My Next Move

8 Replies

Hello fellow BP'ers

After a long search of looking for multi family units that cash flow in the Lowell area, and after I was outbid many times on properties by people grossly overpaying for rental properties, I finally decided to look at SFH that I could get sweat equity in. I made an offer on a house in Chelmsford that was accepted. I bought it for $229,000 and it was recently appraised for $307,000 by the town, which my real estate agent says properties in Chelmsford have been selling for 1.2 - 1.3 times assessed value. So with about $50,000 in rehab I plan to do to the property, I am hoping I will have about $80k+ in equity when all said and done. My girlfriend is also planning to start a daycare in the property so I can get some income of that business as well.

I wouldn't call this my first "deal", but it's a half step into the real estate world.  My question is figuring out my next move.

This house is solely under my name and I am probably at 90% of my max buying power due to my DTI ratio (School loans are a pain), so financing another property could prove to be difficult. I know you can only get usually 75%-80% for a HELOC so that really doesn't leave me with a whole lot of money I can pull out of the house, even with $80k in equity. The other option, is to put the next property under my girlfriends name after she can prove (2) years of W2's with the daycare.

I was also curious if there are any people from Kansas City that could chime in here.  One of my best friends just moved out there so I would have "boots on the ground" to be able to look at properties.  The properties seem to be cheaper than my area so it would make financing a lot easier as well as a smaller down payment.  How is the rental/flipping market out there?  Is there some areas to stay away from?

I am thinking about starting with a flip to make a little bit of cash to invest in a buy and hold property.  I have the real estate bug bad and want to start buying more property immediately. 

Any thoughts/advice?

Have you considered looking at your next investment as your primary residence? Much lower down payment required, do the rehab, sell in 2 years and (Or plan on moving) and do it again.  

I don't know your local market but this might be a way(after a couple years) of building a substantial portfolio of property. 

@Chris Carollo

The only problem I see with that is that we are going to be running a home daycare out of the house we just bought. I also have to live at this residence for a year I believe under FHA regulations. I don't think you can legally run a "home daycare" if you don't live there.

I think my next move is a flip, or possible a buy and hold property.

Have you consider out of state? If you invest in property in the Midwest your ROI will be better and easier to get into more than one property due to cost. Let me know if interested?

@Nick Noon , for the amount of money you spent on that SFR, you could be buying small multi family buildings, in good areas here in Kansas City that will provide excellent cash flow. You should definitely check into the KC market.

@Nick Noon , congrats on making your first move. Action trumps dreaming any day!

My thought: If you're considering investing in KC, especially for flips, you'll need an absolute killer team on the ground in KC. Managing a flip long-distance would be extremely difficult unless you work with a reputable partner. I'd recommend you take up @Jason Hawk on his offer to talk it through.

Second thought: Financing may be a challenge given your DTI and girlfriend's lack of W-2 history. Note also that self-employment income (if she's the owner) is scrutinized more carefully than corporate W-2 income, so be prepared for tighter requirements from lenders. You might want to consider private lenders to finance your flips; check out the blogs and podcasts about private lending to learn how to do it.

All that said, I commend you on the decision to begin an investing career in real estate. It can be a crazy ride, but the rewards can be huge. Good luck!

@Chris Dawson

Thanks for the info Chris.  I am really leaning towards breaking into the KC market.   A little scary being so far away, but I feel the risk may be worth it. 

@Jim Genis

Jim, thanks for the advice.  I am starting to research and get creative on looking at financing.  I may not even need it with some of the properties I've seen for sale in KC in the $30k range.  My buddy who moved out there is a long time friend of mine who is also in the construction industry.  I am hoping that he would be able to manage the flips, while I find the deals and be more of a project manager/financial backer.  I plan on leaning on some of the experiences from other BP members in the KC area as well such as Jason in order to help me get a better grasp of the market.