I have 11k saved for my first investment property. I am going to house hack this prop for a couple years (with an FHA loan). I can save up a little more while on my journey of searching but I need a little confidence boost. Has anyone started out in this situation before? Was it worth it? Does anyone have stories, suggestions or ideas that can give me the boost I need before I pull the trigger on a prop? If you do.. PLEASE SHARE. It would be much appreciated.
(Don't try to scare me out of buying a property.. this is a confidence booster post!)
Rental Property Investor · Kalamazoo, MI · Member since 2018 · 117 posts · 235 votes
7y
@Patrick Crehan
20% of Americans don’t save a single dollar a year
Over 40% of Americans have less than 10k saves for retirement
56% of millennials have no retirement saved, not a dollar
Two thirds of Americans couldn’t cover a 1k emergency without using debt
50% of Americans save less than 5% of their DISPOSABLE income.
Here’s your confidence booster. You aren’t normal. You’ve done what a majority of people never will already. Play slow and steady and your great grandkids will feel the effects of your life. Don’t try to do everything, just one thing at a time.
Rental Property Investor · Grove City, OH · Member since 2018 · 93 posts · 71 votes
7y
You can do this! I am in the same boat, I am still saving for my first property and I have $10k saved up. Have you read the book Set for Life? It helped give me confidence to save up the $25k and get started.
Can you use any money from a IRA or 401k? In some cases you can use these investments as well for DP on a first housing purchase.
Investor · Austin, TX · Member since 2013 · 680 posts · 1k+ votes
7y
@Patrick Crehan , First off, the best investment you can make is in yourself, said by Warren Buffett. It is natural to have doubts, especially when buying your first property. Keep striving to learn about investment real estate, run the numbers, find a grey hair mentor who will charge you a cup of coffee for all his knowledge. Not only will you need to know the ins and out of buying an investment property but you need to learn what it takes to be a good landlord.
Now we got the disclaimers out of the way. YES INDEED GO GET YOU A PROPERTY!!!!!! But NOT A HOUSE@@@@!!!!!!!!!!!!
Start off with a duplex. Rent out one side. Have your privacy on the other but if you're still not comfortable with the cash flow then you have the option of renting out one of your rooms on your side as well. Hopefully, when you run the numbers you will find that the monthly outflow is less than what you are spending now. Any lender will want to approve you without the cash from the other side of the duplex. However, you might find a local bank that will include the income for qualifying. Usually, you have to have 2 years of experience before lenders give credit for your rental income.
House Hacking is the way to GO!!! For young couples especially without children, it is absolutely the best and less risky entry into the housing market!!!!
BTW, I like what Dave Ramey does for about 90% of the people out there, but for buying investment property he has no clue!!! If you're saddled with debt and not discipline with your money then yes you need Dave Ramsey's advice! That happens to be about 90% of the people out there. All of my renters can use his advice. But, by your posted information you are not in that 90%. Go for it.
Real Estate Consultant · Fayetteville, NC · Member since 2017 · 151 posts · 144 votes
7y
CONFIDENCE BOOST!! How long did it take to save $11k??? So, what's the worst case scenario? You don't do as well as you want and you just recoup the money again down the road. You got this.
Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
7y
@Patrick Crehan
Keep saving and educating yourself more in the process. You dont want to over leverage.
You will read alot on these forums about leverage leverage leverage but unless you have plenty of reserves to cover your *** in a downturn, overleveraged usually leads to bankruptcy.
Be patient, be smart, keep saving is my best advice. Make calculated investments and decisions. It took me 4 years to save up for my first rental a few years back at age 30.
Ps, the less leveraged you are the better your financial statement looks later down the line when you put more deals together.
Best of luck
If you are confident you can make all your monthly payments while being able to put some $$$ away, do it. I'm currently 21 and living in my first house hack, only 7k out of pocket up front on a conventional loan. I love having my tenants pay my mortgage. Now that I've been doing it for a little while, i'm already able to start considering a four-plex, hopefully it will happen in a couple months!
It takes a leap of faith to jump into REI, but it's one you wont regret!!
Rental Property Investor · Kalamazoo, MI · Member since 2018 · 117 posts · 235 votes
7y
@Patrick Crehan
20% of Americans don’t save a single dollar a year
Over 40% of Americans have less than 10k saves for retirement
56% of millennials have no retirement saved, not a dollar
Two thirds of Americans couldn’t cover a 1k emergency without using debt
50% of Americans save less than 5% of their DISPOSABLE income.
Here’s your confidence booster. You aren’t normal. You’ve done what a majority of people never will already. Play slow and steady and your great grandkids will feel the effects of your life. Don’t try to do everything, just one thing at a time.
Rental Property Investor · Farmington, UT · Member since 2018 · 171 posts · 148 votes
7y
@Patrick Crehan hey bro. Maybe my own story will help. Granted it was a different time, but the principles all apply over a long enough horizon. I house hacked a 4-Plex back in 2012 and it was the best financial decision I’ve made so far. As a result of that deal I have a line of credit that’s opened up a new world of possibilities. It hasn’t always been easy, but I wouldn’t change it. Your first deal will change everything!
Real Estate Agent · Salt Lake City, UT · Member since 2013 · 19 posts · 5 votes
7y
@Patrick Crehan Hell yes. I’m not sure where your from but the market is hot. If you can find a good deal on a property, or get one that needs work for a good price. Make sure you can afford the payments with no problem. Maybe only take a year to house hack it, or even less if you can.
On another real estate note, I bought a duplex in 08 and we lived in one side for about 6years and now have our second home. The duplex pays a good portion of our current home mortgage now too.
Don’t give up.
Make sure the numbers make sense to you.
Repeat.
if you have any specific question, shoot them my way and I’ll try to answer.
Investor · Titusville, PA · Member since 2015 · 298 posts · 150 votes
7y
@Patrick Crehan - jump in, man! When I picked up my first investment property (a duplex)(conventional loan), I only had $6000 saved and that wasn't fha(which usually makes it less expensive). No reason to fret over unknowns. There are many financiers who would be willing to work with that. If you run into afew that aren't, so what. Keep looking. You'll find them. The keys are, starting out, with that much, in an area that has a lower price point and being able to discuss important factors with the lender so they have confidence in you. Be able to show them your numbers for the property and use their lingo. If you sound like you know what you're doing, for all they know, you do.
Investor · Los Angeles, CA · Member since 2015 · 36 posts · 63 votes
7y
Hey Patrick, I'm from Ohio, but did my first house hack in Los Angeles just after I moved here. If you're buying at a decent price and can improve the property, I would absolutely go for it. There's no better opportunity in the world to build wealth than an FHA loan house hack. It's a rare gift. You just have to do one thing: make sure the value goes up, not down. You can pretty dependably do this (in good economies and bad) by buying a neglected property (avoid turnkey!), add fresh paint, landscaping, and other cosmetic improvements, then spend some money creating a modern kitchen that will make the next buyers fall in love with it. If you can do that, you'll do very well with low risk. Thanks to the leverage you get with an FHA loan (a 25 multiple), it's not unreasonable that you could see your $11k turn into $150k. With my first duplex, I had no idea what I was doing, was terrified, overpaid, but made a dilapidated duplex look great. To date, it's probably the best return I've ever gotten, thanks to the leverage given only to first-time buyers (I made 2000% on my DP). Good luck!!
Real Estate Investor · Colorado Springs, CO · Member since 2016 · 9 posts · 6 votes
7y
@Patrick Crehan you are wise to start with a house hack and fha loan. I wish we would have done that to start with and now have missed the opportunity. If you are able to find a great deal on a duplex, I think that is the way to go. I used to live in Dayton and Cincinnati and the toughest part there are the high property taxes. Depending on how little you are able to put into the purchase you may have to save more for repairs/upgrades or slowly do them as you have the money. Good luck!!
Rental Property Investor · Glens Falls, NY · Member since 2016 · 176 posts · 169 votes
7y
If you're young and have a w2- dump that 11k into a house hack, yesterday. You can afford to stretch yourself thin. Is more money better? sure. But you might sideline yourself for awhile if you don't make the jump. I've stretched myself thin before as I am scaling my portfolio but if you have available credit- use that to your advantage and make a solid plan for repayment.
How do I know what a good deal is (in terms of work that needs to be done to prop, market rate, etc) as this would be my first prop? I did my homework, read plenty of books and listened to many bp podcasts.. but when time comes.. should I trust my realtor? Scan the prop myself and run the numbers? Trust the seller? All the things that run through my head as a first time buyer
Flipper/Rehabber · Augusta, GA · Member since 2019 · 9 posts · 2 votes
7y
@Patrick Crehan
I searched for awhile for our first home. I got lucky and found a HUD home that was in great condition for 75k. The day we bought it I told my wife when we sell this we will make a decent amount of profit. Fast forward a few years later and we are listing the house today for sale at 149,900. We are going to take the profit and put it towards our next live in flip and try and squeeze in a rental property as well. We have lived there for the past few years and have put a good amount of work into the property. We did all the work ourselves, tile, paint, new cabinets and countertops. Using this house to jump start our REI journey. Plan on repeating this process for the next couple years to come.
I have 11k saved for my first investment property. I am going to house hack this prop for a couple years (with an FHA loan). I can save up a little more while on my journey of searching but I need a little confidence boost. Has anyone started out in this situation before? Was it worth it? Does anyone have stories, suggestions or ideas that can give me the boost I need before I pull the trigger on a prop? If you do.. PLEASE SHARE. It would be much appreciated.
(Don't try to scare me out of buying a property.. this is a confidence booster post!)
Have you ever thought of doing airbnb arbitrage. It's a great way to get started if you only have 10-20K.
You can easily get a property set up for a fraction of your total capital that generates $1,000 per month net. Then you can use your additional capital to scale out your portfolio when you're ready.
Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Patrick Crehan I say go for it, be careful but go for it. I would say that @Brit Hale is giving good advice, I would second it. I'd add that while if you go for it, you will also regret not going for it. So don't let fear stop you, but don't let pushing past the fear force you to do something unwise.
House hacking is probably the best first investment ever. You should be okay. Make sure that your numbers work. Depending on your market you should be able to have your tenant pay for your mortgage and more. Here in MA it's harder to do but not impossible. Good luck investing!
Rental Property Investor · Sedan, KS · Member since 2016 · 125 posts · 92 votes
7y
(Don't try to scare me out of buying a property.. this is a confidence booster post!)
I'll spare you the sob story. But I was injured and unable to walk when I bought first property with crippling debt and my wife making minimum wage. We're shopping for a 4th property 8 years later. She has an associates and i dropped out of community college twice.
If we can pull it off anyone can. I've got random downtime at work and in the evenings. I'm far from a professional yet, and our properties are nothing to brag about, but I could probably save you some headache if you decide to tackle some plumbing and run into trouble. A few pics can save a lot of headache. At any rate, good luck! I wish you the best. And there's a silver lining in every single problem you may face.
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Patrick Crehan what's this house hack going to cost to purchase?
House hacking gave me a free place to live for the last 7 years! I would say it's worth it if the cost of your mortgage after house hacking ends up being a good amount cheaper than your rent cost if you just lived with roomies. Don't worry about the whole "debt paydown thing" for the first few years. It's all interest paid to the bank at first anyways.
I do not want to throw anymore than 5k on the down deposit, but it's very important for me to try to have the seller pay my closing costs.. I want to have some cash reserve
Chicago, IL · Member since 2018 · 546 posts · 227 votes
7y
This is a great question and totally understandable as far as just embarking upon something new; there was a great webinar last week that Brandon Turner hosted on How A Newbie Can Start Building Wealth Through Real Estate and the first part of it really addressed a lot of that self-doubt. As someone who is newer to REI and in a very similar boat, this was super informative for me. Specifically, he notes this "Trapped in Fog" concept; a lot of people just getting started often feel "trapped in fog" - no idea what's in the road; you gotta keep driving (most people in real estate have an "I can't see a mile up the road, so I'll pull over" approach; people stop driving because there's not as clear a vision; a lot of these people give up altogether). In real estate you can learn from the mistakes that other professionals have made, or you can make them on your own) - keep going! Commit. Learn & Plan. Shop. Analyze. And Finance. There are a ton of BP tools available and those webinars are definitely a great place to start (they're loaded with good information). I hope that helps. You've got this!
I am in Cincinnati.. the market here is fairly forgiving. An average property (let’s a duplex -triplex where I live) will run between 110,000–150,000.. that’s not hard to afford... I have also heard of people buying single families and turning them into duplexes?
It's pretty common. A friend of mine lived in a small apartment that was actually one of 4 units in a 2 story house in a college town. Things like this I have never even considered. I think it's fascinating. Especially if you descide to live in 1 and get the FHA loan.