2nd Property Advice
Hello,
I just recently bought a 4 bedroom house in Phoenix. I am 24 years old and have 3 roommates renting out the other rooms. I currently have about 26k in liquid cash I am saving up to eventually get my 2nd property. Unlike the first one bought that I live in, this is not a property I will live in. Any advice on what type of properties I should look at or any strategies I should follow? I know I will most likely need more money but I am able to save about $2k a month. I was thinking about looking into section 8 housing because I heard they can cash flow well out of the gate if you do it well. I really liked the idea of getting an airbnb property, but it looks like that market is a little volatile and unpredictable at the moment. Any advice is appreciated!
Hey Jacob, have you looked into small multifamily out of state? Lower barrier to entry and easier way to acquire more doors. You will still need to gather more capital but that will be for any property that you don't want to make a primary.
I know you said you don’t plan to live in the next property, but why not? You can buy a new primary residence and put just 5% down, so you could buy it now and just rent out the rooms like you are doing in your current house. Then you will have two houses rented by the room, cash flow wise rent by the room is great, especially if you can get 4-5 bedrooms.
@Jacob Gray - well said. But with the interest rate and house market price in Arizona, I wonder if it’s even worth buying at this point in time or just wait a little more and watch! Any thoughts? Thanks!
Quote from @Mason Weiss:
Hey Jacob, have you looked into small multifamily out of state? Lower barrier to entry and easier way to acquire more doors. You will still need to gather more capital but that will be for any property that you don't want to make a primary.
I have though about it. I just figured it would be better to buy somewhere within a driving distance from me. I'll look into this!
Quote from @Mona Ghai:
@Jacob Gray - well said. But with the interest rate and house market price in Arizona, I wonder if it’s even worth buying at this point in time or just wait a little more and watch! Any thoughts? Thanks!
Personally, the high interest rates do not bother me! If anything, I almost like them! I would rather buy with high rates than a "high price" because I can always refinance to a lower rate later!
Quote from @Josh Young:
I know you said you don’t plan to live in the next property, but why not? You can buy a new primary residence and put just 5% down, so you could buy it now and just rent out the rooms like you are doing in your current house. Then you will have two houses rented by the room, cash flow wise rent by the room is great, especially if you can get 4-5 bedrooms.
Hey Josh,
That is a great idea! I got my current property on a conventional loan with 3% down. Do you know if they will allow me to purchase another primary residence home within the same state at just 5% down?
Quote from @Jacob Gray:
Quote from @Josh Young:
I know you said you don’t plan to live in the next property, but why not? You can buy a new primary residence and put just 5% down, so you could buy it now and just rent out the rooms like you are doing in your current house. Then you will have two houses rented by the room, cash flow wise rent by the room is great, especially if you can get 4-5 bedrooms.
Hey Josh,
That is a great idea! I got my current property on a conventional loan with 3% down. Do you know if they will allow me to purchase another primary residence home within the same state at just 5% down?
Yes, you can buy a new primary residence every 12 months, the only stipulations when you buy a primary residence are that you intend to move into it within 60 days and that you intend to live in it for at least 12 months, although you can move before that as long as you have an explanation such as job or family, it’s about intent. You can also use 75% of market rent of your current house to help you qualify for the next.
That is great to know.I really appreciate you explaining that to me!
HI Jacob, I am a real estate agent out here but I work primarily with investors. I have found that Section 8 rental properties can be a highly profitable option due to the potential for higher returns compared to market rent rates. Similarly, investing in an Airbnb property can also yield significant returns, but it's important to keep in mind that it requires careful attention to aesthetics and location selection to appeal to renters and maximize profits. Are you looking for more of a turnkey property for your next or one that you would put some work into first in order to purchase it at a lower price?
Hey Jordyn,
I am on the fence of getting a more turnkey property or one that needs work. I like how I do not need to put extra cash into a turnkey property, but I like the idea of being able to force appreciation in a property as well. I like the idea of getting an Airbnb in the Old Town area. I live around this area and I am really familiar with it. I believe I have a good understanding of what people are looking for who travel to the Old Town area due to me being in one of the target demographics of this area (male in his mid 20s). If I could cash flow $1k a month profit on an airbnb property I would be pretty ecstatic. Not sure how realistic that is. I also know these require more work and probably more investment up front to make the property "stand out". My only concern would be some sort of regulation changing soon where the short term market is completely changed up after purchasing. From what I know about section 8 housing, I like that you can buy a "cheaper" place and have it cash flow higher than a typical long term rental property. The less money I put into a property, the more I have to get my next one as soon as possible. I do like the idea of continuing to take advantage of FHA or conventional 97 loans because I can build my portfolio quicker.
I am also curious what your opinions on the "BRRR" method is? I love the concept, but it really feels like a gamble on the market not dropping hard at any point. I was thinking of doing a more conservative version of this method to play it a little more safe.
With the liquid cash that you have, one of the easier ways to deploy it would be working with a turnkey company. Feel free to reach out if you want to discuss more because I have worked with a couple of turnkey companies.
I am doing the same strategy. How long did it take you to rent out the 3 rooms in Phoenix and what platforms did you find roommates?
Quote from @Jacob Gray:
I am also curious what your opinions on the "BRRR" method is? I love the concept, but it really feels like a gamble on the market not dropping hard at any point. I was thinking of doing a more conservative version of this method to play it a little more safe.
Love the BRRR method. If you are worried about the market conditions focus on easy flips that you can get in and out of in 4 - 8 weeks. The last thing you want is to be stuck in a 6 month flip and be 2 months in when something breaks. A little more of a gamble and requires more of your time upfront as you get the renovations complete but it can be a great way to make your cash work quickly for you. I keep an active search on these "lipstick" flips, feel free to reach out and I can start sending them to you.