Rental Property Investor · Beaufort, SC · Member since 2020 · 119 posts · 98 votes
Hello everyone, I am a young service member that is eager to jump into real estate. I am currently in the planning stages of my journey and hoping for someone to guide me in my way of thinking to achieve financial independence before 30 through buying and holding rentals (I am 19 now). I am located in Beaufort, SC. My first plan is to buy a property once every 1.5 years, that I will put $25k down on, that cash flow between $200-$300. Than at year 5.5 I'll have enough money saved up through cash flow, investments, and savings to do a BRRRR with my own money and scale using that strategy to hit my goal faster. OR I can just save about $125k and in 5 years BRRRR using my own money and scale that way. What are some better ways I can go about? Financial Independence to me is $125k in annual cash flow
@Jabbar Adesada This is some excellent forward thinking. You've clearly defined your goal and defined two plans that have a reasonable chance of leading to achieving that goal.
Between the two, if you go with the first option you'll have cash flow and experience on your side as you begin to BRRRR. Hopefully your turn-key properties will have appreciated a bit in that time though that's not something you should rely on.
That being said, you don't need 125k to begin to BRRRR if you carefully utilize leverage. There are commercial lenders, private lenders, hard money lenders and even conventional lenders that can loan you money to purchase and rehab a property. Loans cost money, so you do pay for the privilege of using their money to run your BRRRRs vs paying all cash but it allows you to implement the strategy sooner. I am not saying that this is the right strategy or plan for you because I don't know your tolerance for risk among other things. But it is something to consider.
You may also want to consider house hacking. Using VA loans (assuming you can obtain them due to your service) which I honestly don't know a lot about other than that they supposedly have great terms and rates you could buy a primary residence to live in with very little money out of pocket, rent out the other rooms for about a year or so while you pay down your loan balance to 80% using your roommate's rent money so that you can refinance to a conventional loan (which frees you up to obtain another VA loan) and then repeat. Buy another house to use as your primary residence with another VA loan and move in there to do it again. I'm making some assumptions here about VA loans that they function like FHA loans but you could do the same thing with FHA loans.
@Jabbar Adesada This is some excellent forward thinking. You've clearly defined your goal and defined two plans that have a reasonable chance of leading to achieving that goal.
Between the two, if you go with the first option you'll have cash flow and experience on your side as you begin to BRRRR. Hopefully your turn-key properties will have appreciated a bit in that time though that's not something you should rely on.
That being said, you don't need 125k to begin to BRRRR if you carefully utilize leverage. There are commercial lenders, private lenders, hard money lenders and even conventional lenders that can loan you money to purchase and rehab a property. Loans cost money, so you do pay for the privilege of using their money to run your BRRRRs vs paying all cash but it allows you to implement the strategy sooner. I am not saying that this is the right strategy or plan for you because I don't know your tolerance for risk among other things. But it is something to consider.
You may also want to consider house hacking. Using VA loans (assuming you can obtain them due to your service) which I honestly don't know a lot about other than that they supposedly have great terms and rates you could buy a primary residence to live in with very little money out of pocket, rent out the other rooms for about a year or so while you pay down your loan balance to 80% using your roommate's rent money so that you can refinance to a conventional loan (which frees you up to obtain another VA loan) and then repeat. Buy another house to use as your primary residence with another VA loan and move in there to do it again. I'm making some assumptions here about VA loans that they function like FHA loans but you could do the same thing with FHA loans.
Having served in the Marines myself, I can tell you that you have the potential to save a lot of money if you don’t fall into a lot of the stupid habits that young Marines typically do. Sounds like you have a pretty good plan. Good luck.
Congrats to you for your ambition! I work with a bunch of young aspiring real estate investors just like you, and I am willing to help you out with some advice or even chat on the phone if you wish. But I first recommend you read this article I wrote for Bigger Pockets titled How to Invest in Real Estate Before Turning 21. Once you've read it, let me know your thoughts and if you have any questions. I am a high school teacher in Colorado and I am always looking to help young people get started in real estate investing or help in any way I can. Let me know if you want to chat sometime. https://www.biggerpockets.com/..
Thank you! I love the idea of doing a BRRRR for my first property. I just don't know how to figure out which contractors to use, how to manage them, pay them, etc . Something I'm working on learning currently. And also knowing what I need to add value to that property during the rehab , is also what I lack knowledge on. If I can figure out those two things I would be completely comfortable in starting out from the beginning with the BRRRR strategy. I also love that house hacking strategy and that is something I will implement once I start having to pay for housing most definitely!
Thank you! I am known in my shop as the “finance guy” and have been committed for a little over a year now to living frugally, investing, and learning so I can one day enjoy the privilege of financial freedom
Thank you! I have read your blog and it helped me understand a lot more about what lenders are looking for. I currently have the W-2, the Savings, and I am always learning, but I don’t have a very long credit history. How big of role will that play in them approving me for a loan? Will I be able to leverage being military, having a pretty good debt to income ratio, and everything else they would look for to compensate for not having a many credit lines and long history? It would be awesome if I could chat with you and learn! Thank you for the opportunity.
@Jabbar Adesada - As a veteran (go Army!) my advice to you is the following.
1. Report to Basic Training - Crush it and bury some sand fleas!
2. Research the local real estate market - not sure if you're enlisting or commissioning however, at 19 I would assume that you're enlisting therefore, you will not be able to move off-base until the rank of E-5 or if you're married. If you're single, you will be given a place in the barracks but you could purchase a place off-base but you will not receive BAH due to military regulations. My recommendation would be to use savings from Basic Training to purchase a place (3/2) in the local market and ask some friends to move in with you so that you could house hack.
3. Rent - continue to rent the house out to the same target market (i.e. recent basic graduates) for the next few years.
4. Repeat.
For more information about renting to military, please see my article.
Thank you Kyle, I have been enlisted for a little over a year now and I love the house hacking strategy and your blog gave some great insight on how smart it can be to market towards military tenants. I’m going to do more due diligence on how I can implement that strategy sooner.