Looking for Financial Advise for Getting Started

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Looking for Financial Advise for Getting Started

Justin Allen
Houston, TX · Member since 2018 · 10 posts · 2 votes

Hello Everyone!

I'm looking for some financial advice on getting started. I understand that there are many ways to finance a buy and rehab project. So here's my scenario.

I haven't done any deals as I am just learning about REI. I've calculated my DTI which is about 70% alone without my wife finances. I have about four savings account which totals a little over 3k for different reasons like Emergency (2k), Travel (1k), a credit union saving (~300+), and investments (~350 and adding [Had more but I spent it some stuff to educate myself and get started with the stock market. I'm still learning I took a big hit but slowly building back up]). I typically add about $100 to each for the Emergency, Travel, and Investments account every month. After bills paid, I typically have around $300 to $400 left to spread out for savings monthly. I have a principle of 9K left on my car which I plan on using the extra savings to quickly pay it off so I can have an extra 350 to save and invest. I thought about trying to quickly pay my Student Loans off after my Car, but I have about 18 more years to pay it off so the payment is super low (~250). I was paying double at first but that payment will also go towards the car loan.

With my finances, should I continue to save up for a certain down payment size for a buy and rehab? Or would could I be able to find loans that I qualify for which such a high DTI?

I hope this all makes sense. Thanks in advance!

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Bart H.
Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
7y
Originally posted by @Justin Allen:

Hello Everyone!

I'm looking for some financial advice on getting started. I understand that there are many ways to finance a buy and rehab project. So here's my scenario.

I haven't done any deals as I am just learning about REI. I've calculated my DTI which is about 70% alone without my wife finances. I have about four savings account which totals a little over 3k for different reasons like Emergency (2k), Travel (1k), a credit union saving (~300+), and investments (~350 and adding [Had more but I spent it some stuff to educate myself and get started with the stock market. I'm still learning I took a big hit but slowly building back up]). I typically add about $100 to each for the Emergency, Travel, and Investments account every month. After bills paid, I typically have around $300 to $400 left to spread out for savings monthly. I have a principle of 9K left on my car which I plan on using the extra savings to quickly pay it off so I can have an extra 350 to save and invest. I thought about trying to quickly pay my Student Loans off after my Car, but I have about 18 more years to pay it off so the payment is super low (~250). I was paying double at first but that payment will also go towards the car loan.

With my finances, should I continue to save up for a certain down payment size for a buy and rehab? Or would could I be able to find loans that I qualify for which such a high DTI?

I hope this all makes sense. Thanks in advance!

I am a big Dave Ramsey fan, I am a believer in his baby steps.  Get your emergency fund, then pay off your debts.  THEN buy a house.

I would consider early on trying to house hack, buy a property and rent to friends.  Check out the book set for Life by Scott Trench.

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  • Dennis Dahlberg
    Phoenix, AZ · Member since 2017 · 93 posts · 105 votes
    8y

    Not enuf moola... I suggest that you first get your Texas Real Estate License..  Start there.....

    0Reply
  • Bart H.
    Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
    7y
    Originally posted by @Justin Allen:

    Hello Everyone!

    I'm looking for some financial advice on getting started. I understand that there are many ways to finance a buy and rehab project. So here's my scenario.

    I haven't done any deals as I am just learning about REI. I've calculated my DTI which is about 70% alone without my wife finances. I have about four savings account which totals a little over 3k for different reasons like Emergency (2k), Travel (1k), a credit union saving (~300+), and investments (~350 and adding [Had more but I spent it some stuff to educate myself and get started with the stock market. I'm still learning I took a big hit but slowly building back up]). I typically add about $100 to each for the Emergency, Travel, and Investments account every month. After bills paid, I typically have around $300 to $400 left to spread out for savings monthly. I have a principle of 9K left on my car which I plan on using the extra savings to quickly pay it off so I can have an extra 350 to save and invest. I thought about trying to quickly pay my Student Loans off after my Car, but I have about 18 more years to pay it off so the payment is super low (~250). I was paying double at first but that payment will also go towards the car loan.

    With my finances, should I continue to save up for a certain down payment size for a buy and rehab? Or would could I be able to find loans that I qualify for which such a high DTI?

    I hope this all makes sense. Thanks in advance!

    I am a big Dave Ramsey fan, I am a believer in his baby steps.  Get your emergency fund, then pay off your debts.  THEN buy a house.

    I would consider early on trying to house hack, buy a property and rent to friends.  Check out the book set for Life by Scott Trench.

    1Reply
  • Costin I.
    Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
    7y

    @Justin Allen Here is my "starting up" collection:

    • Read Dave Ramsey book "The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness." and complete the baby steps there.
    • Read Scott Trench’s book “Set for Life.”
    • Finish the school and get your degree - you'll need it later, especially if it's business management.
    • Get a job first where you have W2 income. Save 50 percent after tax income. Find deals in your market. Buy at discounted prices. Rehab. Rent. Refinance. Repeat.
    • Find a mentor as well to help with the process.
    • Doing an internship with someone that is serious about their business, and then making sure that you're just as serious about their business as they are, is an awesome way to gain invaluable experience and support for yourself in the long run.
    • Intern with a flipper. Intern with a wholesaler. Intern with Rental Investor. Then decide what you want to do long term. You have a long journey ahead.
    • Find a duplex/triplex that needs a little work, live in one unit rent out the rest. Repeat. Do this four or five times and you'll never have to work again if you choose.
    • Aggressively save money and buy a Multifamily 2-4 units with 3.5% FHA loan and house hack. Raise the rents to market values and rehab to force equity and sell in 2 years to avoid capital gains. If you decide to keep the property you can refinance into a conventional loan and hopefully you have enough equity to eliminate the PMI/MIP. Then move out and repeat the process.
    • I would look for a 2-4 unit too house hack. You can get into these with 3.5% down for an owner occupied FHA loan. Great way to get started FHA makes sure its a cash flowing deal before they allow you to buy. And house hacking allows you to make a little off the property, and seriously subsidize your rent. And lastly, you gotta live like a college kid. Rent out rooms, go the cheap route. Having those cheap expenses will really catapult you forward financially!
    • Income from RE investing is slow and boring (in a good way). The RE investing that makes fast money is not really “investing” - it’s a self-employed RE business. For example, flipping, deal finding, wholesaling, syndicating.
    • Boosting your credit score is the no-brainer investment. Go on My Fico and learn the credit hacks. Do them!!!
    • [Biggerpockets] is notorious for the no and no money down niche, but you really need to have a good financial runway prior to investing otherwise you will lose your bottom when it goes sideways.
    • Read all the usual books. But to be honest with you, If you do not learn some construction skills, your progress will be a lot slower! as contractors will be raking in the majority of your profits.
    • Work slave job with W-2 documentation for 2 years to gain favor with banks. Freddy/Fannie conventional loans want to see those 2 years. Keep same job no matter how crappy. It's only a stepping stone to break free.
    • While you are slaving, eat ramen, roommate up or live in trailer, avoid Starbucks and tuck every dollar you can squeeze out into a bank account. need 20% down and money for materials. so for 80K home (trashed), you will want 35K banked to get started, just a rough idea.
    • Get a pro account on this site so you can access the PRO only blogs and avoid all the goofy stuff that can confuse you sometimes.
    • Take NO advice from salesmen such as realtors/brokers. Not because they are wrong, but because they are salesmen.
    • Take NO advice from anyone who does not own more real estate than you do. Why chance it.
    • Just keep reading, saving, researching your target area. Know the rents! Know the values.
    • Then, get pre-approved. Buy property. Buy another and another until you have enough equity to refinance one for large amount of cash. Take cash and start BRRRRR process (read up all you can on BRRRRR). Give boss notice. (sorry about all the school time you invested). Your free. Done.

    Do all this and you'll be on a very good path. Just remember, there are no secrets and shortcuts in real estate investing, just slow and steady progress. You want fast, you are closer to speculating than investing and your risk skyrockets.

    "Ignorance is bliss. Knowledge is power, but also a burden. The cure to both - the 4 ions: education, action, progress(ion), not perfection".

    1Reply
  • Costin I.
    Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
    7y

    @Justin Allen ...but wait, there is more, you get double your request for only $0.00 + S&H, only for limited time:

    Here some recent articles good for starters:

    - one to raise you up:https://www.biggerpockets.com/renewsblog/3-important-questions-starting-investing-real-estate/

    -one to bring you back down to earth:https://www.biggerpockets.com/renewsblog/dont-just-dabble-in-real-estate-investing/

    - one in the middle:https://www.biggerpockets.com/renewsblog/cheap-free-steps-today-pro/

    One way or another you will pay your "real estate tuition" - either in time, effort or money. My suggestion - better in time and effort, and money (through the mistakes you going to make), than paying a guru.

    BP has a whole section dedicated to education and starting up -https://www.biggerpockets.com/intro-to-rei/overview

    Between BP and books and all the other podcasts and blogs available for free, you shouldn't need any paid training - don't fall for that. Just find a good mentor to shadow, someone willing to impart from his/her experience, take them to lunch and make yourself useful to them, and they will teach you.

    You might want to read and follow these threads:

    https://www.biggerpockets.com/forums/12/topics/625324-looking-for-financial-advise-for-getting-started?page=1#p3749945https://www.biggerpockets.com/forums/67/topics/624342-how-to-prepare-for-a-career-as-a-flipper

    https://www.biggerpockets.com/forums/55/topics/625011-new-to-wholesale-real-estate Learn to use BP to its whole potential - subscribe to BP blog and podcasts and start reading posts and listening to their podcasts collection.
    You might also want to read:

    The Ultimate Beginner’s Guide - https://assets2.biggerpockets.com/uploads/user_file/file_object/329/UBG_2018.pdf

    ...actually the entire section: https://www.biggerpockets.com/guides

    Get busy with the entire Education section on BP:

    Bonus for the weekend, my collection for starters (read the comments too, and then if you like the author, go check out what else they wrote):

    If this not enough to get you started and keep you busy ...let me know and I'll send you a list of blogs, podcasts, and books. 

    0Reply
  • Nicole Marshall
    Indian Harbour Beach, FL · Member since 2018 · 92 posts · 99 votes
    7y

    I'm still in the early stages. I bought a fixer upper, because it was in my price range in the area I wanted to live in. I didn't have any plans to invest in RE when I bought the house, I just knew that I didn't want to waste my money by paying someone else rent when that money could be put towards a mortgage. I ended up with a 4/3 with a pool. I rent out the other 3 bedrooms now, which more than pays for the mortgage and utilities every month. This helps tremendously while I fix the house up, so I don't have to worry about borrowing more money. So some version of a house hack, whether it's MF or SF or maybe some SF with an ADU? That will give you a leg up in your journey. Good luck!

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