Great advice that might have temporarily killed my plans

Andrew Cornstubble

Rental Property Investor · Sedan, KS · Member since 2016 · 125 posts · 92 votes

@Ramonater Ramo I'm pretty green still and live in an affordable area. But I've thought a lot about what I would do in your situation. I would try and contact some investors through bigger pockets and maybe make a few wholesale deals or just ask them if they'll be willing to pay you a finders fee. Use what time and connections you have to help bring a successful investor some good deals and maybe pocket some cash while you grow.

Tim Herman

Member since 2018 · 2k+ posts · 1k+ votes

@Ramonater Ramo Parkside lending is offering a 5% down owner occupied jumbo mortgage. Don't know what the qualifications are. Your payments would increase from $2700. Estimate of $3800 per month plus maintenance.

Marc Winter

Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes

As a fellow "getting up there in age" guy, I can tell you from this end of things owning your own home free and clear is a great feeling. So is owning f&c rental properties--nice for retirement.

However, the challenges of getting from point A to point B will take work, creative thinking, and probably some sacrifice mixed with leaps of faith. Keep in mind that there are always deals out there--in ANY/EVERY market. And remember that you don't have to buy your "forever" home right now. You'll probably move every 5 to 7 years as per averages.

For your own home, I think you would be an ideal candidate for a lease/option or taking a property 'subject-to'. Creative real estate is all about CONTROLLING the property--not always necessarily about outright ownership. Build up your reserves, get your own home (one way or another) and take small steps towards getting rental property under your control or ownership. You are off to a good start!

2 Reply

OP

Member since 2019 · 27 posts · 4 votes

@Jay Hinrichs thank you for your reply and i agree with buying your home regardless the price as long as its a good neighborhood and good for the family.

OP

Member since 2019 · 27 posts · 4 votes

@Andrew Cornstubble You've honestly ready my mind. As soon as i let what advice i got sink in and get over the fact that i might need to delay my plans for now, I immediately started thinking of different avenues to increase my income through real estate. I still need to do some research about wholesaling or i was even think about talking to investors that would put up the cash while i do all the physical work and try to find flips or something along those lines.

OP

Member since 2019 · 27 posts · 4 votes

@Tim Herman i have never heard of Jumbo mortgages. I will definitely look in to that. $3,800 towards my own home is better than $2,700 for rent. Thank you

OP

Member since 2019 · 27 posts · 4 votes

@Marc Winter Exactly, getting from point A to point B what i need to figure. I never really thought about my first home not being my "forever". After reading what you said and letting sink in for a while that might actually make buying my first home easier since i wont be searching for my "forever" home yet. I don't know much about lease/option or taking a property 'subject-to' but i will definitely look in to that and talk to my real estate just to see his thoughts and learn more about that. Thank you for your reply.

Jo W.

Real Estate Agent · Buffalo NY · Member since 2017 · 68 posts · 33 votes

@Ramonater Ramo

It all depends on your personal risk tolerance, how involved in real estate are you looking to be, and how much you and your family are willing to sacrifice.

Were you considering house hacking?

What about saving and buying a 4 unit investment that will generate about 8-9 k a year?

Ned J.Pro Member

Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes

Big question..... what is keeping you from moving from Irvine? Work? Family? Just don't like change?

Unless there is something locking you to that area, have you considered a move to a more reasonably priced area. I live in CA, so I understand that term is all relative...... it will all be expensive, but there are areas that are more "reasonable" in price than others.

You just got fully out of debt.....are you ready to then jump to having 450k of debt for one item..... that is NOT an asset...???? Your house will not make you $$....... it will consume it.....if you are lucky it will appreciate and you can make $$ when you sell....or refinance along they way and pull $$ to use in other investments.....but who knows when that is and what the market will be at that time.....could be worth double what you paid for it.... or half...... no one knows for sure.

At the current price points for some pretty mediocre/poor houses, I would keep renting....

The other decent option is to house hack...... get someone else to pay all/part of your debt.... then its an asset....not purely a liability...... still not gonna be cheap if you stay in CA, but its better than buying at these prices.....

Andrew Cornstubble

Rental Property Investor · Sedan, KS · Member since 2016 · 125 posts · 92 votes

@Ramonater Ramo I used to think that also. May as well join some real estate clubs and make some friends now. Good luck to you out there. I had no idea how big the world of real estate was until recently. It's equally as exciting though.

OP

Member since 2019 · 27 posts · 4 votes

@Jo W. As of now i have not truly considered house hacking since it will be even more expensive than a single family home although, i do plan on looking in to that option.

Based off my research in GA to get a 4 unit that will generate 8-9K/year is probably near the same price (if not higher) as a single family home in Mission Viejo. That's a great suggestion though that i will consider. The great thing about all of the replies is that its opening up my mind to look at different options. Thank you

OP

Member since 2019 · 27 posts · 4 votes

@Ned J. Short answer to whats keeping me in Irvine is that for the first 7 years of my marriage we lived in 3 different countries and 5 different homes (due to my work) now that we have finally settled down and have 3 kids, i want some stability for my family and i think if i told my wife lets move again she might give me a black eye.

house hacking is something i am going to consider but, it wont be cheap trying to find a good place to live in while house hacking

OP

Member since 2019 · 27 posts · 4 votes

@Andrew Cornstubble That's the plan to start going to meet ups and networking.

Don Gouge

Johnson City, TN · Member since 2017 · 209 posts · 367 votes

I look at things a bit differently than many in that I don't ALWAYS think that buying a home to live in is always the best thing to do. Homeownership has a lot of costs that people are willing to overlook. When you rent and the heat pump dies the landlord pays. WHen the roof needs replacing it doesn't come out of your pocket. The landlord pays the property taxes. When you rent and need to move you just give notice if you are month to month or of you have a lease you are usually within a relatively short period of time of lease end. If you own and have to move you have to sell and that can take a very long time. You have to pay a lot of money to sell your home. Ordinarily I believe in most long held beliefs in common sense investing but there are always exceptions and times do change. A college education is a great example. Young people have been told for the last 75 years that college was valuable and a great investment and should be pursued at all costs. Now graduates come out of college with massive student loan debt that is altering their lives and working low wage paying jobs.

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

@Ramonater Ramo How long have you lived where you are now? At the risk of you getting a black eye, why not talk to your wife and see what she thinks about moving? Perhaps she would like to live closer to some of her family or dreams about living in a certain city with the condition that you will live there for a set number of years. This is assuming your job and hers are portable or you can find similar work in that city.

Geordy Rostad

Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes

Don't do nothing.

But also, don't FOMO into a bad market. Owning your house is great long term but if I could do it all over, I would have bought a 4-plex first and lived in a unit. If I had done that when I was 20, instead of buying a house I could barely afford, I'd be living a much different live today.

Personally, rather than owning my house, I would rather have 5 houses generating an income stream that would pay my mortgage(or rent).

Keep saving. Keep analyzing deals. Look for some BRRRR deals in Georgia and maybe try to wholesale some deals locally to get your feet wet. Grab the thing that makes sense when it finally pops up. If you are continuously looking, you'll know when that happens.

Ned J.Pro Member

Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes

Totally get not wanting to uproot the family and move again....

As a family, you have to decide on what your priority is at this stage...... stability of owning a home where you are now......and because your market is so expensive, delaying any chance of building wealth for the future.....or focus on building for the future by moving to an area that you can afford to buy and invest in..... or stay put, rent and invest in another market.

Nothing wrong with any of those options..... you have to do what's right for you.....

Megan Hirlehey

Pittsburgh, PA · Member since 2016 · 140 posts · 119 votes

Maybe I missed this somewhere in the OP or in the comments, but what is your dad's friend's reasoning for owning your own home outright before you start to buy rental properties? Even buying your own home before starting to invest isn't really a "must-do" to-do item in my opinion, it all depends on your personal situation. If you live in an area that you and your family like and you don't forsee any reason to move in the next 5+ years (job changes, move closer to family, etc) then it might be a good idea to stop putting rent money in someone else's pocket and start building your own equity, but it's really a personal decision based on your individual circumstances.

As far as paying off your house (assuming you do buy one) before buying an investment property, unless it's a personal "comfort factor" for you, I think it's a waste of your exra money and almost ten years of NOT being invested in anything given how low mortgage rates are. I see how $3,000/year is low "dollar-wise," but 10% return is still higher than any current mortage rate on primary residences. If you put $30,000 in the bank and earned a 10% return on it over the year, anyone with a pulse would say that's an awesome return, so looking at it from an ROI stanpoint, if you make early mortgage payments on a 5% loan, you've only created a 5% ROI (in other words now you've tied up $30,000 for a year to only earn $1,500), as opposed to the 10%/$3,000 return you could earn elsewher in the market. Choosing the 10% ROI option is clearly more logical, so to me it does not make sense to tie up all of your money in a liability (your primary residence is a liability if you only live there and generate no income from it), unless having a paid off house is just something that makes you sleep better at night.

George Pauley

Chandler, AZ · Member since 2017 · 174 posts · 269 votes

I really, really, hate that fatherly advice. As rich dad reminds us, our homes are NOT as asset. If you want a doo-dad (like a home, car, vacation, etc.), build up your passive income to the point that you can afford it.

Let's look at the numbers a different way. You are currently paying $2700 in rent to have a place to live. It would cost you $120k in down payment, to then make mortgage payments greater than $2700 to have a place to live. Alternatively, your original plan was to pay $30k to make $3k a year. At this point you are getting 1 month of rent free every year. Take that same $120k and buy 4 such investment properties. Now you are getting 4 months of free rent every year. Or put another way you are now only paying $2100 a month in rent. Yielding you $600 a month extra cash to start building up a down payment for investment property #5.

Yes, your rent will keep going up, but so will the rents on your investment properties. Inflation acts on both assets and liabilities, and the two (generally) offset each other.

Yes you run the risk of getting older and still not owning a house. But do you really care if, at that point, you have enough passive income to cover the mortgage payment?

Aaron Youngman

Rental Property Investor · Member since 2018 · 10 posts · 5 votes

If you're a Dave Ramsey person then why do you have two leased cars?

OP

Member since 2019 · 27 posts · 4 votes

Originally posted by @Theresa Harris:

@Ramonater Ramo How long have you lived where you are now? At the risk of you getting a black eye, why not talk to your wife and see what she thinks about moving? Perhaps she would like to live closer to some of her family or dreams about living in a certain city with the condition that you will live there for a set number of years. This is assuming your job and hers are portable or you can find similar work in that city.

We have been in Irvine since August of 216. My wife and I have already had this conversation and Irvine (and its surrounding areas) is her dream area. As i said before after 7 years of literally moving around the world, now that we have 3 kids, we want and need stability. We are talking about and considering if i were to get a job overseas (which typically pays twice as much) for about a year or 2 in order to rush this whole home buying process

OP

Member since 2019 · 27 posts · 4 votes

@Geordy Rostad I definitely do not plan on doing nothing and i am still analyzing properties and trying to get a better understanding the realty market in general. I like the idea of buying a 4 plex first and live in 1 but, 4 plex in Orange county, CA just costs way too much. Had i been in GA or TX then i would definitely look in to that as a serious option.

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

Originally posted by @Ramonater Ramo:

Originally posted by @Theresa Harris:

@Ramonater Ramo How long have you lived where you are now? At the risk of you getting a black eye, why not talk to your wife and see what she thinks about moving? Perhaps she would like to live closer to some of her family or dreams about living in a certain city with the condition that you will live there for a set number of years. This is assuming your job and hers are portable or you can find similar work in that city.

We have been in Irvine since August of 216. My wife and I have already had this conversation and Irvine (and its surrounding areas) is her dream area. As i said before after 7 years of literally moving around the world, now that we have 3 kids, we want and need stability. We are talking about and considering if i were to get a job overseas (which typically pays twice as much) for about a year or 2 in order to rush this whole home buying process

You mentioned you'd moved around a lot, I just wasn't sure how long you'd been in your current home. If that is her dream area and you can't afford to buy; buying something elsewhere to increase your income...and have a tenant pay down the mortgage on the rental, is a good compromise. If I had 3 small kids, it would be hard to live away from them for a year or two and probably hard on your wife to be a single parent.

If you did get a job overseas, remember to look at your net gains, not the gross income. Costs at home may increase (e.g. child care expenses).

OP

Member since 2019 · 27 posts · 4 votes

@Megan Hirlehey thank you for your reply

1) I agree about not putting money in someone else's pocket however, given my personal situation + area i live in his justification is i don't even have money for a down payment yet, so why put all my cash in a property that wont wont ultimately help my buy a home quicker. This is all based off a 20% down payment

2) 10% ROI is great and i agree with you but, that 10% ($3K, even at $4K) doesn't really help me in Irvine given my rent. Of course the property i buy in GA could go up in value and i can sell it in 2-3 years for a profit but, i this guy is playing it safe by being conservative with the numbers.