out in 2 years, move and turn to a rental. The price will be higher and the cash flow will not be as good initially as a lower end neighborhood, but it will be easier to manage (more passive) as it will attract more financially stable tenants, and the appreciation and rent growth will likely be higher over the long term as it will be a more desirable location with higher demand. Also, spend those 2 years focused on building a quality team you can depend on when you move ... I normally recommend self management, but in your case you may consider contracting out property management even though you live there in order to test them out and make sure you have a winner before you move. If you do NOT find a winner PM before you move, then consider selling (at profit if you bought and fixed right) because a loser PM + absentee owner = a bad experience for you.

  • Real Estate Investor · Cleveland, OH · Member since 2016 · 7 posts · 1 vote
    10y

    @Matt Motil @James Wise thanks for your inputs, yes, I was considering that as well, though PMI scared me a little bit, but I guess it's not that much anyway. Do you think it's wiser to look for multi family house for up the FHA's limits (I believe it's 271.5k here in Cleveland).

    And with other cash on hand, you believe it's better to just look at houses that can be purchased with loan with 25% down ? Is it hard to get loan without house being the primary residence ? Or better to make cash offers for cheap multi/single families, rehab them, rent and refinance for future purchases ? 

    My main goal is to build up a good portfolio in the time of 2 years, given that my monthly cash income from primary business that I can invest will be the same or will grow. 

  • Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
    10y

    I sent you a message @Anton Rachitskiy. You're asking all the right questions. You have a few different options you could go with. Best thing would be to find a local investor friendly real estate agent that you feel comfortable with. They will be able to help you navigate the local market and make the best choices for your personal and investment options. 

  • Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    10y

    @Anton Rachitskiy

    FHA you are going to have the lowest down payment and they limit you to a total of 7 units with all the properties you own including the subject property you are purchasing. The primary you are purchasing can be up to a total of 4 units, maximum. So if you start investing first..... You will be limited to the number of units you could purchase.

    @Matt Motil is a great connection to have, and ask questions to in the Cleveland market. He has great experience. 

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