My Recommendation: A simple way to start

1 Reply

This post is for someone looking to purchase their first deal and who wants to keep things simple.

I've been investing for around three years now. Initially I had no one to help me. I did my own research, took the plunge, learned by trial, made mistakes and along the way attracted a fantastic realtor @Marcus Auerbach , PM, contractors, banks which was a game changer. Below is what I wish I would have done starting out....

Quick Summary of Below - Househack in a great area, buy some dividends.

Property Type - Househack

Buy a duplex, triplex, or fourplex to rent in and live in one of the units. If you buy a duplex, try to put down 20%. If you buy a fourplex, use 3.5% down FHA. More units = more income that can allow you to cover more debt.

Location - Only high end

Buy the property in and A/B class neighborhood where you want to live. High end, high rents, high appreciation only, no slum areas, period! If you can find a trendy area, near food/bars etc will be beneficial. Also consider the people that live in this area. Do you understand them? Can you relate/communicate with them and their situation? Consider who your competitors are in the neighborhood. What are you up against? Is there something you can offer with your unit that others can't?

Property Condition and Loans - Use the bank

When you are looking for a property I think you have two options. The first, buy something that needs a lot of work to have a lower mortgage payment at the cost of more money out of your pocket. The second, buy something that only needs $10k or less in work. In this scenario I would suggest the second for a few reasons. Interest rates are extremely low right now still (historically speaking). Take their money while you can! Also, this is your first purchase, don't over extend yourself financially and skill set wise. Hold on to your cash. This is a long term investment/game.

Cashflow, Appreciation - Just cover PITI with this one

This is going to be your home and a rental. Make sure you like it. If you buy a SFH to just live in, you're responsible to pay the mortgage, taxes, insurance. So get a nice duplex, triplex, fourplex and make sure that the rent covers the PITI so you can live for free. Have them pay it. If you have some extra money to cover maintenance, great. Remember, you bought in a desirable area. Rents will go up and so will the value of your property.

Dividends for small bills

So now you have your housing costs paid for. That's the biggest expense you just knocked out. Now think about the smaller bills you have. For example, internet. Once again, don't pay for it yourself, have the company pay for it. If you have AT&T internet that costs $50/m, then buy their stock which pays dividends. Buy enough stock so the dividend income cancels out your bill. If they raise the price of the internet, most likely your dividend will go up. Do this for the smaller bills/expenses. Think everyday things you need like toiletries, gas, etc.

So there you go. You get a househack to pay for your housing costs, then buy some stocks to pay for your smaller bills. When you have an expense of any kind always ask yourself if someone else can pay it, not you! It's simple nothing complicated and will make your life a little easier. It's not 100% financial freedom, but is very little work.

Hi Bill, thanks for the reference! My pleasure! You can be proud of yourself, you have been working hard, were resilient to challenges and kept evolving, adapting and pushing on - looking back you have accomplished a lot in a relatively short period of time! I will never forget when you grilled the guy who said roof replacements are not a concern or his on rental properties. A lot has happened since then. And I have a feeling that was just the beginning. A quote comes to mind: "most people overestimate what they can do in a year, but underestimate how much they can accomplish in five years!"