Is this a good plan for a newbie?

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Is this a good plan for a newbie?

Lilah Johnson
Rental Property Investor · Member since 2021 · 24 posts · 25 votes

Hello all. I'd appreciate some guidance or validation in my plan below. I am a first-time investor that has been researching my butt off for the past few months and am very appreciative of this forum. So much information and resources! 

I'm pulling the trigger and getting started in real estate investing after reading all that I can get my hands on and educating myself. 

I have saved about 40-50K to use as a downpayment on, hopefully, two three-unit or quadriplexes in the Ohio area. These would be buy and hold. 

I'm currently in the process of taking out a Heloc on my primary residence of up to 100K that I just want to have at my disposal until I have saved enough cashflow from those properties to support any repairs, vacancies, etc. 

I then plan to reach out to banks in the Ohio area to get preapproved for a mortgage so I can have that on hand. 

Afterwards, I will reach out to agents and property managers in the area to find properties. 

Am I on the right track? Any ideas or advice would be appreciated. 

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Justin Phillips
Lender · Phoenix, AZ · Member since 2018 · 440 posts · 256 votes
5y

@Lilah Johnson Sounds like a good plan to me! 
I always recommend investors look at more specialized 1st position Helocs that are tied to zero balance sweep accounts. Basically it allows all of your normal banking deposits/idle funds to be swept directly towards your remaining balance. It allows you to pay down your debt the same way large corporations do, while retaining access to every dollar. 
My wife and I ReFi'd into one based on these inflated values, so we're ready for when the market turns. 
That would be my other big piece of advice, stay strict on your deal criteria when hunting. With the market hot, you'll want to make extra sure you're running conservative numbers. 
You're in the perfect place for crowd sourced Real Estate Investing Wisdom! Very best of luck! 

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  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Lilah Johnson:

    @Rick Albert something I didn't consider. I think this could probably put a bump in my plan. I didn't know that they'd count it if it was unused at the time if applying for financing for a property. Thanks for letting me know.

     Double check with your lender to confirm. However the idea is you can accrue that debt at any moment so the lender has to assume the worst.

    2Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @Grant Wilson thank you! Good advice. I'll check out the link

    1Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @Emma Minor Hi Emma. Sure. It doesn't hurt to take a look if you're still offering the list. Either way I really appreciate it! And good luck with your investing.

    0Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @Mel Hayes Hello. No not leaving California. Will be an out of state investor for the moment.

    0Reply
  • Grant W. Wilson
    Lender · Boerne, TX · Member since 2018 · 29 posts · 28 votes
    5y

    @Jason Shine now that’s a whole different ballgame. I would advise to just pay the taxes in the event you can’t find a suitable replacement for the relinquished investment. Get with your lawyer, but maybe you could utilize special option period clauses & simultaneous closes to only sell your property if you found a suitable replacement?

    0Reply
  • Mel Hayes
    Investor · Los Angeles, CA · Member since 2016 · 256 posts · 110 votes
    5y

    @Lilah Johnson Before you take out any loans or do anything to your credit you should get pre-approved. You dont want to mess with your DTI while going through the loan process. I've heard you can get a loan for as little as 10% down on oos property if you say its your second home. Maybe look into that since you are not moving. Have you visited Ohio? Cheers.

    2Reply
  • Duane Alexander
    Investor · Atlanta, GA · Member since 2020 · 253 posts · 240 votes
    5y

    Seems like a decent plan except you're missing one important thing. How do you plan on finding a deal? The BP books and this community in general focuses heavily on things like finding a good agent and property manager etc. All of this is unimportant until you can source a deal. I wasted the first 6-9 months of my investing career because I ignored this and just thought someone (a "rockstar" agent and pm lol) was just going to hand deliver me a deal. That's not how it works. Dedicated some time to learning how to market and salesmanship to source deals from motivated sellers directly. This is especially important for you because the competition for on market multi families is friggin insane! Marketing and salesmanship is the most important part of real estate investing and sadly 95% of investors ignore this and its why 95% of investors who want to start never get their first deal.

    2Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @Mel Hayes not yet but plan to this summer. Great advice. Thank you

    0Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @Duane Alexander good advice I haven't heard of yet. Thanks you!!

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    5y
    Originally posted by @Lilah Johnson:

    @Mel Hayes Hello. No not leaving California. Will be an out of state investor for the moment.

     Based on what you're looking to do you'll probably want to keep The Ultimate Guide to Grading Cleveland Neighborhoods handy. Should be a big help to you.

    1Reply
  • Lilah Johnson
    OP
    Rental Property Investor · Member since 2021 · 24 posts · 25 votes
    5y

    @James Wise thank you. This has actually been my pain resource in researching the neighborhoods. So thank you for this!

    0Reply
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