I plan to graduate with 40k cash if the sale of my house goes through (currently under contract). I graduate in May. I’ve accepted a job offer in Charlotte NC at approximately 50k/year starting June 2018.
About the first deal that gave me 40k. I bought a 10k bank owned house in my junior year of college and renovated it over the course of a year. I invest $9,500 in materials so all in at $19,500. Currently under contract for $40,000.
The investment strategy post graduation:
I buy another foreclosed REO for cash (25-30k) and fix it up for the remaining 10-15k that I have. Example: I buy a 25k house in Charlotte, it's worth approx. 40k at time of purchase, I put 10k in and it appraises for 60k+. 25k equity captured (some at the time of purchase, some through forced appreciation).
I also house-hack it. Example: Its a 3/1 or 3/2 so my girlfriend rooms with me and I give her subsidized rent at 200/month and I rent out the remaining two rooms for 550/month all inclusive. Gross income per month is 1300 per month in this scenario. My living expenses are covered by my househack and the house is paid for so no mortgage. I make roughly $3500 per month from my corporate job post tax and it goes directly into savings and from there into future investments.
I refinance the property and pull out the equity I have captured 6-12 months in. The math at this time would be 3,500 per month saved from W2 job (42,000 after 12 months) and 75% of the equity pulled out of my house after 12 months would be 45,000. I am assuming that the money I make from renting rooms in my house will cover my living expenses for that year. At the end of year one I should have about $87,000 at my disposal, one year after graduating.
A very similar strategy to option A except I get a leveraged property with more bedrooms that costs more. More rental income with more rooms but more expenses because I have a mortgage in this scenario.
So I am looking for advice on my strategy. The goal is to be able to stop working if I want after 2 years. I am exiting college in a very good position (Job offer, 800+ credit score, 40k cash, no debt) so my starting point is good. As you can see I plan to use a number of strategies talked about here on BP to execute (frugality, BRRRR, househacking, etc.)
@Trenton Tabor - Congrats on the graduation and the house sale!
If it were me, I would go with option B. The Charlotte market is crazy right now and finding an REO/sub $40k property is going to be tough. You might have luck with an REO at a higher price point being an owner occupant, but I honestly have looked at the inventory in a while to see what is available.
I'd target one of the older neighborhoods in the 5-10 mile radius area around Uptown. The NW section will be the cheapest/roughest, south will be the most expensive, so I'd target the north and east areas in that band. You can find some 2/1 and 3/1 properties in the $150K range that might fit nicely with what you are looking for.
Best of luck and welcome to Charlotte!
Using those two alone I would probably choose B. If you can find a "C" it would be to house-hack a duplex or triplex. I think that would really be where you'd see some return. At your salary level you're going to be looking a pretty austere life if you plan on stopping in two years - what I would say is get into a career that you enjoy, do the RE on the side as you go, and you'll get to a point where you can make an intelligent decision on what you want to do from here. Lying on the beach and drinking mojitos in the Bahamas sounds fun but you have an entire life in front of you and you are going to want to do something of value in it.
Thanks for the response. I found a promising foreclosure in Charlotte for 42k asking price but I am sure it wont be available by the time my funds are available. If I do go with the leveraged option I am looking at houses 3/2 or even some 4 bedroom homes in the 120-140k range.
I do need to learn more about the bad areas . Yes, north-west of downtown seems to have the cheap houses and I have deduced that that is where the crime is. The south-east area is where clusters of high priced property is. The other location factor is where my workplace will be (north of Downtown) vs where my girlfriends work is which is south in the ballantyne area. Which would make the prime spot for me right in the middle, near downtown.
@JD Martin The multifamily in Charlotte don't seem to make sense financially. They are over valued. As far as living an austere life, I currently am living on $900 per month and that includes rent (College student life). My life isn't too bad right now. In the above scenario I would be living for free so I would have about $1000 to spend monthly and that doesn't include rent since its mortgage free. It would be like going from having $600 per month to having a $1000. My savings rate would be above 75%.
The plan is not to sit on a beach once I have the ability to leave my job, the plan is the do a passion job at that point and have my financial stress be covered by my real estate.
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