How to approach/finance a second property after recent purchase?

Question

Hello all,I am 21 years old not making too much, and I am looking to get my second property, but not sure how to go about it. I know the obvious answer would be to wait it out, possibly HELOC my primary property and then use that as investing capital but I want to see if I can get started without my equity being touched as of yet. How would you go about acquisitioning your second property with no cash, and the recent purchase of your first property?

Kerry Baird · Answer

The lowest down payment and lowest interest you’ll get is on your owner occupied property.  If I were to tell my younger Me how to get where the older Me is now, I would suggest:

Save up for the first unit, one 2-4 units.  Owner occupy that for 2 years while saving up the rents and making improvements with my salary.

Buy another 2-4 unit and move into it, getting lowest down payment and lowest interest available. Rent out last unit.  Repeat.

It is inconvenient to move repeatedly and to use elbow grease to improve my houses, but I’ve done the hard things to get where I am.  I bought house number 32 and 33 a couple of months ago (look at my blog).

Talk to everyone you meet about houses.  My next door neighbor saw a guy with a FSBO sign out and told me about it.  I bought that guy’s house where he was the bank for me.  It was free and clear, and he agreed to charge me 6% interest only.  My payment is $1500 for a $400k house, and I’m using it for airbnb.  It has been a total word-of-mouth deal because I told my neighbor that I buy houses.

Be prepared for the next down turn, which means keep an emergency fund.  Sometimes people lose jobs and dropping the rents does not help.  Have a few months’ of mortgage payments on hand for each house.  Ask me how I know.

Adrian Birchler · Answer

I'm looking at BRRRR because I don't want to wait to grow my portfolio, so it's really the only option I see outside of partnerships (also pursuing). If you're looking for insight on your first strictly investment property I wouldn't waste my time with wholesalers. I'd go straight to someone in your market who is BRRRR investing or simply purchasing investment properties and start there. Wholesalers are the last piece to add to the team in my opinion. They're added after you have a team in place and are actually ready to close on a deal all-cash. I've had surprisingly good luck finding local BRRRR investors willing to meet for coffee and network so highly recommend reaching out to local investors through BP, facebook groups, etc. Pro tip: look for investors that are only one or two steps ahead of you as they're more likely to be willing to meet and there's a better opportunity for partnerships rather than meeting with investors with 50+ units with systems in place and not a ton of time to meet. Hope this helps! @Jaleel Phillips

Jaleel Phillips · Answer

Thank you so much for letting me know about that, i will continue trying to conversate with others, and 2-4 units in my city are scarce and are upwards of $400,000. I am working now on having a few months payments on hand for my primary. Thank you for your insight.

Jaleel Phillips · Answer

Hey Adrian,

Thanks for the response. I agree with you saying saving and increasing income is key, but i also feel as though im waiting for something i could potentially get started with now. Im also house hacking my property and after having my mortgage paid am cash flowing positively $250. BRRR'ing is what id love to get started in, i suppose i will try to find a wholesaler who may have more insight on how to get my first investment property.

Adrian Birchler · Answer

Hi @Jaleel Phillips, I'm in a very similar situation. I just purchased a duplex I'll be house hacking which wiped out most of the capital I had saved. The best next step that I see is building a team for BRRRR investing. I am currently networking with as many wholesalers, private/hard money lenders, and other BRRRR investors in my market as possible. I am a Realtor and property manager and have a rehab team already in place so don't need to worry about those pieces. Along with this networking and learning BRRRR inside and out I'm focusing heavily on increasing my income as a Realtor/PM to rebuild capital quicker. I think focusing on increasing income, saving as much of it as possible, and getting the pieces together for BRRRR would be the best option for us. Looking forward to hearing other ideas!

How to approach/finance a second property after recent purchase?

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