Real Estate Professional · Boca Raton, FL · Member since 2016 · 116 posts · 17 votes
I borrowed $120k from a family member to buy a primary residence for me and my family (I will pay him back $1k/m for the next 10 years, starting next month, or refinance if needed).
Last night I was talking to my wife, and we just realized that maybe we can come up with something better (even if she really want little place with a little yard for the kids).
Live in flip? Duplex? Turnkey out of state? Foreclosure? I really like the BRRR strategy but it's "impossible" to find sealant here.
I live in South Florida, everything I see expensive and market always hot, market uber competitive.
What would be the advice of an experienced investor to a newbie with a young family?
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Francesco Barbati If you borrowed $120K from a family member at 0% interest (less than that when you factor in inflation) for the purpose of a primary residence, honor that. They might look at it like "Francesco can pay me back with essentially what he would be paying in rent." That's a very different proposition than "I'm going to risk this money on a flip!" Providing a 0% interest loan to help your son/brother/cousin/etc. buy a home for his family is not the same as providing a 0% interest loan to fund that same persons investment strategy.
Buy a multi-family building. This way you make good enough income on it to pay the $1k every month as well as get extra that can be towards your rent. After a certain point you can refinance and use that to grow.
Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
9y
If you have a couple kids, I'd say just get a SFH for yourselves to start. Nothing too expensive but in a nice school district. use a 5% conventional down. Use the rest of the money on a multifamily at 20-25% down and rent it out.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Francesco Barbati If you borrowed $120K from a family member at 0% interest (less than that when you factor in inflation) for the purpose of a primary residence, honor that. They might look at it like "Francesco can pay me back with essentially what he would be paying in rent." That's a very different proposition than "I'm going to risk this money on a flip!" Providing a 0% interest loan to help your son/brother/cousin/etc. buy a home for his family is not the same as providing a 0% interest loan to fund that same persons investment strategy.
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
9y
I'm not an experienced investor but I would suggest, if possible, consider house hacking. Use the BRRRR strategy to buy a small multi-family (2-4 units) and increase its value. You can use the money received from your family member for the down payment and the rehab costs. By living in one of the units you can receive favorable FHA financing (this will require you to occupy the property for at least 1 year). Assuming you purchase the property correctly, you'll be able to live for free because the rents coming in from your tenant(s) should cover the mortgage, taxes, insurance and PMI. You'll be able to create equity which will allow you to refinance out of the FHA loan. At that point, you'll receive all the money that was originally invested in the property to either A) pay back your family member or B) repeat the process with another property. Additionally, you'll create a cash flowing property with no money invested!
I borrowed $120k from a family member to buy a primary residence for me and my family (I will pay him back $1k/m for the next 10 years, starting next month, or refinance if needed).
Last night I was talking to my wife, and we just realized that maybe we can come up with something better (even if she really want little place with a little yard for the kids).
Live in flip? Duplex? Turnkey out of state? Foreclosure? I really like the BRRR strategy but it's "impossible" to find sealant here.
I live in South Florida, everything I see expensive and market always hot, market uber competitive.
What would be the advice of an experienced investor to a newbie with a young family?
What other markets have you looked into for Turnkey? There are plenty of markets, including the Midwest where you can see an amazing ROI.
If you have a couple kids, I'd say just get a SFH for yourselves to start. Nothing too expensive but in a nice school district. use a 5% conventional down. Use the rest of the money on a multifamily at 20-25% down and rent it out.
I love that idea but I forgot to say that it is very hard to get a loan because I move here 2 years ago, and I have only 8 month of W2, and only recently got a raise from my job.
On top of that, a nice SFH within a reasonable distance from work, starts at $250k here.
At $1000 per month you are paying 10% interest to buy a primary plus taxes and insurance etc... That's not a great deal with current rates in the 4's.
That was the deal. I can pay $1500/m on primary home with no problem, so I can make it work and I have other cash in my personal savings. I could invest more than $120k, but that I get in a risky zone... which I might still do, since I have back up plans, but I wanna try to stick to $120k for now.
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
@Francesco Barbati If you're willing to live alongside others, especially your tenants, I would highly recommend you house hack. If you and/or your wife can't qualify for FHA that's another story.
Francesco Barbati If you borrowed $120K from a family member at 0% interest (less than that when you factor in inflation) for the purpose of a primary residence, honor that. They might look at it like "Francesco can pay me back with essentially what he would be paying in rent." That's a very different proposition than "I'm going to risk this money on a flip!" Providing a 0% interest loan to help your son/brother/cousin/etc. buy a home for his family is not the same as providing a 0% interest loan to fund that same persons investment strategy.
I absolutely agree with everything you wrote, but as long as I pay on time every month, I will be fine. That is why I am considering different routes, and see if I can extract more value from this cash now.
@Francesco Barbati If you're willing to live alongside others, especially your tenants, I would highly recommend you house hack. If you and/or your wife can't qualify for FHA that's another story.
We would love to find a good deal to house hack, and finding a seller financing deal would be a "magic unicorn". I would not qualify for an FHA before next year.
I borrowed $120k from a family member to buy a primary residence for me and my family (I will pay him back $1k/m for the next 10 years, starting next month, or refinance if needed).
Last night I was talking to my wife, and we just realized that maybe we can come up with something better (even if she really want little place with a little yard for the kids).
Live in flip? Duplex? Turnkey out of state? Foreclosure? I really like the BRRR strategy but it's "impossible" to find sealant here.
I live in South Florida, everything I see expensive and market always hot, market uber competitive.
What would be the advice of an experienced investor to a newbie with a young family?
What other markets have you looked into for Turnkey? There are plenty of markets, including the Midwest where you can see an amazing ROI.
Where the numbers make sense, and I feel like I can trust 100% the provider. On top my mind there Jacksonvill, also because I could drive there if need, but providers there offer very little return in my opinion.
I'm not an experienced investor but I would suggest, if possible, consider house hacking. Use the BRRRR strategy to buy a small multi-family (2-4 units) and increase its value. You can use the money received from your family member for the down payment and the rehab costs. By living in one of the units you can receive favorable FHA financing (this will require you to occupy the property for at least 1 year). Assuming you purchase the property correctly, you'll be able to live for free because the rents coming in from your tenant(s) should cover the mortgage, taxes, insurance and PMI. You'll be able to create equity which will allow you to refinance out of the FHA loan. At that point, you'll receive all the money that was originally invested in the property to either A) pay back your family member or B) repeat the process with another property. Additionally, you'll create a cash flowing property with no money invested!
That is the first thing that came up in my mind. But I cannot get an HOA (at least until next year). On top of that market is hot and competitive here.
I borrowed $120k from a family member to buy a primary residence for me and my family (I will pay him back $1k/m for the next 10 years, starting next month, or refinance if needed).
Last night I was talking to my wife, and we just realized that maybe we can come up with something better (even if she really want little place with a little yard for the kids).
Live in flip? Duplex? Turnkey out of state? Foreclosure? I really like the BRRR strategy but it's "impossible" to find sealant here.
I live in South Florida, everything I see expensive and market always hot, market uber competitive.
What would be the advice of an experienced investor to a newbie with a young family?
What other markets have you looked into for Turnkey? There are plenty of markets, including the Midwest where you can see an amazing ROI.
Where the numbers make sense, and I feel like I can trust 100% the provider. On top my mind there Jacksonvill, also because I could drive there if need, but providers there offer very little return in my opinion.
Yes, that is a very difficult market. Have you looked into other Midwestern cities?
Buy a multi-family building. This way you make good enough income on it to pay the $1k every month as well as get extra that can be towards your rent. After a certain point you can refinance and use that to grow.
I wish I could do that. A 2 duplex in Boca Raton, start from 500k...
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
I don't know zip codes but Gateway and Congress is a very popular area with Renaissance Commons, tons of restaurants, etc. It's very close to 95 as well to commute to Boca.
Rental Property Investor · Boca Raton, FL · Member since 2014 · 1k+ posts · 713 votes
9y
@Brian Garrett and @Francesco Barbati... the premium in Boca Raton is due to the schools systems. Check out the school ratings over any of the areas you're looking in and you will see the difference.
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
9y
@Jon Huber Exactly I grew up in Boca Raton and went to preschool, middle school and high school there. I'm still there almost every weekend so I'm very familiar with the area and market.
At $1000 per month you are paying 10% interest to buy a primary plus taxes and insurance etc... That's not a great deal with current rates in the 4's.
That was the deal. I can pay $1500/m on primary home with no problem, so I can make it work and I have other cash in my personal savings. I could invest more than $120k, but that I get in a risky zone... which I might still do, since I have back up plans, but I wanna try to stick to $120k for now.
I believe David is WRONG about his "10% interest" comment. Rather, it IS "0%" if after 120 months, it's completely paid off! ie. $12k paid in year 1 results in $12k off the PRINCIPAL, etc!
Regarding the suggestion that was put to you to use the $120k as a DEPOSIT on something more expensive, that'll only work if Lenders don't care about it being already 100% FINANCED!
Q. How much of your OWN additional funds can you bring to the table to impress Lenders with?
I agree with those who suggest you ONLY use the $120k for the purpose it was loaned to you...