Hey I finally took the plunge and bought my first property at 28 years old! Woohoo! Its a rental property here in Indiana for 36k, has a renter already in it at the end of the lease doing month to month. Not a huge cash cow but useful to show as a loss on my income when I keep track of my expenses. I'm working as an electrician making good money and I wanted some advice on how to proceed. Closing and down payments are a lot. If I keep on doing small deals I could see this taking a while. What are some ways you guys get enough money for another deal? Of course I'm not going to do something again right away but I'd like to start planning and making a path so I'll be ready when the time comes. Also any other advice that you have would be greatly appreciated. Thanks!!
Congrats on your first rental property, you are officially an "INVESTOR"!
Here are a few suggestions I have on building funds/acquiring your future properties:
* Find off market deals - With these deals, you may have some flexibility in how you can structure the deals. You could potentially owner finance, allowing for a lower down payment. You could also partner with someone and split the rental income/equity.
* House Hack - Ones of the best ways to pick up properties is to house hack. Its so freckin easy its not funny. Find yourself a quad with a low down payment option such as an FHA or first time home owners loan. And repeat the process over time. This eliminates the need for you to continuously come out of pocket 20-25% every time.
* Wholesaling - If you are interested, you can wholesale off market deals to build funds. With just a few in your pocket, you will probably be easily lined up to pick up more property
* Save Up - This is an obvious one but not so obvious to many. Start by lowering your expenses. If you are driving around with a $500 car payment and have a mortgage or rent of $1200 a month, that's $1,500 right there that could be saved. Times that by 12 and you are at $20,400 saved a year! Also, once you start to pick up property, your savings will grow more rapidly allowing you to pick up the next one faster.
Good luck on your journey, you are off to a great start!
@Arden Aemmer I’d say try to save as much as possible. If you aren’t self employed maybe see if you’re allowed to do some moonlighting after hours or on weekends to quickly pick up some extra cash to help finance additional deals as soon as possible. The electrician I use charges slightly under the going rate and works nights and Saturdays and makes bank.
I'd definitely consider the FHA 3.5% down payment house hacking on a multi family which I would use personally if my partner wasn't vehemently opposed to living in such close proximity to other people. I believe you only have to live in the building for one year and then you can do it again with the next property.
Some of my properties only cash flow $125 per door per month but are in great locations with a probability of appreciation as the years pass. And some have a huge cash flow of like $850 per door. These I was able to negotiate great deals on at purchase.
So don't worry too much about starting slowly, make sure that each deal pays its own expenses and try to make the next one a little bit better if possible. Utilize the BP calculator. If I could find decent SFH that was $36,000 and didn't need a major overhaul I'd be on top of that all day long unless I could find affordable multis. Which should consolidate expenses with a higher margin of cash flow.
And congratulations on your first home!!!
If you have retirement accounts, you can also try borrowing from there.
I also stopped contributing to my 401k because I had no employer matching, so now that is extra money I can save up to put into real estate.