Making the jump for my first property

8 Replies

I am a young professional looking to get started in REI. I just recently built a new house and we had our first child. I have a solid full-time job, with a fairly decent amount of investments. I would like to get into single family rentals to start out as I am currently tight on cash. I have been working with local community bank lender on some options for a loan to get started, but I know I know it will be small. I've thought about looking into some foreclosures or other houses around $30k-$50k with a little bit of work. I live in a smaller city in Mississippi with some of the smaller towns having the better deals, but less people.

My question is should I look for houses in a better town, but are of less value, or in a smaller town, better location, but less people and therefore a possible harder time to find renters?

Also, if you are strapped for cash, what is most important? I feel that if you can get the loan and set the rent to provide at least $200 in cash flow a month after all expenses, it is most important. Am I wrong?

Thanks and I love the site and the community.

Hi Peter, 

Welcome to BP. I live and buy my properties in Jackson. I would very much recommend that you start out by buying a place close to where you live. It makes managing much easier. As for financing, if you are buying houses in the 30-50K range (as I do) you will find that getting a mortgage will be expensive if you can get one at all. My strategy has been this: I will initially pay cash for a house in this price range. After I have owned it for a year and fixed it up, I get a HELOC. Only a few banks like Wells Fargo will give HELOCs for investors, but you can often get a teaser rate the first year and closing costs are either low or non-existent. I then use that money to buy a second home, and so on. This method has enabled me to buy nine houses since 2011. Usually my mortgage payments on these HELOCs are less than $200 a year.

Thanks for the response! Yeah the towns are only a few minutes away(Baldwyn, Guntown, Pontotoc) so getting to them would not be a problem. Right now, I don't have the cash available to pay for the house, which is why I was looking at a small loan from the community bank. I don't know exactly how the HELOC works, so I will research that for sure. Thank you for the information!

Good information, Susan. If i may ask, did you use hard money or private money for the initial renovations?

Originally posted by @Gene Grey :

Good information, Susan. If i may ask, did you use hard money or private money for the initial renovations?

I used my credit cards. ;} I find if I do balance transfers I find it is the about the cheapest loans I can get. But mind you, I try to buy houses that don't need much more than 5K worth of work. 

Originally posted by @Peter Vance :

Thanks for the response! Yeah the towns are only a few minutes away(Baldwyn, Guntown, Pontotoc) so getting to them would not be a problem. Right now, I don't have the cash available to pay for the house, which is why I was looking at a small loan from the community bank. I don't know exactly how the HELOC works, so I will research that for sure. Thank you for the information!

I actually I can walk to most of my properties, that's how close they are. Community banks won't give you HELOCs but they may give you conventional mortgages but you are probably going to have to buy a more expensive house. Wells Fargo is the only bank I know that gives HELOCs for investment properties. 

@Peter Vance

If the numbers work and the deal makes sense to you, go for it. The best way to learn is to take action and get started in the RE business. Even starting small in your local area is fine, you will learn so much from the process itself. Best of luck

I pay cash for the home (my own or private lender) and after rehab & placing tenant I will refinance with a small community bank. Haven't looked into HELOC but would be interested in that as well.

@Susan Maneck , do you have a lender at Wells that you work with.

Not really. At Wells Fargo most everything is done online. The underwriter is usually out of state somewhere. Getting a HELOC is a long and laborious process but it is so much cheaper than other types of financing. You can get a teaser rate for the first year (but you have to ask for it.) Then if you pay it off by the end of the year you can go back and get another teaser rate. I manage my HELOCs the same way I used to manage balance transfers on my credit cars.

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