creative ways to buy my 1st house??
Real Estate Agent · Glendale, AZ · Member since 2017 · 55 posts · 10 votes
So I have two types of student loans - federal and private. The federal consist of 2 subsidized and 2 unsubsized loans that are about 3.85%. The private is where it hurts - its at about 11.25%. I am making balloon interest only payments on those and I know I am not paying those off anytime soon. I have came to the realization at this point in life, it will be similar to a car payment for about the next ten years (and I started paying them off a year ago) if I am not able to make significant amounts of money in real estate. Yet, I am confident I will make money.
Luis.
Have you thought about just buying a rental property and making cash flow that way instead of buying a duplex?
Exactly Jake, I am paying 0 maintenance and no utilities. That's exactly, what I am doing, pay off my credit card debt (which isnt too much, about 1900) and paying my student loan on time. Thanks for that site as well!
Luis, if you can hold on to your current rental situation for a few years, I would do it without thinking twice. If its temporary, then thinking about what to do next is great.
Instead of concentrating on purchasing a buy and hold property, maybe you should think about getting your license and generating extra income through being a realtor. You could use this to pay down some principal on the 11.25% private loans or save for down payments. I would not worry about the loans at less than 4% until you are in a much stronger position.
Just remember every time you pay those loans down you get a guaranteed 11.25% return on your money. (Money saved is money earned!) That's a killer rate for a guaranteed return.
The personal finance forum is great. They wont recommend a lot about RE, but they will help you sort out your income, debt, and budget to get you in a strong position for when the market is offering a little better deals than it is today.
I hope you get approved for that 203k loan! I applied with a loan officer last year. At the time, I wasn't introduced to BP and not familiar with any type of programs like I am now. So I can't say I didn't qualify for X amount of loan because I just didn't know what I was applying for you know. Best of luck with you as well. It's people like us, that have to get started somewhere right?! Keep me updated with your progress!
Now that I look back at the 1st few years I was moved to Arizona, I realized, I actually had a friend who lived just like the story you mentioned. There house was a two story, 4 bed 2 1/2 bath in Mesa too. This post does have me thinking about not living in those ghetto neighborhoods and putting myself in a position in dealing w/ low quality tenants. Even if I did qualify for a quad in the ghetto, I really don't want to that to be my 1st real estate, homeowner experience when there are other avenues I can get into. Your comments make so much sense. I know I have a few things to to check off my list, before I can actually get that 4 bedroom house and rent out the rooms to my friends. That's the avenue I want to take!
I did you 1st option a few years ago by earning my associates degree but to be honest that's similar to graduating the 15th grade. It's useless. I work at the University of Phoenix and get free education but I quit more than half way into my bachelors degree program last year. When I started to realize anyone can earn a living in real estate, my eyes opened. I just started school this past week to get my real estate license. Of course its a process like anything else. I do have a partner w/ working capital and we are working as a team to purchase our 1st fix and flip. That's a topic of conversation for another day.
I plan on leveraging the license to work full-time, earn more money and to hit your number 4 - pay off student loan debt. To touch on your 2 option, I called my lender (Navient) last Friday and found out I can't refinance because according to them I make too much money. I currently have 3 credit cards - 1 paid off, the other two with balances that I am currently paying down. Credit score is currently at 655. The action items you have outlined are a work in progress!
I really like the discussion from everyone. I was in a similar situation about 10 years ago and I actually rented the home I lived in (you have rent for $300/mo... that is awesome! Mine was the same). I then purchased a home and rented it out. The rental wasn't where I wanted to live, but it paid for the rent on the other home... then the market crashed and I lost a lot... but prior to that it worked swimmingly!
So it can be lovely as long as things keep going up. Happy investing!
We have to get started somewhere right?! My train of thought about money, finances and real estate has been opened thanks to this community, the BP podcasts, rich dad poor dad book and so many other avenues in which I have been educating myself in. Keep in touch with your journey, I will be happy to assist in any way I can!
@Luis Aguilar thanks man, other creative financing strategies could be good to look into as well. I think when you go to make an offer its always best to provide a few deals. If you can find a motivated seller for whatever reason you can throw some other strategies related to seller financing or even lease option (or sandwich lease option) which I think is a really cool way to get a property without much money but can be a win for all parties involved. For more info on lease options refer to Brandon Turners book on investing with low and no money down to get some gears going. I will definitely be researching more on the subject to look to incorporating that into my investing.
@Luis Aguilar Sounds like you are on the right track and have thought a lot of this through! You are absolutely correct that the real estate agent licensing is a "process". I was able to get through all of it and pass the two tests on the first try by staying incredibly focused, and utilizing some smart studying tactics. Feel free to PM me if you'd like to chat about the coursework, or about getting started as an agent.
I started my RE education (just last week!) through a program called The Forum, not sure if you ever heard of it? My school is in Chandler, instructors name is Marty. Great stuff so far, tons of terms to understand but I love how Marty goes over material that will be on our test. Are you currently using your license to sell homes or invest in real estate though other avenues?
@Luis Aguilar Marty is a great instructor, he was my Broker instructor back in the day. Focus on the test at the end of each chapter, in the end, that will be most of your test.
@Luis Aguilar There are creative ways to purchase your first home. I would go with an FHA with 3.5% down with the seller paying your closing cost. we are talking about 3500$ on a 100000$ house.
Unless you need quick cash, I wouldn't consider selling the property, its nice to have your tenants pay your mortgage while getting a little extra to reinvest. Listen to the BP podcasts because they are awesome.
Good luck
Redgy
@Luis Aguilar I haven't heard of the forum, but that doesn't mean it's not a good program. I attended the AZ School of Real Estate and Business in Old Town Scottsdale. I'm almost positive Marty was one of my instructors....short guy from New York? If it's the same Marty, he was AWESOME! By far the funniest and most helpful teacher.
I currently work as a full time Realtor with HomeSmart. About 50% of my business is with traditional home buyers and sellers, and the other 50% is working with investors.
What a small world!! Yes, Marty did mention he also teaches a broker class and hes actually going to start them again next week. But hes a great instructor with his humor and knowledge. He tests us on his lectures every session through those test questions at the end of the chapters. Note to self - index cards for those questions alone!
You can't guarantee how the real estate market is going to be because what I've learned is that there isn't an exact science to it. I know you can look at trends and study them to make predictions. With that said, I'm sorry for your past experience. How's your market appreciation looking like at the moment? Are you currently investing in your market or others?
Hello everyone,
My long term goal is to create wealth through real estate. I am getting my real estate license for many personal reasons. Eventually I am going to find properties that I can fix and flip and purchase rental properties for residual income. With that being said, I want to start my real estate path by purchasing my first home.
I am a w2 employee only making 33k a year. I realize, in the market I live in, I can possibly get an fha loan and move into a house. Yet, I don't believe I can afford let's say a 1k monthly mortgage payment. Are there any suggestions out there as far as getting an fha loan to purchase a duplex (through a real agent) rent out one of the units, house hack it, live in it through whatever time I need to according to fha, re-finance (pull money out the house assuming the property has appreciated) and then sell it? I believe I can't rent out the unit if I purchase the house through an fha loan, am I right or wrong on that? Let's have a creative discussion on how I can possibly purchase my first home!
Sorry to be getting to this discussion so late, but I wanted to reach out.
Luis, First let me congratulate you on your mindset. You are thinking outside the box, and wanting to take your limited resources and maximize them. I can appreciate AND relate to your situation. I started out after college in my early 20s as a single mother, waiting tables, making OK money for a 20 something, but not enough for any kind of RE purchase. I decided to go into Real Estate and had big plans for my future (had to because I had a little one depending on me to support and provide for her). I had to wait 2 years after becoming a Realtor to make a purchase, because I didn't realize that changing my occupation (even though it was little money) would prevent me from obtaining decent financing. Lesson #1 learned.
But once I hit that 2 year mark, I wanted to find the BEST way for me to maximize my resources as a Realtor AND my leverage financially. I started looking at the HUD list because, at the time, HUD offered a 6% co-broke for purchases, and would pay 3% toward closing costs. This allowed me to have my down payment because I represented myself as the Realtor AND closing costs paid, AND have a little bit left over for rehab (which almost all HUD homes need). I closed on my home, did most of the remodeling myself (took the "how to tile yourself" class at Home Depot, painted, etc) and lived there for 3 years until I was able to buy the next one. Then I moved out and rented it for just under 3 years. The market was climbing and hot at the time, and I had to make a decision to keep or sell. It was also the last year that I could sell and not pay capital gains because I had lived in it as a personal residence for 2 of the last 5 years. So, I chose to sell. I walked away with over $125K, which was double what I paid for the house. I kick myself now because when I think about how much easier it would've been to buy a multi-unit instead of a single unit, and leverage the existing income on the property to qualify. However, I made the best decision at the time, and did well. It was a stepping stone that led to bigger and better things. Each next purchase got bigger, or in a better location, or had more bedrooms, etc.
All that not to pat myself on the back, but rather to offer you some encouragement, and share with you that what you are wanting to do CAN happen. If I had to do it all over again, I think I would've explored the 3-4 unit options. You may want to do that too. Your limited income doesn't necessarily have to hamper you when you combine it with the existing tenant's rents. The lender will usually allow you to use up to 75% of the income. So, for example, if there are 4 units, 1 vacant (to be your unit) and 3 paying $600 per month. That would be $1,350 in monthly income that you can add to your income to qualify for the loan.
There were some suggestions from other posters to get a big house and get roommates. While that may be a good way to save money, it will be hard to qualify for the initial purchase as the roommates will not already be in place. You need established income at the property already to help you qualify. Your best bet, in my humble opinion, is to find a 2-4 unit where there is 1 vacancy, or 1 lease that will expire within 60 days of COE (for you to live in), and STAY at your W2 job unti your purchase is complete so that you don't have to wait another 2 years for job seasoning.
There are also first time home buyer programs that can help you with down payment assistance if you are short on funds. Your contract can be negotiated to have the Seller pay for some of your closing costs to minimize your out of pocket expenses. You may have to show some reserves, but any type of savings, 401K, or accessable funds can be used to satisfy this requirement.
Wow. Sorry so lengthy. Feels more like a blog post! lol. Anyway, if I can offer any encouragement, answer any questions, or assist you on your journey in any way, please feel free to reach out and ask.