Advice for First Time Purchase/Investment

[Ross Sims]

Hello Bigger Pockets community!

This is actually my first post on here, I just discovered BP last week. I think I have listened to 15 of their podcasts already!

I'll give you a little background on my situation. I am 25 years old with zero debt to my name. I went the tradition route and obtained my bachelors degree from The University of Alabama. I then moved from there to Charleston, SC and have been here since July 2016. I currently work part-time with a bank and part-time with a church. I know Charleston has some great real estate opportunities. I would love to get started and quit renting from others. 

Here is where I would like some advice. I have about $13,000 for a down payment. My gross annual income is around $19,000. I am a first time home buyer. My current goal is to buy a duplex in my price range, preferably under budget, REO, or just a great deal. I will more than likely put 2.5% or so down and with the first time home buyer program in South Carolina they will give me a $5,000 grant towards the down payment. I would use the remainder of the $13,000 for any kind of repairs and touch-ups needed. My dad will be co-signing on the loan with me so I will probably be approved for a loan far greater than I would want/should take on. I would feel comfortable with a $100,000 duplex.

I would live in one side of the duplex, so there may not be cash flow but the tenant rent would cover my mortgage. I would potentially apply the BRRR strategy, or portions of it anyway. My next goal would be to purchase a second duplex and move in to that one so that my current one would create a positive cash flow. Then potentially purchase a flip to start snowballing some funds for larger rentals. 

One last thing, I am thinking of getting my real estate license. I know that most don't think you need it for real estate investing. For me it would be for two reasons: to help me learn the industry and it would become a potential greater revenue stream thank working part-time at the bank. 

I would love to connect and network with anyone in my area, or even from afar. 

Thanks for reading!

[Justin Smith]

Ross, you're 25, have little income, and are new to real estate. This is the perfect time to take a gamble! You will be educating yourself about neighborhoods and the numbers over the next several months and analyzing every property that hits your target markets close to your price range. It's going to be an educated play. But don't do the time sensitive thing. You'll either get extremely lucky or you'll end up in the wrong property if you rush it. There are many ways around the problem of a new lease in July. Figure out an alternative option (sublease a room in a shared house for example). As for the $150K mortgage, the difference in PITI will probably be around $300 from $100K to $150K. You can handle a month of vacancy. As an owner occupier it'll almost be foolproof. You're going to have a rental unit paying the majority of your expenses. You're going to have a roommate share your side. You're going to do your own repairs (within reason).

I'm no pro, but my first property was a 4000 square foot assisted living facility (with 16 beds in 8 bedrooms) in Philadelphia on the border of a warzone and I bought it in 2009. Was it a gamble? Hell yeah! Was it too much to handle? Yes it felt like it at times, but I took it one step at a time and figured out a solution to every problem. It was worth it. I was a recent college grad in "the recession," and I made under $19K some years but now it's a 4 unit cash-flowing asset that I can borrow against to purchase other properties. Full disclosure, my dad helped me finance that deal just like yours will. It's great to be able to start out with the confidence that an encouraging parent can help provide. 

I am all about being conservative with your numbers and living extremely frugally and I see you are doing both and I commend you for it, but I am also confident that you are resourceful enough to land a duplex for your first house hack and handle every problem it'll throw your way. The problem is it's going to necessarily take you out of your comfort zone. I encourage you to embrace that, and I'll be looking out for properties for you.