This is for Chattanooga TN, and I will try to keep this short. I house hacked a duplex in 2015 and I have been saving since then. I have been doing a ton of research, reading, and number crunching but the options seem endless. My strategy is to buy and hold to build a passive income and I am currently looking to start my first short term vacation rental (like Airbnb). I have enough saved to swing the 20% down, furnishing, light repairs, and closing cost on properties up to 150K. I assume the thing to do is to shop the internet for an investment mortgage? I also need to find that “good deal” as I am sure most people do. One way would be to subscribe to wholesale deals, assuming they would work with a non-cash buyer? The other way would be to use a real estate agent, and I have yet to select one so please feel free to recommend one. They may not be needed on a wholesale deal but I also have only a little experience in buying houses, so it may be warranted. My experience is limited to conventional options so maybe I need to think outside the box to maximize my capitol investment. Also it seems the lowest risk would be to just house hack another property.
If you have read this far, I really want to thank you for your time. The possibilities seem endless and I would rather not make a financial gaffe that destroys my chances at real estate. Any advice would be greatly appreciated.
Rather than buy in the conventional sense you could get creative there as well. It will take a lot more digging but you could find someone to owner finance you on the purchase whereby they would act as the bank. A better option would be to do a master lease option with a seller. You could 'test drive' the house for a period of time testing your strategy and see how it performs. If it goes as planned they you can move forward with the purchase. If not, then you are out the option money but don't have the mistake hanging around your neck for years afterward. I'm sure there's a ton of info here on both strategies.
@Nick Johnson , I think @Brian Levredge is right that you could be more flexible in your purchase but I think a 20% down deal is entirely doable. I just think you need to know what the conventional rents would be before buying in case the Airbnb idea doesnt work out as well as you want it to. I dont have any Airbnb experience but its seems like most the people doing it are renting places they have extra space in and less whole house deals. Side note I always like networking so if you want to meet up at some point let me know. I am also in Hixson. I have several properties in Chattanooga and really like the market. (it is getting pricier now though so you need to be more picky)
The COC return is pretty decent with airbnb in Chattanooga from what I am calculating. Using sites like airdna and mashvisor you can get a pretty good feel for what and where to buy. So my current strategy is to buy in the 100k-150K range, furnish and rent via airbnb. Sounds solid, except I have yet to choose a real estate agent, financing company, or property.
As for the agent, someone recommended Edrington team (David Hanson). They seem to do a good bit of business. If I house hack a multi-family property I will be able to keep most of my liquid capitol. Where should I begin when it comes to locating a property? Just get daily MLS updates and be vigilant?
@Brian Levredge , Sounds like a good choice but I have heard that owner finance is hard to come by and I am not sure where to begin on that front. Is owner financing always a better deal than the bank.
@Jeffrey Holst , we should grab lunch!
@Nick Johnson I am up for lunch almost any day. I am full time in real estate (really part time but dont tell my wife) I have a flexible schedule. Also (and I hesitate to mention this) if I were recommending a realtor I'd consider this guy I know from Hixson named Jeff, all kidding aside I generally work only with my own properties and a couple of investors (friends and family) but id be happy to help you out if you want. Lets do lunch either way.
Oh yeah and one more thing, I'd like to learn more about vacation rentals so if we meet up you will need to tell me more about the plan.
@Nick Johnson , I like the idea of the master lease. We currently have 2 properties that we have (are still in the midst of ) that we purchased that way. Like @Brian Levredge and @Jeffrey Holst said, Its a great way to get in and test drive the situation and see if it works for you. We were able to negotiate with a guy and get in with a $100 option fee and no interest for 2 years! So the stuff is definitely out there, just a bit harder to come by. Hope that helps. Offer stands for lunch/coffee as well! Cheers
@Nick Johnson Hey Nick, I'm starting a casual meet up next week if you're able to join us. Feb. 22nd 5PM - 7PM at Feed Company in Southside. I'll add you on the event so you can see the details!
Nick - You mentioned not knowing where to begin on owner financing, so I thought I'd share my experience. I've just finished my first flip, so I'm by no means an expert here. My point being that like everything else in this business, you study, then you try.
The seller owned a rental property that had been her primary residence in Harrison until she got married and moved into her husband's house in Chattanooga. She kept the rental for about 10 years, but now it was in disrepair and she was tired of dealing with it. She owned it free and clear.
I had read a fair amount about creative financing, so I decided to give it a try during my contract negotiations. The key was in building a relationship based on integrity and trust (read Chris Vonn's book, Never Split the Difference). I had built a good rapport with this lady, helping her get some insurance work done on the house prior to my buying it (which helped me, too, but that's a different story!). Basically, I built trust with her (legitimate trust, not window-dressing - always be sincere). Only after establishing the relationship was I able to ask her if she had an immediate, pressing need for the money. She said she didn't, so I offered to make interest payments to her until after the house was renovated and sold, at which time she would get her money.
Long story short, she agreed to take back a 12 month note on the house for 5.5% interest-only payments with nothing down. At closing, I owned the property for the $2300 I paid in closing costs. This left me with only the rehab costs to finance, which I did with 0% credit cards! The house is done and under contract now, scheduled to close in 4 weeks, at which time she will get her money from the closing proceeds. I've been paying her ~$200/month in interest payments during the holding period.
Anyway - just one example, your mileage may vary. Every situation will be different. But hopefully it will be encouragement for you to study creative financing. It's a key tool that you'll need to leverage limited funds.
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