Buy a rental OR Build a spec home

[Justin Sherfey]

Hello BP!

I’m a 20 year old college student looking to either buy a rental OR build a spec house with my dad. I live in Spokane, WA and was looking for advice on which to do first with today's market. I have about 70k in the bank. A spec build would have a cash on cash return of appropriately 75k over a 9 month period (if all goes as planned) and for a rental to work I'd need $200+ cashflow and 15%+ ROI. At the moment I do not qualify for bank financing because I do not have two years of provable income (I'm a musician). Any ideas on which path to take in today's market?

[Jay Hinrichs]

Originally posted by @Melissa Murphy:

Hi Justin,

A very good question and lots of variables to consider. A spec is a riskier way to get into the market, but the payoff can be stronger. It seems like it would be putting all your eggs in one basket. With the cash you have, you could probably buy a rental or house hack (buy a duplex and live in one side), which is less risky, also eliminating your rent expense.  Also, private money, although not cheap compared to conventional rates, would allow you to get your foot in the door and likely refinance, once you have built up your employment history. If you need the names of a few local private money lenders, happy to connect you. 

Congrats on getting started so early on this great journey! 

Melissa 

 in my mind on the west coast house hacking four plex's as a young up and coming investor is probably one the best things one can do.. use your 4 mortgage slots for 6 units over a 4 year ramp up and get the best rates and best leverage.