Can I get started in real estate with $20k

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Can I get started in real estate with $20k

Wilhelm J. Lieto
Alexandria, VA · Member since 2017 · 19 posts · 2 votes

Good day BP members,

I live in one of the most expensive areas in Northern Virginia (NoVA). I work in D.C. but only make enough money to afford a place 40+ minutes away. Currently I live with my family in Alexandria but they are moving soon and I'm not going with them. I haven't been with my current job too long, and was broke before I had this job so savings is minimal at best right now.

I own a 2007 Corvette C6 which I paid off about a year and a half early, due to my current living situation and job. KBB assessed it at about 20K and I've been completely against selling it, till recently.

After my long winded introduction, my questions for you all are:

Will the 20K be enough to start investing in real estate in my area?

What is the best course of real estate investing in the NoVA area?

What other kind of guidance would you recommend?

I am open to any and all advice from everyone! Thank you for your time and I look forward to what you all have to say!

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Christopher Lightner
Real Estate Agent · Virginia Beach, VA · Member since 2014 · 47 posts · 22 votes
9y

Definitely look into house hacking. You could use your VA loan to buy up to a quadruplex with no down payment, live in one unit and rent out the other three. After a year you could use an FHA style loan to repeat this process with a low down payment + PMI and have up to 7 units rented plus one that you live in.

If you found a property tomorrow and took a month to close, you could have 7 doors 13-14 months from now. And you could do it with $20k.

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  • Dennis Poulsen
    Investor · Fairfax, VA · Member since 2014 · 18 posts · 8 votes
    9y
    I would say that your best bet to get started might be to look into buying a place of your own and house hacking. Lots of good programs out there for first time buyers
    1Reply
  • Brandon Foster
    Los Angeles, CA · Member since 2015 · 69 posts · 75 votes
    9y

    I agree with house hacking.  I live in Los Angeles where prices have skyrocketed.  We were able to buy a duplex priced at $400,000 with around $20,000.  A good place to start is speaking with a local mortgage broker or bank.

    1Reply
  • Kara LeboeufPro Member
    Rental Property Investor · Glens falls, NY · Member since 2013 · 124 posts · 50 votes
    9y
    You could JV with anther investor. I live in Norfolk, there are good cash flowing houses around here If you keep an eye out. If your interested send me a message.
    1Reply
  • Gregg Hutton
    Real Estate Agent · Farmville, VA · Member since 2017 · 116 posts · 32 votes
    9y

    BP has an event Every 2nd Saturday in Vienna

    1Reply
  • Jason G.Pro Member
    Rental Property Investor · Long Island, NY · Member since 2015 · 434 posts · 495 votes
    9y

    @Wilhelm J. Lieto, banks will likely want to see two years of W2s for a loan as well as reserves. In addition, while $20,000 may be enough for a down payment on a property (depends on the loan as well as the purchase price of the property) you would still need to make sure you have money for closing costs and that you will be able to pay the mortgage payments. You will also need to account for repairs and maintenance, CapEx, and vacancies.

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    Thank you for your responses,

    I plan to use my VA home loan for my first place, so I'm not too concerned with a down payment.

    I've kept an eye out for Norfolk for a few months now as a potential investment area. 

    Right now I'm working on saving enough for closing costs. Currently I can qualify for 350k home loan. That's at the max of my budget though. 

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    what is the address for the BP event in Vienna 

    1Reply
  • Christopher Lightner
    Real Estate Agent · Virginia Beach, VA · Member since 2014 · 47 posts · 22 votes
    9y

    Definitely look into house hacking. You could use your VA loan to buy up to a quadruplex with no down payment, live in one unit and rent out the other three. After a year you could use an FHA style loan to repeat this process with a low down payment + PMI and have up to 7 units rented plus one that you live in.

    If you found a property tomorrow and took a month to close, you could have 7 doors 13-14 months from now. And you could do it with $20k.

    5Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    @Christopher Lightner Thank you, that's some amazing information. however I'm having issues finding those in NoVA area. The only ones I can find are on loopnet in DC and they are in the millions.

    Also I've heard you can calculate the income from renting out the other units of as a means of income to qualify for a loan for one of those. If any one has any information on that please let me know.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    @Wilhelm J. Lieto you should touch base with @Upen Patel. He is a loan officer in the area and has extensive experience with the VA loan, and he has helped many people here on BP purchase homes. He will give you a good idea of what you can afford.

    [email protected]301-893-4635Podcast Guest on Show #192
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    3Reply
  • Diogo Marques
    Financial Advisor · Cascais, Lisboa · Member since 2015 · 199 posts · 83 votes
    9y
    Look for the deal not what you can chew individually.
    0Reply
  • Joe Facenda
    Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes
    9y

    I am a Northern Virignia Realtor and investor both here and other markets including the Hampton and Newport News - a great investment area for cash flow.

    You will not find quads or even duplexes (where you own both sides) in close in Northern Virgina. Can't speak to D.C. And MD as I am not licensed there.

    For $350,000 in Centreville other areas about that far or further from D.C. you certainly can find a nice sized town home and you can rent out the secondary bedrooms and/or a basement.

    If you say you qualify for $350,000 know that most traditional lenders will not do a rental offset on your first rental property.  So if you buy your personal residence and then want to buy a rental, you may need to be able to carry the full amount of both loans within your debt ratio limits.

    However, whenever someone speaks of loan program requirements, they are talking in broad strokes.  There may be alternative programs or ways around loan roadblocks.

    But for now, I would get the personal situation settled first and then plan for investing down the road. 

    Not real estate related but sounds as though things in your personal life are changing rapidly and my advice to folks in that situation whether it be marriage, new child, divorce, separation or death is to let things settle before making too many major decisions.  We all need a roof over our heads so that is a decision that must be made sooner than later but investing can wait until everything else falls into place and there is more room in the brain to think things through.

    3Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    @Joe Facenda Thank you for your insight! I do have another question for you though. Should I use the money I get from selling the car as part of a down payment for my first place, or should I save it and have 0 down? both situations I'm going to use my VA loan.

    I've used the mortgage calculator on Zillow to get an idea for what monthly payments will be, and I've noticed that the 20k only drops the payments like maybe $200. Am I doing my math wrong or does that sound about right? 

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    @Russell Brazil Thank you very much for the recommendation, I will try to touch bases with him soon.

    0Reply
  • Ron Flatt
    Investor · Hillsboro, TX · Member since 2017 · 358 posts · 245 votes
    9y

    You have several options-

    As a new investor:  

    look for a Single Family (SFR) large enough and rent out the other bedrooms to roommates. (not my choice but some folks do well with this.) You can probably get the mortgage paid by roommates.

    My first choice would be to find a duplex, triplex or quad and move into one unit.  Rent the others where your tenants will cash flow for you.  

    20K down can make a nice incentive for an owner finance.  Point out the advantages of owner finance.  A better interest rate than a CD, savings on tax hit, and monthly cash flow for them.  If they want the cash out instead of payments over 15, 20 or 30 years, put a balloon after a shorter time, (I recommend at least 5 years and 10 is better, that gives the time to appreciate and you are paying it down.)  You can refinance later, pay them off and maybe even pull enough cash to buy another property.

    Put your cash with someone some else and you can buy more.  Again, get an exit strategy going in.  Someone needs to be willing to buy out the other party at some point if it is not sold.  You can always amend, and make it for a longer period but I recommend you have a 2-5 year term with most partners.  and Still vet your partner, (you are married to them for the term of this partnership)

    Good luck, start shopping for that property.  

    1Reply
  • Sheriff Shoetan
    Part-time Investor · Stafford, VA · Member since 2015 · 7 posts · 4 votes
    9y

    @Wilhelm J. Lieto Have you considered Stafford, VA? It is only about 35 to 45 minutes to DC and the new HOV extension is a great help. You can easily get a SFR or a townhouse for under 350k. You can rent out the basement for $900 to $1,000 a month. Use your VA loan and keep your 20K or your car. Reside in the house for a year, rent out the entire house after a year and apply for another loan to buy a townhouse in Alexandria or Springfield. I used the same strategy to get started on real estate investment. You will hardly find any active quads in NOVA. I currently have one of the few active quads in NOVA, 18629 Amidon ave, Traingle VA 22172. The town of Quantico and Manassas have some but not sure if they are active.

    3Reply
  • Dan Bernstein
    Real Estate Agent · Alexandria, VA · Member since 2014 · 184 posts · 78 votes
    9y

    @Wilhelm J. Lieto, I would also recommend a duplex or quad in the DC Metro area.  $350K is not enough to buy a quad.  In NOVA, most quads close to the beltway are going to be over $500K...We are working on one in Falls Church that is over $600K.  Arlington has a large supply of 4 units, but nothing on the market and like Falls Church, those are going to be out of budget.  Duplexes, however, are in budget.  

    You could Buy a duplex in DC in an area like Trinidad. Use your VA loan and try to roll in closing costs in the deal. Take your $20K and refurbish the units so you can get the maximum amount of rent. Hold the property for 5 years, save and do a condo conversion and sell the units, then roll that profit into a 1031 exchange into a 4 unit or other larger multifamily.

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    thank you, I'll check it out. What is a 1031 exchange?

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    9y

    I would build up a savings long before I start investing, exception being you house hack your VA loan. All you need is a string of bad luck and you'll lose the investment without savings and your cashflow will be too low to make a proper reserve for a while.

    Also, if you sell your primary vehicle what are you going to replace it with? If you get a cheap used car expect to set aside money for maintenance, if you get a nicer used car you're going to have considerably less than the 20k from selling you vette.

    I'd look to see what it costs you on insurance/gas per mo and then compare that to the replacement car. If it doesn't pencil out to much... you could consider taking out a title loan in the future if you needed the money. Doesn't make much sense to pay interest on money to sit in a bank acct, but also doesn't make much sense to get rid of car you know is reliable for a used one to just have some money in savings. 

    0Reply
  • Rita Oliva
    Real Estate Agent · Falls Church, VA · Member since 2016 · 25 posts · 6 votes
    9y
    @dan Bernstein, I would like to get some info on your quad in Falls Church. When you say you're working on it, do you mean renovating it to sell?
    0Reply
  • Joe Facenda
    Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes
    9y

    Sorry for the delayed response.  I have been out of town and staying away from electronics except for urgent business matters.

    Anyway, if it were me and I had a choice of using a VA loan with no down payment or putting $20,000 down, I would go no money down.

    Your calculations are a bit off, $20,000 will save you a little less than $100 per month.  I'd rather have the $20,000 in my pocket for investing or emergencies. (FYI, I use a quick ballpark estimate of $5/month for each $1000 borrowed so 20x5 = $100.  Actually at 4.5% it is $5 a month. At 4% it is $4.67 and 3.5% is 4.33 but I can't do non-round numbers in my head) 

    Hope that helps.

    0Reply
  • Joe Facenda
    Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes
    9y

    @danbernstein A quad in Falls Church and duplexes in Arlington?  I have never come across these in over. 2 decades in the business.  Kudos to you. I certainly have sold duplexes where you only own 1 side but not seen any where the title includes both sides.  If you can share privately, I would be curious as to your Falls Church address and any neighborhoods you know of where you can buy both sides. 

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    @Matt K. the corvette is just a luxury for me. I have two vehicles, so I can afford to sell it. But thank you for your advice! 

    0Reply
  • Wilhelm J. Lieto
    OP
    Alexandria, VA · Member since 2017 · 19 posts · 2 votes
    9y

    @Joe Facenda Thank you for your help, I've found a place and know the sellers personally. we are thinking of doing a private sale, any advice for a private sale? Also I agree with keeping the money in pocket too.

    Any one else please feel free to chime in about private sales.

    0Reply
  • Joe Facenda
    Realtor / Investor · Vienna, VA · Member since 2014 · 133 posts · 114 votes
    9y

    It depends on your experience. A private sale could be fine. Since you are getting a loan, and using VA you will have an appraisal which will offer some protection. Make sure you agree now on the logistics if the appraisal comes in low or the appraiser requires repairs to made - not uncommon on VA appraisals. .

    Make sure you get a home inspection and again, agree how you will handle any issues that surface.

    There are a host of other things to watch out for but those are the two big ones. 

    Also, know that in VA, the settlement company attorney is NOT an advocate for either party. If you want an attorney representing you, you will need to hire someone different than the title attorney.

    0Reply
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