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Aaron Carter
  • Real Estate Agent
  • Bemidji, MN
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59
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What is my next step? Any advice Greatly appreciated!

Aaron Carter
  • Real Estate Agent
  • Bemidji, MN
Posted May 9 2014, 09:46

Personal info:

I am 25 years old. I currently work full time as an RN, a stable job in my area (rural MN) with fairly substantial opportunity for salary growth. My wife is a dental assistant, also a stable job. We are expecting our first child this summer. She would like to quit her job in one year and become a stay at home mom which is something I support. We are currently renting a house which is being sold in two months. We have been looking for a home in the area but have decided to live with my in-laws for one year until my wife becomes a stay at home mom.

Financial info:

Living with my wife's parents will allow us to save a fairly substantial amount of capital, I expect around $40,000, conservative estimate, in one year from our earned income. We are quite frugal in our spending...

We currently own a duplex which we purchased for $86,000 last year. It was poorly managed and after repairs we are receiving $700 for one unit and $750 for the other unit after phase one of our remodel. However, I am currently covering utilities at this time. I have been saving capital and making improvements to the property this summer, which include adding two bedrooms and one bath to one of the units, after which I will also no longer be covering the cost of utilities for either unit. After improvements my conservative estimates are as follows:

(included 8.3% vacancy rate)

Gross Income: $20,350

NOI: $16,185

Cash flow: 11,870

Cash ROI: 43.88%

Estimated ARV: $125,000

We would qualify for a UDSA rural development loan for our future primary residence next year which would require no money down in addition to lower interest rates. Taking into account that our earned income will be significantly reduced when my wife quits...

One thing that should be noted is that if I purchase another investment property prior to purchasing our primary residence, I would likely not qualify for a USDA rural loan...

I look at the MLS every day for deals and would like the cash available if one comes up, either for our primary residence or an investment. At this time prices in my area are listed, in my opinion, much higher than market value (they also haven't been selling). I have not found any reasonable deals at all lately that would allow me to cash flow a property.

Questions:

Where would you recommend that I place the money while we are saving? High interest savings accounts? Other options?

Should I take advantage of the no money down loan and use all our capital for investment?

How much leverage would you recommend for either my primary residence or buy and hold properties?

Should I use our duplex as collateral?

Since I am new to Real Estate investing, and finance in general, would it be more beneficial for me to find a partner and form an LLC, which would allow me to diversify my risk further? Do I look in other areas for properties?

I have big dreams and am willing to make sacrifices now for returns later...

Any other input about variables I may not be considering would be greatly appreciated!

Thank you!

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