Specialist · Clementon, NJ · Member since 2016 · 67 posts · 18 votes
Hello,
This may be a long post lol.
So I’ve been wholesaling for a while now, the good thing about that is that I have a gauge on real estate but now I’m looking to start investing.
Here’s my situation. I have a full time job, making almost $4000 a month. Pretty good credit. Last time I checked it was around 708-715 I can’t remember exactly.
Additionally I have about $13k reserved for investing.
Here’s what I’m looking to get out of investing:
-Cash flow while also being able to keep some cash reserves
-for my first property I don’t want too big of a rehab because I will still be working my full time so I don’t have much time to really monitor how the rehab is going if that makes sense.
I do have some real estate education on investing from wholesaling and working with different buyers. But of course most of them used cash!
With my budget and my market, if I buy cash it’s pretty much a shell and leaves no reserves for rehab.
My question and point to all of this, which funding route should I go based on my investing goals?
Real Estate Agent · Columbus, OH · Member since 2019 · 82 posts · 133 votes
5y
@Raven Walker Have you considered househacking? You can buy a 2-4 unit property with a FHA loan and only put down 3.5%, you live in one unit and then rent out the others. From there you could put money into the property and then do a cash out refinance, then use that money from your next project and repeat. I don't know much about the market over there but here 13k and a W2 job like that could go a long ways.
Rental Property Investor · Springfield, MO · Member since 2020 · 120 posts · 96 votes
5y
@Raven Walker What’s a typical price point for a fixer upper property in your market?
13,000 seems like enough to have a fair bit of reserves while still keeping your personal finances afloat. It sounds like you are going to have to borrow the majority of your next deal. Your lender may want you to have some skin in the game too, so make sure to factor that in.
As far as choosing between private or Hardmoney, preferably private money since it will be cheaper. However, as a new investor, many do not have the connections or track record. So you may go down the Hardmoney route.
Even if you choose hard money, and you pay more in fees and interest, it’s not all bad. It’s better to do a deal than to not. And in 20 years you will have forgotten about the couple grand you paid your hard money lender to use their money for a while.
Specialist · Clementon, NJ · Member since 2016 · 67 posts · 18 votes
5y
@Dalyn Hazell
Thank you dalyn for your feedback!
A typical fixer upper may be around $40K-60k
Also what I got from hard money lenders is that they usually want their money back within a year. Is this true and is it ideal for a rental? I always thought hard money was best for flipping.
Rental Property Investor · Springfield, MO · Member since 2020 · 120 posts · 96 votes
5y
@Raven Walker Yes, the year requirement is a real thing. I’m actually going through that right now. My hard money lender wants everything due in one year.
However, as long as you finish the rehab and the refinance within that year (assuming you're using the BRRRR), you'll be fine. Now, with the refinance, you want to make sure there are no, or little, seasoning requirements, meaning you have to hold the property for X months before they can refi.
In short, Hardmoney lenders are definitely not for only flippers. Countless landlords use it as well.
Specialist · Clementon, NJ · Member since 2016 · 67 posts · 18 votes
5y
@Dalyn Hazell I completely forgot about the refinance part! Thank you for reminding me! Okay so that makes things a bit more clearer because that narrows down the options of what town in my city I can do this if I do choose to go the hard money route.
Real Estate Agent · Columbus, OH · Member since 2019 · 82 posts · 133 votes
5y
@Raven Walker Have you considered househacking? You can buy a 2-4 unit property with a FHA loan and only put down 3.5%, you live in one unit and then rent out the others. From there you could put money into the property and then do a cash out refinance, then use that money from your next project and repeat. I don't know much about the market over there but here 13k and a W2 job like that could go a long ways.
Specialist · Clementon, NJ · Member since 2016 · 67 posts · 18 votes
5y
@Kwame Amoako good morning. I actually have an fha on my personal property already so I’m not sure if I can use another at the moment. I also don’t mind using a conventional loan. Right now I’m in the process of finding a good lender. Hopefully one that is also an investor