Seeking advice...ultimate goal is to have over 30 properties

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Seeking advice...ultimate goal is to have over 30 properties

John Burtle
Real Estate Broker · IL · Member since 2016 · 284 posts · 178 votes

I'll try to get to the point.

I use to work for an investor when I was younger. Ever since then I've wanted to get into real estate. I never acted because I also wanted to become a police officer. I focused most of my life on reaching that goal. I'm now 29, and I've been a police officer for almost 4 years now. I work in a small town, so I don't make much. 38-40,000 per year. I do have student loans, which will be forgiven in 7-8 more years as long as I stay in law enforcement. I pay a percentage of my salary per year on the loans. I have some credit card debt, which I'm working on paying off. I'm 1,900 in the whole with the credit card. I have a truck that I owe 26,000 on. I've had it for almost two years. I'm currently renting a house. 

What I'm wanting to do is get my credit card paid off in the next 5-6 months, refinance my truck in March of 2017, and buy a house in April/May of 2017. 

That's where I'm torn. I imagine I won't be able to spend more than 80,000 on a house due to my DTI even after the credit card is paid. My student loan debt is 32,000 and banks have been telling me they can't base a mortgage off my current payment. They have to figure my payment as if I was working a normal job and had to pay the whole loan off. Which I understand. So, I'll probably be capped at 80,000 max.

At the same time my ultimate goal is own over 30 rental properties in the next 15 years. I want to retire from law enforcement in my late 40's. It's a rough career and it's just not like it use to be. I won't get into all that though. Mid 40's I'd like to get out and live off the rental properties, and I'd like to get into actual house flipping once I get out of law enforcement. 

The problem is I'm not sure how to go about buying my first home with my long term goal in mind. Does anyone have advice? I know I'll need 20% cash to obtain a mortgage for a rental property regardless of what I do. Just not sure how to get started. I have to be out of the house I'm currently renting no later then September of 2017 due to the fact the owner is moving back into it. I'm just trying to get everything lined up. As far as investment properties I could go 3-4 years with no profits since I can live life off my full time job salary. I could sit back and let the rental properties build profits etc...

Anyway....some advice would be greatly appreciated, and sorry for the long story. 

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Justin Harris
Akron, OH · Member since 2016 · 1 post · 7 votes
10y
Hey John!! I know right now it seems like your goal is pretty far away but keep your head up and you'll be there soon enough. I would just like to share my story with you because I believe your situation is similar to mine. I officially closed on my first home last year on August 28 2015 at the age of 26 years old. One day away from my birth date. That year and the year before I made around $38,000. At the time I owed over 57,000 in student loans, $3000 on a car loan, 2000 in credit cards. Instead of waiting to pay down my balance on the credit card I just got a new one. Doubled my credit limit which shot my score up 30 points or so. I now had a beacon of 709. I went through several banks, around 5 to be exact. I finally found one that approved me for a house up to 135,000. I then went shopping. I probably looked at around 100 houses before I found this beautiful 3 bed room 1.5 bath with a double garage for 31000. That's right 31000.... It was a forclosure property, and with the bank that approve me we did a renovation loan (conventional) for a total of 60,000 including all repairs. The house appraised for 102,000. To get the loan I had to live in the house for a year but only had to put 3.5% down. I currently rent two of the bedrooms out for a $100 profit a month while I still live there. There's always a way to go. Doesn't matter how many people tell you no. The bank I used was prime lending if you want to try them. Let me know if you have any questions! I'd be happy to walk you through what I did and even warn you about what I should have done better.
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  • Richard Warner
    Portland, OR · Member since 2012 · 66 posts · 30 votes
    10y

    John, do not make 'saving money' a priority. Don't spend the next 5-6 months (*edit* or even 2-3 months) focused on paying off a credit card that is a drop in the bucket compared to your auto and school loan. You can accomplish a lot more than $1,900 in 6 months my friend! 

    Forget about paying down your debt faster, pay your minimums and focus all of your energy on increasing your income. 

    You need a business, join an MLM, get into a sales position, something else if you are cornered at your current job. 

    0Reply
  • Richard Warner
    Portland, OR · Member since 2012 · 66 posts · 30 votes
    10y

    John, take some time today and listen to a few "CardoneZone" podcasts from my favorite mentor Grant Cardone. Learning from him the past few years has transformed our lives and I'm confident he'll have the same effect on you. You can do it man! Be great!

    >> CardoneZone Podcasts 

    1Reply
  • John Gunderson
    Investor · Madison, WI · Member since 2013 · 18 posts · 5 votes
    10y
    Consider house hacking a 2-4 unit bldg... and use your current career to add value. I personally would love a police offer in a bldg I was trying to upgrade and build equity in. It's likely you can find investors in your area that would agree with that as well. They would potentially help you do the deal and share in the success. As far as your goal of 30, it's a good start, establishing a track record with partners and investors is key. Good luck!
    0Reply
  • John Burtle
    OP
    Real Estate Broker · IL · Member since 2016 · 284 posts · 178 votes
    10y

    @Richard Warner I'll listen to some of the podcasts when I get off work tomorrow afternoon!

    @John Gunderson I appreciate your reply and advice!

    0Reply
  • Anthony GaydenPro Member
    Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
    10y
    Originally posted by @John Burtle:

    I'll try to get to the point.

    I use to work for an investor when I was younger. Ever since then I've wanted to get into real estate. I never acted because I also wanted to become a police officer. I focused most of my life on reaching that goal. I'm now 29, and I've been a police officer for almost 4 years now. I work in a small town, so I don't make much. 38-40,000 per year. I do have student loans, which will be forgiven in 7-8 more years as long as I stay in law enforcement. I pay a percentage of my salary per year on the loans. I have some credit card debt, which I'm working on paying off. I'm 1,900 in the whole with the credit card. I have a truck that I owe 26,000 on. I've had it for almost two years. I'm currently renting a house. 

    What I'm wanting to do is get my credit card paid off in the next 5-6 months, refinance my truck in March of 2017, and buy a house in April/May of 2017. 

    That's where I'm torn. I imagine I won't be able to spend more than 80,000 on a house due to my DTI even after the credit card is paid. My student loan debt is 32,000 and banks have been telling me they can't base a mortgage off my current payment. They have to figure my payment as if I was working a normal job and had to pay the whole loan off. Which I understand. So, I'll probably be capped at 80,000 max.

    At the same time my ultimate goal is own over 30 rental properties in the next 15 years. I want to retire from law enforcement in my late 40's. It's a rough career and it's just not like it use to be. I won't get into all that though. Mid 40's I'd like to get out and live off the rental properties, and I'd like to get into actual house flipping once I get out of law enforcement. 

    The problem is I'm not sure how to go about buying my first home with my long term goal in mind. Does anyone have advice? I know I'll need 20% cash to obtain a mortgage for a rental property regardless of what I do. Just not sure how to get started. I have to be out of the house I'm currently renting no later then September of 2017 due to the fact the owner is moving back into it. I'm just trying to get everything lined up. As far as investment properties I could go 3-4 years with no profits since I can live life off my full time job salary. I could sit back and let the rental properties build profits etc...

    Anyway....some advice would be greatly appreciated, and sorry for the long story. 

     Let me just say don't give up. I work in law enforcement as well and had the same issues with debt when I was your age. 

    The thing that made all the difference was getting out of debt. It freed up a large portion of my earnings so I could invest in real estate.

    Podcast Guest on Show #21
    1Reply
  • Gina Tavizon
    Realtor · Cypress, CA · Member since 2014 · 36 posts · 14 votes
    10y
    I'm gonna throw out a few out-of-the-box ideas.....some I think have already been suggested. You'll have to research to see which of these are possible, realistic, etc. I think someone suggested house hacking. That's a great way to get into something and save/make $$. Maybe a fixer. Maybe a single family and rent out the other rooms or a duplex and rent out the other house and rooms in your own. Then fix and flip and make some $$ to buy more. Maybe buy-and-hold the next ones. Also another creative house-hacking idea is instead of renting out the other rooms the traditional way, rent them through Airbnb. They are short term rentals that make bigger money faster. But you really gotta research that. Location is everything but also being a good host to make it attractive to travelers. One well known investor is investing in these only right now because of the profitability. But he's also researching the heck out of it and mastering that system. It's worth checking out. Also, seller financing. So many creative ways to do that. Listen to BP podcast 188. Great advice on how to approach seller financing. You can help a seller make more money if they are the bank rather than them putting it in a savings for less than 1%. And you can structure a loan that works for you if you find a seller open to options. Good luck! Thank you for protecting all of us! I respect the heck out of law enforcement.
    2Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    @John Burtle

    Great..you have a goal. Consider defining it a bit more. 30 houses COULD be great...or not so great. Forget doors. Set your goal for income. Do you want five houses bringing in $800 per month each or three bringing in $1500 each. Define your goal. Once you know what you want to achieve, then set a plan. You can amend that anytime. Remember too that RE is not a get rich quick business but it IS a get rich business. Don't expect overnight success. Build your business one good deal at a time. As it grows, you will find it easier and easier to scale. 

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    10y
    Lol you don't want that much homes unless you like creating a new job. Once you get 5-7 houses I would make the jump to commercial. I went really quick to 10 and then found out that a lot of SFH is not sustainable.
    0Reply
  • Alex Hayslett
    Rock Hill, SC · Member since 2016 · 2 posts · 1 vote
    10y

    Renting a house and owe $26,000 on a diesel truck. Time to rethink your strategy.

    How much is the interest? How much is the insurance? I'm sure the gas mileage isn't great either.

    To put things in perspective I bought a $3k Jeep cherokee in 2010 and have put maybe $400-600 into repairs and pay a measly $30/mon for liability insurance. 

    You could sell the truck and easily have enough to buy a beater and put down a down payment on a house, that way you can start building equity and actually work toward your goal. I also went from an $850/mon apartment lease to buying a small 2bedroom condo for only $500/mon so you can probably save money that way too. 

    The truck is really holding you back. You can buy a brand new one in 20 years when you have 30 rental properties :)

    Good luck

    1Reply
  • Ben Zimmerman
    Rental Property Investor · Raleigh, NC · Member since 2016 · 396 posts · 995 votes
    10y

    @John Burtle  I'm curious, why are you interested in buying a rental property if you are currently renting yourself?  Assuming you are content with your job, there is a high likelihood that you will be staying in that same area for at least a few years.  Why not buy a home for yourself instead of a rental?  There are several pro's to this scenario...

    1.  Interest rate:  The rate any lender will quote you will be in general around 0.5% percentage points lower if you plan on living in the home as opposed to using it as a rental.  On a 100k loan that is $500 a year at a minimum.

    2.  Qualifying:  It is generally easier to qualify for a loan if you plan on living there since banks view investment properties as slightly more risky.  If you have less than stellar credit, this will be a much easier route.

    3.  Lets face it, you need a place to live, whether that's the place you are currently renting, or buying a place for yourself.  If you buy a rental, you may generate a yearly profit if all goes well, or you may not.  Either way you are still pissing money away by renting your current place from your landlord. 

    4.  Tenants:  Having a rental property means managing tenants, even if it's just one door that you have to worry about.  Do you know what makes for a solid contract?  Are those tenants going to take good care of your property?  Nobody will take better care of your house than you will, so if you buy a place for yourself, you are guaranteed to have a good 'tenant' (yourself) that will not destroy the place.                             

    5.  Remodel:  Buying a fixer upper sucks as a rental because while the property is being rehabbed, it is essentially sitting empty doing nothing but creating bills for you.  You can't rent it out until it's finished, and in the meantime you're stuck paying property taxes, and the mortgage on it.  If you buy it for yourself, you can still live in it while you have work done in other rooms, essentially getting some use out of it.  It won't be ideal, but it's better than nothing when you're first starting out.

    6. House hack: This is where I got my start. I bought a 3/2 SFR and rented out the two upstairs rooms. The rent from those two rooms covered the entire mortgage, leaving essentially just the utilities to be paid by me. This saved me a ton of money, and was how I was originally able to get the process snowballing as the money I saved went towards buying my next property. You say you live in a small town, but there are always people looking for a simple place to live.

    If you decide to go this route, then I will offer one word of caution.  People tend to buy nicer places for themselves, as opposed to if they are going to rent it out.  Call it keeping up with the Jones's, having 'standards', or just being materialistic.  Just be careful and buy what you need, and not what you want.  Buy simple and cheap, you can always treat yourself to a much nicer home 5-10 years from now once you already have a dozen other income generating properties and are financially secure. 

    Finally, I'm not sure what programs Illinois has, but there may be some government programs that will give you a grant towards your personal home.  Who doesn't want free money?!?  I did some googling and found at least one program, called the "Good Neighbor Next Door" program, which offers a whopping 50% discount off the purchase price of a home in select revitalization areas providing you live there for at least 36months.  Maybe those areas aren't the best areas, but I can live most anywhere for 3 yrs if you give me the place for half price, and at the end of the three years buy a different place for yourself and turn this other home into a rental.  Or maybe this program doesn't work for you for whatever reason, but I'm sure there are other programs out there.

    0Reply
  • Ryan K.
    Investor · Richmond, VA · Member since 2015 · 139 posts · 43 votes
    10y

    I'd also recommend selling that diesel crew cab and getting something more economical to help your situation. I own a diesel pickup that's been paid off for quite a few years and if I had to do it over I wouldn't have bought it in the first place. It's just not practical unless you are really towing heavy or have some other need for it. And don't forgot once you are out of warranty the repair costs can get out of control, not to mention the maintenance items are expensive (compare prices of heavy duty rated tired to standard truck tires for example). Downsize to a smaller less expensive payment truck at a minimum and use that savings to pay off credit card and student loans.

    0Reply
  • Ryan E.
    Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
    10y
    John Burtle I just heard about this program and thought of this thread: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/gnndabot Basically it offers LEO's, firefighters, teachers etc a 50% discount off list price on HUD homes in certain areas where you live. There are some rules to the program like you have to live there at least three years but great way to get started at a huge discount! You could rent out extra rooms to buddies/co workers and actually make money each month off rents.
    0Reply
  • Brandt Smith
    Cypress, TX · Member since 2016 · 132 posts · 49 votes
    10y

    @John Burtle your first step is to adjust your spending to match your current income, and do this with RE investing in mind. That means you may have to eat beans and rice for a while. It means you may have to sell your truck and pick up a reliable beater. Who cares. Your goal is to quickly build up a war chest to invest. As far as the credit card debt goes, $1900 is nothing. Make it go away.

    While you are doing this, do all the foundation work (learning, cleaning up credit, paying down loans, getting your network / team together).

    Start with bird dogging or wholesaling to help build up your war chest. Look out for smart properties where you can get in for little out of pocket (learn to double close with hard money). Pretty soon you will have several properties that bring in $4-6k per year and it will snowball.

    This is a marathon. You will get there. 

    0Reply
  • David Smith
    Investor · Kelso, WA · Member since 2016 · 3 posts · 0 votes
    10y

    I agree with everyone else - Dump the truck, The total of your vehicles should not exceed 10% of your yearly income.  So sell the truck, pay off the credit cards, Buy a 10-15 year old Ford F250 or F350 with a gas engine (they are cheap because everyone wants a diesel) Buy a duplex and rent out one side, The rent from the one side should cover most or all of the mortage.  Figure out how to save $1,000 a month and buy your next property in 20-24 months

    0Reply
  • John Burtle
    OP
    Real Estate Broker · IL · Member since 2016 · 284 posts · 178 votes
    10y
    Just an update. I sold the truck a few weeks ago. My dad donated an old car to me and I've been having a lot of problems with it. Things are slowly getting better though. I'm looking forward to actually being able to pay off my credit card debt and being able to save money.
    1Reply
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