Financial circumstances and a plan to get started.

1 Reply

Good afternoon.

I wanted to share my current financial situation, and see if some of my conclusions make sense to those who might have walked in my shoes. 

I currently own a home that I have little equity in, bought in 2008. Hard to say exactly how much, because I haven't had the home appraised, but at the most I might have is 7-10K. I might sell my home next year if everything works out how I’d like, so I’m trying to take that into consideration in my plans.

As far as cash to invest is concerned. I have a little over 20K in what I would deem my “rainy day fund”, so I normally don’t touch that cash all that much. It’s not earning any real interest, so although I’d like to use some of that $ to invest, it’s there in the event I lose my job or some unforeseen catastrophe takes place (knock on wood)!

I invest quite a bit in my 401K and my Roth. I also have a separate brokerage account that just sits there and earns interest. It's a collection of 401K rollovers from past jobs. I thought maybe I might consider using some funds from these accounts. However, there seems like a lot of red tape in doing so, and for a first time investor probably doesn't make sense in the event that REI doesn't work out.

I bring all this up, because when I started on this idea of real estate investing, I knew very little other than the experience of buying my home. I’ve only been on BP about a month and I’ve learned so much and it’s opened my mind to the realities of actually investing.

I don’t necessarily have “extra” cash set aside to invest with, so that’s an issue considering most conventional mortgages require 20-25% down for rental property. Also, even if I could secure a property, then you have to consider cash reserves in the event the unexpected occurs.

I like the buy and hold strategy and would like to pursue it, but I may need to be a bit more patient and creative in my investment pursuit. I’ve read Brandon’s latest book, regarding investing with little or no money down and there’s some great information in there for someone in my position. I'm not looking to "get rich quick", I'm looking to build wealth passively over the long haul.

I’m thinking I could look at some of the following options to at least get started:

  • Properties that are being offered with seller financing.
  • Partnering with a family member or friend (Need to be careful with this one).
  • Private investor who would put up the cash, but I would manage the property (This of course would mean I need to invest close to home vs. at a distance to start).
  • Sell my current home and buy a multi that I could live in and rent the other unit (FHA or 203K Loan).
  • Wait on investing altogether, maybe get another job to increase my income and hence my rate of savings.

Just trying to figure out how I can do this in the near rather than the long term. I’m 41, and I don’t want to wait 5 or 10 years to get going.

I'm financially responsible and handle all the finances in my home. I invest where I can to the degree in which I can.  Always looking to decrease expenses and turn those liabilities into assets.

Am I way off in my thought process? In your experience, have you tried any of the items I mentioned?  Any suggestions/recommendations you might offer?

Thanks in advance for any feedback.

I think you make some pretty valid points.

Do you have a target area you will purchase in?

Have you thought about renting out your current home instead of selling?

An FHA loan would require a pretty low down payment which might work for you.

There are definitely houses you can buy with 15k-20k down, however it might require you expand your target market from where you are now.   One thing I noticed in my area is there are very few multifamily for sale, but if I drive 20- 30 minutes further there are quite a few for sale.

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