Got the 1st! Working towards 2nd Property.

27 Replies

Hello,

Im 26 years old and I purchased my first rental property almost 7 months ago. It's a two family property that I was able to use FHA financing to acquire. The house cost 168k and the taxes are about 6k a year with insurances my mortgage payment is about $1520 a month. Both units are 3 bedrooms which is great because one of the units rents for 1300$. In the other unit I occupy one of the rooms while renting out the two rooms to friends for about $550 each bringing in an additional $1100. See below for current numbers on property number 1.

3.5% Downpayment - 6k

Unit 1=$1100

Unit 2 =$1400

Total Rental income  $2500

Mortgage payment  - $1500

Total Cashflow = $1000

I save the cashflow in a separate bank account which I use to pay expenses such as the water bill along with other potential maintenance expenses. I have two other jobs (Realtor and Soccer Trainer) I still manage to work and save a majority of my money. I don't have a car payment (yet), Im still driving an 2004 acura rsx thats literally on its last leg. Im living rent free but working towards purchasing my next property. I keep hearing I'm going to have to put down 20-25% on the next one. I wish to purchase another duplex or triplex in a better area with parking. Obviously the price will be much more than my current home. After acquiring a better property in a better location for myself I wish to continue focusing on rental properties. I think I'm doing well for my first property but would like any advice possible if out there. Currently I have 20k saved up and patiently waiting to have enough for my second property. My property also gained 30k worth of equity I noticed so Im not sure if I can tap into that or convert current property to a conventional then just do FHA again on the next property.

Look forward to hearing back for any advice out there in regards to working towards the 2nd property.

If you’re correct about having gained 30k in equity then you’re right at about 20 percent. What’s your PMI per month? If you could find a bank to do 80 percent LTV, I’d refinance. Most will probably only do 75 percent LTV, so ask around and see what you find

Originally posted by @Caleb Heimsoth :

If you're correct about having gained 30k in equity then you're right at about 20 percent. What's your PMI per month? If you could find a bank to do 80 percent LTV, I'd refinance. Most will probably only do 75 percent LTV, so ask around and see what you find

My PMI is only about 100$ a month. How long do I have to wait before I can refinance?

Correction, It went up even more!! I have 50k worth of equity!

I’d have a realtor run comps, but I believe you said you were a realtor?  If so pull your own comps lol, which I’ll assume you’re doing.

Typically you need 6 months before you can refinance 

Congratulations and good luck on your next project !

Originally posted by @Caleb Heimsoth :

I’d have a realtor run comps, but I believe you said you were a realtor?  If so pull your own comps lol, which I’ll assume you’re doing.

Typically you need 6 months before you can refinance 

Yes, I have the comps to support it.  Its been 6 months!!

@Naeem Boucher this sounds great! i don't have any advice as i'm currently looking for deal #1 but i saw the location and had to say wassup and congrats! I'm in PA but I hail from Jersey and my mom's church is in Paterson! Keep it up!

Originally posted by @Chanise P. :

@Naeem Boucher this sounds great! i don't have any advice as i'm currently looking for deal #1 but i saw the location and had to say wassup and congrats! I'm in PA but I hail from Jersey and my mom's church is in Paterson! Keep it up!

 Thank you!! Much appreciated! Good luck to you!

@Naeem Boucher nice work on your first property. I'm 25 and closed on my first about 5 months ago, and also rent to roommates. They cover all but $250 of my monthly PITI, and it's a 3/2 condo so maintenance is very minimal. I'm not matching up to numbers like yours, but it has definitely helped me ramp up my savings for the next one (I came from being a renter paying $1,000/month).

I have a conventional loan, but like me, aren't you allowed to move out of this property after living there for 12 months, rent out your unit, and go get another owner-occupied loan? Let's say your next place is $200k, assuming your DTI can spare it you can get a 5% down conventional loan ($10k down). Other than that, you'll have to put either 20% down on a SFR or 25% down on a MFR if you're not going to live in it yourself.

Originally posted by @Derek Luttrell :

@Naeem Boucher nice work on your first property. I'm 25 and closed on my first about 5 months ago, and also rent to roommates. They cover all but $250 of my monthly PITI, and it's a 3/2 condo so maintenance is very minimal. I'm not matching up to numbers like yours, but it has definitely helped me ramp up my savings for the next one (I came from being a renter paying $1,000/month).

I have a conventional loan, but like me, aren't you allowed to move out of this property after living there for 12 months, rent out your unit, and go get another owner-occupied loan? Let's say your next place is $200k, assuming your DTI can spare it you can get a 5% down conventional loan ($10k down). Other than that, you'll have to put either 20% down on a SFR or 25% down on a MFR if you're not going to live in it yourself.

I’m not certain! I’ll have to check on this with my mortgage guy. 

Congrats on your purchase as well!! I was interested in condos as well but wanted be cash flow positive. 

Awesome! Good stuff. I hope things go well. New Jersey, huh? I’m still trying to figure out what that state does with all their tax money?!? For what they charge their residents, every individual should be promised a paid admission to their prestigious Princeton U. Really. It’s very unfortunate the property tax rates. I imagine it really significantly impacts your mortgage payment and CF.

Originally posted by @Naeem Boucher :

I’m not certain! I’ll have to check on this with my mortgage guy. 

Congrats on your purchase as well!! I was interested in condos as well but wanted be cash flow positive. 

I'll be profitable once I move out and hold onto it as a rental, but you're right, it wasn't possible to cover the entire PITI with my bedroom not producing any revenue. My plan all along has been to live here for 1-2 years, then go move into a new place with 5% down and repeat the process (hopefully with a MFR this time.) I know it's not for everyone, but at this time in my life I actually enjoy moving somewhere new every couple of years.

Originally posted by @Dave Rav :

Awesome! Good stuff. I hope things go well. New Jersey, huh? I’m still trying to figure out what that state does with all their tax money?!? For what they charge their residents, every individual should be promised a paid admission to their prestigious Princeton U. Really. It’s very unfortunate the property tax rates. I imagine it really significantly impacts your mortgage payment and CF.

 Yeah I keep hearing the taxes suck compared to others!! What do you pay in taxes? 

Would you recommend out of state investing?

Originally posted by @Derek Luttrell :
Originally posted by @Naeem Boucher:

I’m not certain! I’ll have to check on this with my mortgage guy. 

Congrats on your purchase as well!! I was interested in condos as well but wanted be cash flow positive. 

I'll be profitable once I move out and hold onto it as a rental, but you're right, it wasn't possible to cover the entire PITI with my bedroom not producing any revenue. My plan all along has been to live here for 1-2 years, then go move into a new place with 5% down and repeat the process (hopefully with a MFR this time.) I know it's not for everyone, but at this time in my life I actually enjoy moving somewhere new every couple of years.

 As long as you have your plan brother!

@Naeem Boucher Congrats on the purchase, seems to be working out great!

Where did you buy? Numbers seem to be reasonable for a duplex in NJ. I'm from NJ myself. 

Originally posted by @Mike Ventura :

@Naeem Boucher Congrats on the purchase, seems to be working out great!

Where did you buy? Numbers seem to be reasonable for a duplex in NJ. I'm from NJ myself. 

This property is in Paterson nj. Rough area but I’m born and raised in this area so I know the areas to invest in. 

@Naeem Boucher Gotcha! Thought that might be the case because of your tagline "Investor from Paterson". Although it may be a rough area you have a unique advantage having grown up there. Many people may stay away but if you know where to invest and make some money have at it!

All the best!

Originally posted by @Naeem Boucher :
Originally posted by @Dave Rav:

Awesome! Good stuff. I hope things go well. New Jersey, huh? I’m still trying to figure out what that state does with all their tax money?!? For what they charge their residents, every individual should be promised a paid admission to their prestigious Princeton U. Really. It’s very unfortunate the property tax rates. I imagine it really significantly impacts your mortgage payment and CF.

 Yeah I keep hearing the taxes suck compared to others!! What do you pay in taxes? 

Naeem, I pay under $2k for my personal residence here in coastal SC.  Its a beautiful area, about 40 mins from the beach and 20 mins from historic downtown Charleston.  We have all the amenities of a typical suburb.  Our schools may not be as good as yours however, but I can guarantee yours aren't "300%" better than ours (that what your taxes are).  Hey, I guess it could be worse.  I family some family outside Trenton, NJ and they pay $10-15k per year in taxes!  Insanity.  And the one paying $10k per year has a nice, but not over-the-top 2500 sf 4 bed, 2 bath home.  

Anyways, I bought my first property, a duplex, at age 27.  You've got me beat - good stuff!

Congrats Naeem, Great job at such an early age.  I'm starting to invest in Paterson, and although I didn't grow up there I had a few years working there plus family that live there enough to feel confident with the areas.  Paterson has a bad rap, and some of it is justified, but it's a centrally located, easy to access city, and still relatively afordable.  Not to mention there is great food there (Middle Eastern, Peruvian, Jamaican, Colombian, Mexican) if you aren't afraid of the areas.

Originally posted by @Dave Rav :
Originally posted by @Naeem Boucher:
Originally posted by @Dave Rav:

Awesome! Good stuff. I hope things go well. New Jersey, huh? I’m still trying to figure out what that state does with all their tax money?!? For what they charge their residents, every individual should be promised a paid admission to their prestigious Princeton U. Really. It’s very unfortunate the property tax rates. I imagine it really significantly impacts your mortgage payment and CF.

 Yeah I keep hearing the taxes suck compared to others!! What do you pay in taxes? 

Naeem, I pay under $2k for my personal residence here in coastal SC.  Its a beautiful area, about 40 mins from the beach and 20 mins from historic downtown Charleston.  We have all the amenities of a typical suburb.  Our schools may not be as good as yours however, but I can guarantee yours aren't "300%" better than ours (that what your taxes are).  Hey, I guess it could be worse.  I family some family outside Trenton, NJ and they pay $10-15k per year in taxes!  Insanity.  And the one paying $10k per year has a nice, but not over-the-top 2500 sf 4 bed, 2 bath home.  

Anyways, I bought my first property, a duplex, at age 27.  You've got me beat - good stuff!

 How many property’s do you have. ?!

Originally posted by @Ryan L. :

Congrats Naeem, Great job at such an early age.  I'm starting to invest in Paterson, and although I didn't grow up there I had a few years working there plus family that live there enough to feel confident with the areas.  Paterson has a bad rap, and some of it is justified, but it's a centrally located, easy to access city, and still relatively afordable.  Not to mention there is great food there (Middle Eastern, Peruvian, Jamaican, Colombian, Mexican) if you aren't afraid of the areas.

 Thanks man!! I completely agree with you!

@Naeem Boucher First, congratulations for getting started, and on a great CashFlow for that matter (many never do). 

Simply, REFi out from the first asset, and use some of the proceeds in addition to the 20k you saved up to get another FHA for the second property, so you'd have to owner-occupy into the second asset. 

Now, for the second property, you should scale up to a 4-unit (if you are financially able to of course). Acquiring a duplex or triplex is a pit stop really. 

Hope this helps. Goodluck. Thanks! - Ola 

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