Seasoned Investors - What Would You Do if You Were In Our Shoes?

Question

My wife and I are at an intersection in life and would would be super grateful to hear your feedback on how you might tackle our unknowns regarding a re-start into real estate investing. We have over 16 years of property management which included a rental we owned in the 90's.

We have our house on the market in Caldwell, Idaho (hot market) and we expect to clear over $100k in equity. We will be debt free and have over $30k in cash after the sale.

Here are some of the challenges: We're both in new careers and can not get traditional lending (I'm commission only and need 2 years income history). So, we're looking at owner financing as primary funding option and possibly hard money (which we don't know much about just yet). The other challenge is . . . Where should we live? Can't afford an investment property and a primary residence at the same time.

Our Long & Short Term Goals: We'd like to get into multifamily and primarily want cash flow over all other benefits of RE investing (we have a lot of catching up for retirement and current cash flow is unpredictable with commission only job).

Experience: We're hard working and not afraid to talk to people, do research and make decisions. Again, we managed a 22 unit apartment building for 9 years and owned a rental property for 7 years back in the 90's. Excellent credit. Several years of new construction, remodeling and handy man experience.

• The Big Questions - If You Were In Our Shoes....
• 1. Where to Live - Would you try to buy a multifamily with a vacant unit? Would you temporarily rent while starting up the RE investing?
• 2. The Money - Would you shoot for owner financing or hard money lender? ....or, both?
• 3. How much reserve would you keep in the bank?
• 4. What's the #1 most important contact to have?
• 5. Any recommendations on contacts in the state of Idaho?

Thanks in advance for the feedback - Have A Great Day!

Steve Vaughan · Answer

If my big question was where to live after the sale, I'd question the sale.  Is it just to pay down debt?  I noticed the difference in $100k equity vs $30k net.

Tell us more about the house you're selling.  Value, rent rate if rented out, mortgage balance, pmt, rate , etc.

Why not stay there while you wait out the 2 years,  save and learn? Expensive?

Jay Hinrichs · Answer

Many will have the generic advice to buy rentals.. but to me I would find a vehicle that increase your income and keep saving money..   and one way to do that is to value add flip.. and scale that and then add rentals as you can get financing for them through traditional means.

Dennis M. · Answer

I wouldn’t be kissing the banks butt ( or a HML) nd using that 30k on a down payment I know that ! Find aN older burnt out landlord With a big multi family apartment that is poorly ran . A fella who has been beat up for 30-40  years in the rental game . A man disgusted with tenants toilets termites and trash who wants to just collect sea shells and meander around the beach all day

Negotiate an owner finance deal with him and use the cash for the down payment keeping some back for reserves of coarse . 30k is plenty of cash to do this . Your one motivated seller away from your goal .

Look for as many doors as you can get under one roof and don’t be afraid to buy distressed or one with low rents . The idea is you can value add and find an opportunity others missed . If you do what everybody else does don’t be surprised when you are broke and in debt up to your eyeballs  like everybody else

David Short · Answer

@John Culotta. I would stay put for 1-2 years and take advantage of appreciation. If only at 8% per year you increase your net to almost $75k in 2 years. Air BB a room in your house at $100-125 a night when you visit your grand kids rent your whole house . Your best business decision might to be to stay. An extra 1k on your high interest debt per month ( from room rental) also increase you net to over 100k in just 2 years ..it also let’s you get job stability.

Jean Laurin · Answer

@John Culotta. House hack a small multi family for a year... then do the same with another property.

Lynnette E. · Answer

This is more outside the box, but how about trying to get a 'job' doing maintenance, security, landscaping at an estate property in exchange for living in a guest house/extra room.  This type of a situation would allow your to save your salary and not have housing or utility costs.  And you are qualified to do the tasks and could do them in your extra time.  For a couple of years you could really bank your salaries!

And when you do retire you can move to a hidden treasure that is not a mini California!

The main problem I see with the mass CA exodus into an area is that many of them move to an area to get the low cost of living, then they want to bring along all of their social programming and drive up the cost of living where they move to.

BTW, I am a born and raised CA person.  Where I moved in TN has many of these  ex-CA pats, and they really do want to bring along all their social programming.  Not me!

Mary M. · Answer

I would save funds and spend the time your seasoning in your new job to learn. Dont get in over your head chasing unrealistic investments.

2 years is a very small amount of time to learn and try to focus in on what you want to do.

Theresa Harris · Answer

the big question is why are you moving?

Don Spafford · Answer

@John Culotta With your job, are you tied down to a certain location? Or are you a remote worker? I'm assuming from your comments that you don't have any kids at home. What I would suggest is that you talk to a lender, who may be able to work with you and try to buy a duplex to house hack. Mountain America Credit Union is very good to work with as they understand investment property and could count the expected rent received toward your income. If you buy right you may be able to find a property where the rent from one side alone will cover your mortgage payment. However, do achieve this you may also need to leave the treasure valley area, which is why I asked about your work. If you moved to a lower priced city you could easily find a duplex in a good area for under $200k and if one side rents out for around $800/mo then you should pretty much have your mortgage covered which will satisfy the lender and help you accumulate more cash for the next property. Then a year later you could do another house hack, maybe a 4 plex this time and rent the other side of that duplex and then you start to build wealth with the velocity of money. Then when you are ready to, if you still want to, buy your own personal home again you have two or more cash flowing properties already done for you and you will hopefully have good growing equity in them as well. That's what I would do, it doesn't hurt to at least talk to the lender and find out if they are willing to work with you given the circumstances.

John Culotta · Answer

Thanks everyone for all the great ideas, feedback and input. We are looking forward to the future and have better vision and perspective with the tips you've all provided!

Seasoned Investors - What Would You Do if You Were In Our Shoes?

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