Where to go from here?

2 Replies

Hi, so I am 22 years old, live around the Seattle area, and am looking to get into real estate investing. I have spent a decent amount of time on Bigger Pockets and other investment mediums to gain some knowledge but I just need somes tips on how to get my foot in the door and potentially start my first flip. The market around the entire Puget Sound area is fairly expensive, not like what you see around other investors buying houses for just $100,000 (I wish, maybe for a mobile home/trailer). From what I see, I would say the average cost in neighboring cities would be around 300k-400k (for desirable areas). I work construction and have a decent amount of experience and connections through work that getting my foot in the door flipping houses would make sense. Now, I don't work some glorified office job that pays an amazing amount of money like I see in other posts, of course it's easy to save an obsurd amount of money to invest in real estate if you make good money. With that said, I do make decent wages and it will continue to go up until I become a Journeyman. My budget and wages are as follows:

Income:

$27.2 (hourly wage) * 40 (hours a week) = $1,088 (pre-tax income)

$1,088 - $405.6(deductions: Social Security, Medicare, Federal Withholding, Union Dues)  = $682.4 (take home/week) (slightly changes based on worker's comp rates)

$682.4 * 4.33 weeks/month = $2,954.79 monthly income

Expenses:

Food: ~$400 (13.54%)($100/week. Not sure how this sounds for most people. Just groceries, not dining)

Utilities: $141.12 (4.78%) in this category I have phone bill, gym, Netflix, and phone insurance.

Rent: $500 (16.92%) I split rent with my girlfriend and this includes my portion of gas, sewer, pud.

Transportation: ~$340 (11.51%) This is car insurance and gas. I travel a lot for work since I live out of the city where its cheap to live.

Clothing/Personal care: $443.22 (15%) this would mainly consist of random things like laundry soap or deodorant, etc. I don't really spend money on clothes, I'm pretty minimalist, just the occasional dinner date with the girlfriend.

so Total so far I have: $1,824.34/$2,954.79 (~61.74%) 

Now I would like to put about 15 more percent into a Roth IRA before using my saved money towards potentially more volatile investments, so that would put me at about $700 a month to save for real estate investing. But with these numbers even living a minimalist lifestyle, saving enough money for a 20% down payment on a fixer upper at $300,000 is quite the stretch. At 700 dollars a month for a 60k down payment would take me a little over 7 years to save. Now like I said I would get wage increases as I progress towards becoming a Journeyman (current wage is $38.10/hour), but i would also like to live in a house (potentially using a VA loan to avoid 20% down and PMI). On top of all this I am looking to make flipping houses my entry into investing then hopefully turn to more BRRRR type business plan so I can get out of working construction, although I would be putting in a lot of my own sweat equity into my flips. I am just curious if I could be able to get a private investor to fund a flip for me and me do the Project Managing and some labor and split profits (no I don't mean 50-50), or if it would be an option to find a flipper and be able to be an assistant to them, and gain experience and network like that. The only thing with the second option is, is that I do work a full-time job so I am not sure how that would look.

I know this is a long post, and thank you if you made it through it all, I would just appreciate any insight from other people in similair situations or experienced investors as to what I could do to make this happen in a reasonable time frame.

Thank you,

Josh

Yeah Josh

Numbers don't lie just like ball doesn't lie (actually it does) in a basketball pickup game.

In a Denver/your market, etc.  Things are much 'tighter' and there's less room for entrants.  The only money to be made in those kinds of markets with higher entry costs are for those that are taking a 300k house and turning it into a 500k house.  Or something to that effect.  When there's a floor to entry, it hurts entrants and the biggest way it does that is to not allow your to enter and get the experience.  

My view is that these numbers force a choice.  Either choose to move to a market that is more conducive to getting into the RE game on your terms, or ... not.  

House hacking and what people refer to as BRRRR are much easier ways to get into the RE game and more in line with what you're describing of your risk/life profile.

You can always move back to a Seattle , Denver, Bay Area, etc later and do it on your terms.  Build that Pacific view house yourself or buy the 1.2m house with cash.  But your first step is the most important, and do it quickly.  

Hey Josh, Jim has some great points above.

I️ would add to that by saying you should challenge the norm on how to buy a property. It’s not easy but if it was...this game wouldn’t be as fun.

A few thoughts:

- instead of 20% down, consider: FHA financing is as little as 3.5% down. Personally I️ would go for a conventional loan which if you search hard enough can find a lender that will lend with only 5% down.

- partnering with a sibling, good friend, etc. maybe they cover acquisition finance but you manage/ fix up?

- flipping is an expensive business, and you need to have a cushion for unknowns. Down payment, carrying costs, and repairs should all be accounted for.

- house hacking is my favorite route; if you can find a way into a house that has a mother in law apt you can offset that new fancy mortgage payment with a tenant. And you won’t see them much.

- consider a career move? Not that there is anything wrong with yours, just throwing it out there. Currently this is taking 40 hours (plus transit) of your week when your passion seems to be elsewhere. Work for a flipper instead and take a short term pay cut to learn the business and get long term benefit, and invaluable experience?

- there are many ways to skin a cat in real estate. One thing I know for sure is the first deal is the hardest.

Good luck! Love the PNW!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here