looking for advice, starting out

Birmingham, AL · Member since 2014 · 875 posts · 947 votes

7y

@Sarah Cowns Welcome to BP and congrats on taking your first step! Even just putting your goals and concerns in writing is still a step, so well done.

As for your situation and questions, there are a few things to consider before anyone gives you 'first step' advice. Ok I tend to ramble on BP, so I will try to keep this concise (but, seriously, lol).

1) You have debt, but you've already made a smart move by getting it onto a 0% interest card (amazing how many folks don't know how to take advantage of that, well done there as well). How long is the term? When do you need to have this paid off by, and under your current circumstances can you hit that goal?

2) If you can easily hit that goal with your current income and have some income left over, then start saving for a downpayment. If paying this off before the 0% period is over is going to be a struggle, for any reason, I'll be the conservative investment advisor here and say just pay that sucker off asap and put off investing until it's done. I pretty much always advise getting rid of credit card debt before investing, the only reason you have wiggle room is because it's already at 0%.

3) One thing to consider (though don't take this as a gospel recommendation) is that you could continue to move that debt around onto another balance transfer card when this period is up IF IF IF IF you can do so with no fees. Again, I very much recommend that you try to bust through this debt asap, but if you think that will be a struggle for any reason (and again I think investing should be the secondary priority here), at least come up with a plan for what you will do if you can't kill that debt before your current 0% period elapses. Two solid cards for this are the Citi Simplicity and the Chase Slate, but of course, check on terms and conditions etc before you pull any triggers. I have a friend that is very credit card savvy (travel hacking etc) so these are recs that I've heard from her and I know have been used successfully by many folks in those circles. Always do your own research, the point here is that you need a plan for this debt if you can't kill it before the 0% period is over.

4) So your debt is one thing you need to tackle, of course. I'd say that you should use the time you have while you do that to do some more thinking about what kind of REI you want to get into. You've said rentals, does that mean you want to find properties, analyze deals, handle rehab, find tenants, and then manage them? Or do you want to build a team (agent, contractor, PM) that does those things, and you manage that team? Do you have the time and energy or skillset to do those things? Do you want to be a landlord? There are a lot of ways to do real estate investing, but they aren't all right for every person or every lifestyle. You need to be very specific about your needs and goals with regard to time, energy, budget, and control. Hone in your expectations and requirements and you'll help yourself avoid long-term headache.

5) Re: your timeline. The end of the years is well and truly nigh, so I would advise you to maybe back off on that. It is 100% understandable that now that you and your husband are on the same page, you're both itching to get started. Everyone's been there. But don't pull the trigger on something just so you feel like you've 'done' something. Taking the time to really strategize and clarify your goals and needs is going to be worth the potential few months of lost income. Plus, you can pay off your debt in the interim.

It sounds like you may be psyching yourself out a bit, but at the same time, very few people have been happy having jumped into something they didn't understand just because they felt like they shouldn't wait any longer. Yes, the advice is always to 'just take the first step', but what those people mean is that, once you know the basics of how to analyze a deal and know exactly what kind of investment you want, don't get mired in analysis paralysis waiting for the absolute perfect deal. If you're not yet to the point where you can confidently run numbers to assess a potential investment, don't understand ROI or equity or how to estimate expenses, you're not ready for that so-called 'first step'. When people get successful enough to start running seminars, it's easy for them to gloss over this part of the process and just say 'read everything, then jump in'. There's a lot of homework that goes into successful REI, so don't cheat yourself out of a solid foundation because someone who's already millionaire dared you to.

Oh and, re: seminars, I personally don't think folks should waste a ton of money on things like that. REI meet ups in your area or free webinars, heck yes, learn all you can! But don't spend $$$ to have someone tell you what you can learn here. You're a nurse, so I'm guessing you've got the brain to figure this stuff out on your own if given the time and resources. Luckily, you have both.

You're not yet at a point in your REI journey where you'll be using 'systems' or 'lead generators', you're still learning the basics. You can learn that here, and you'll find most folks on BP are extremely helpful and won't make you pay $1000 for the privilege of listening to them talk ;) That money could be put to better use paying off debt, and then building your downpayment savings.

You maybe don't have a leg up the way some folks do when they start REI, but you aren't in a bad position, just a transitional one. Take the time to get that solid foundation. Pay off your debt. Solidify your goals. Ask questions. You'll be glad you took the time to do it right.

Good luck!

Clayton

1 Reply

Jay Helms

Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes

7y

@Sarah Cowns - first off, I challenge you to dig deep into discovering your goals, the REAL reason you want to invest. Once you hav me those established, settting your investing criteria is next, which makes the analysis process very efficient. Find a mentor yes, but don't limit yourself. Join a mastermind group or local REIA so that you are around like minded people who will challenge and push you to achieve your goals. I run a mastermind that meets virtually if you'd like to know more, send me a DM. Congrats on taking step 1!

1 Reply

Account Closed

Real Estate Broker · Oklahoma City, OK · Member since 2016 · 39 posts · 58 votes

7y

@Sarah Cowns Hi there. I advise you to start "working the problem backwards" at this point by making appointments with community banks and see what THEY think of your financial situation as it relates to your business plan, because you will need a Lender to finance you. Depending on what they tell you, you can react accordingly (stop, wait or go). Putting a house under contract without knowing your financing is reckless at best. You can try "conventional" financing from bigger banks (the benefit of getting a 30 year fully amortizing mortgage), but that's as painful as a root canal in my opinion. Right now, your combined INCOME (yours and your husband's) is by far your BIGGEST ASSET. My guess is that you should knock out the debt NOW even though it is only 0% because (1) it currently hurts your credit score; and (2) paying it off will impress the community banks. You can tap that 0% credit card reservoir of cash LATER for doing the repairs on your new acquisition when the time comes, then pay it back. More later.

1 Reply

Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

7y

@Sarah Cowns

Sarah congrats on getting involved. Education is the most important commodity you can have. Sounds like your financial picture is improving. Good job!

It sounds to me you need a mentor who can lead you through the steps. I know I spent the first year like a sponge gathering knowledge but taking that first step was not easy. After the first one it came much easier.

Attend a local REIA group for hands on info. Biggerpockets has great information but you need more hands on. A mentor will be a great asset. A mentor who is active so you can see there projects and learn.

Study, study, and more study so you can learn the vocabulary. You have to be able to speak the language. Just like in your field of nursing I would be a novice but you are a seasoned veteran. Learn how to evaluate properties. It’s all about the numbers. No emotion, if the numbers don’t work move onto the next one.

If I can help you pm me.

Good Luck.

2 Reply

Stephanie P.Pro Member

Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes

7y

@sarah cowns

Hey Sarah

Congratulations on "hearing" your husband and getting this thing into gear. Well done.

He's got the skills and probably the contacts to get the physical part of real estate investing going, but the contracts are an equal part. You need to understand the contracts part or you can get into real trouble. Try to go to some meetups or REIA's in your area and find mentors or experienced people that can help you with the contract part.

Here's a strategy you could employ; Seller Financing. Find an attorney in your area that specializes in estates. See if they have a client that will be willing to sell a property and hold the financing for a short period of time (6 months or so) while you and your husband improve the property and get it ready for sale. They want to get rid of the property. You don't have cash. They hold the paper. You get the property with little to no down payment with the agreement that they get paid out when you sell the property. Everyone wins. The more win win strategies you employ, the faster you are to early retirement.

It's much more complicated than that, but that strategy works for a multitude of people and it can work for you with the right team in place.

You're going to be great.

1 Reply

Joshua S.

Member since 2018 · 294 posts · 97 votes

7y

Originally posted by @Sarah Cowns:

Good afternoon!

First off, I want to say thank you for reading this and spending your precious time helping me out.

I'll start by laying it all out there.

As most of us here at bigger pockets the idea of working until 65 doesn't exactly appeal to myself or my husband. I am an RN at a major local hospital and he is an HVAC journeyman. I'm 35 and he 32. We live in a Midwest City, OK, right across city lines of Oklahoma City. We have two children, a slew of pets, and two properties. Our previous home is now being occupied by family members who pay the mortgage, nothing more. Not an ideal situation but it is what we agreed upon with child care and the situation that was at hand about four years ago. We want to retire my husband ASAP, knowing full well that will take a few years. I enjoy my work very much so I don't feel so strongly to retire necessarily as soon as possible but would definitely like to acquire financial independence ASAP.

My husband was the one who first brought up the idea of rental properties and/or flipping about four or five years ago. I wasn't able to 'hear' him at that time or understand what he was even so worried about. I started my education into this endeavor about six months ago after having the realization that my husband had years before; I do not want to work until 65, I want to be available to the ones I love, I want financial independence, I want freedom, (and so many more reasons) and I knew the path we were on wouldn't get us there. I've been reading Robert Kiyosaki's books, podcasting, and generally trying to read and absorb as much as I can. Now we are thinking more about rental properties and BRRR strategy as apposed to flipping.

Finances, here we go. Currently we have $8,500 in credit card debt, way better than the $20,000 we had in the spring. All of which is currently 0% interest after a balance transfer we did earlier this year. Both our vehicles are paid off but are going to need another one soon. We do not have any savings. We have basically been working paycheck to paycheck for years, certainly while we've been trying to pay down the credit cards. I have about three years worth of money tracking that I've been watching to see where money is going and make changes etc. We both have great credit scores so approval for mortgages and loans won't be an issue I believe. However we currently don't have any money saved for down payments or what not.

My biggest concern is that I feel like I'm missing some sort of baseline knowledge. I read and listen and frequently I feel like I don't understand terms, acronyms, or concepts. Truth be told, contracts and all the verbiage just get me confused. I don't have a strong understanding of equity or ROI or how to even tell if a deal is good or not. (I'm aware a lot of people have these same question.) Being that this is so foreign to me, it is very possible I'm just psyching myself out and actually know more than I think. Or I truly do need a real estate investing for dummies book.

Another confession, today is the first day I have gotten on BP website and not the mobile app! The mobile app is great but doesn't even compare to the online page so I will be going through the forums and blogs since this is such an easier way to maneuver around. Any tips would be helpful. I'm still trying to understand how this site works.

Sooooooo many times the advice guests give on BP podcasts is just do it, take the first step, stop letting your fear stop you, I wish I would have started earlier, learn from experience. I'm ready to take that first step and would love to buy a rental property by the end of the year.

A few questions I have:

Should we pay off the debt before trying to get a rental?

What about turnkey? I've gotten a ton of info from the epic real estate investing podcast and cash flow savvy.

Is it realistic or feasible to buy a house by the end of the year?

Should I find a mentor?

What is the first step or thing I should do?

I've gotten mixed recommendations with seminars and meetups. Some people swear by them and other people don't. What do you think?

Lastly, I'll tell you a secret. This is my first step. This is my daily goal. I'm sitting here already excited and wondering what responds I will get. I'm trying to have patience and understanding for myself and realize that this is a process and I have already learned so much in a short time. I am capable of doing this and I am just so incredibly thankful that there are these books, podcasts, websites, and people out there to learn from. I know this was a long read and I thank you for reading it. And thank you to Bigger Pockets for everything. I am excited for the future and there is no way I could have learned everything I have without Bigger Pockets.

I'm happy to answer any other questions anyone may have!

Hi, Sarah, great job taking the first step. It's always the hardest. Just wanted to answer a couple questions in case others haven't or the answers didn't connect (sorry, I didn't read all the responses).

Equity is very simple. It's the amount you would walk away from the house with if you sold it - excluding agent fees. So, imagine you are selling your house without an agent or the agent is working for free (your cousin or something). Your house is being sold for $100,000 and you owe $70,000 on it. Your equity - what you would walk away with after the sale - is $30,000. So, obviously, two things can affect the equity in your home - 1. The value of your home. If you could sell the same home for $120,000 and owe $70,000 then your equity is $50,000. 2. How much you owe on the home. If you're able to sell for $100,000 but you owe $60,000 then your equity is $40,000.

ROI is a little more complicated because it involves time, but it's just percentages that most mom and pop investors don't have to worry about. For example, what do you care if you are making 9% or 12% per year on a rental if you were able to get the financing you needed and got a good tenant in it and everything? They are paying the mortgage down for you and hopefully giving you some cash flow beyond that and the percentages are more or less irrelevant. Obviously, if you progress to a higher level you'll want do better with your money, but don't get overwhelmed with it for now, that would be my advice.

Yes, I think you should pay off debt first. First of all, although you have good credit scores, your credit utilization and debt to income ratio will be factors in the bank's decision on financing, so you will look better having paid it off. Secondly, you'll need money for a down payment and it seems like the debt isn't allowing you to save. Once you have it paid off hopefully you can begin to save for a down payment if you can put off buying a car.

I haven't done turnkey (yet), because I pay my rental manager to find me good tenants and I don't want to inherit a bad one. I hate to be pessimistic, but I envision other owners selling a place that has a good tenant and no real issues and I always scratch my head about it. I know there are reasons to get out of good properties, but to me it seems like a sucker's bet. Why not just buy a place that you can walk through and have inspected while it's vacant and then get a tenant who's been credit checked and income verified and so forth? Yeah, it's "more work", but so is going to the salon when you could just give yourself a buzz cut at home. Sometimes the extra work is worth it in my opinion.

I don't think it's realistic to buy a house this year. Personally, I would pay that debt down and do as much education as you can over the next year and then save like crazy. I don't know what your expenses are like, but many people have plenty of cuts they could make like making lunches instead of buying them and so on. You can get a cash back credit card that gives you 2% back on purchases and then pay it off fully every month. That's a way to get free money, I've gotten about $700 back this year with that. I haven't tried this yet, but you could sign up at acorns.com. It's a service that rounds up your purchases and saves the pennies in an account for you. That way you're "saving" but not really missing it. Get a Costco visa and go there for your gas and get 4% cash back, I personally do that. Etc etc. - basically hack your life for savings wherever you can find them and pay off debt and then when you are ready to buy a house / rental you will hit the ground running. Anyway, just my two cents, but hopefully something here will help you. Good luck!

1 Reply

Jim Cummings

Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes

7y

@Sarah Cowns. Agree wholeheartedly with @Account Closed.

I agree your next action step is to meet with some local lenders, and get their take on where you are financially.

I'm all in favor of paying off debt - but wouldn't payoff the credit cards until I met with a lender and got their take on it. Sometimes, strange as it sounds paying off debt can be harmful to your credit situation.

Good luck! And congratulations on seeing the light!

1 Reply

Julie Dike

Manassas Park, VA · Member since 2017 · 37 posts · 21 votes

7y

Start watching the Bigger Pockets webinars! I've learned a ton from those.

1 Reply

Brandon L.

Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes

7y

Hello! @Sarah Cowns

Welcome to BP, and congratulations on making the decision to invest in your future via real estate.

I have written a few blog posts that may help you get started here on BP, and with your investing. Please click on the links, give them a read, and share your thoughts in the comments.

First is a post that I feel will help not get overwhelmed with the amount of info that is here on BP:

https://www.biggerpockets.com/blogs/5868/52761-the-simple-guide-to-getting-started-on-bp

The second is a post that will help get you focused with your real estate investing goals:

https://www.biggerpockets.com/blogs/5868/52743-im-new-to-bp-any-advice-would-be-appriciated

The last one is a post that will help you choose an “investor friendly” real estate agent.

There are many agents out there, but it’s important to choose the right one.

https://www.biggerpockets.com/blogs/5868/52724-im-new-to-investing-how-do-i-find-an-investor-friendly-agent

I love answering questions if you have any! Good Luck :)

1 Reply

Janice Reynolds

new york city · Member since 2017 · 40 posts · 23 votes

7y

welcome to bp. as a fellow newbie i think that listening to all the podcast will help you understand the various terms in real estate since that how i have been learning myself cause a lot off the terms are repeated over and over. I also understand what you mean by saying the podcast keep saying you should jump in asap because i have the same issue but the main thing you should understand is that once you have the education on how to analyse for deals and know your market then and only then you should start. everyone learn a different pace so don't be rush until you feel you are ready.

1 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Sarah Cowns:

Good afternoon!

First off, I want to say thank you for reading this and spending your precious time helping me out.

I'll start by laying it all out there.

As most of us here at bigger pockets the idea of working until 65 doesn't exactly appeal to myself or my husband. I am an RN at a major local hospital and he is an HVAC journeyman. I'm 35 and he 32. We live in a Midwest City, OK, right across city lines of Oklahoma City. We have two children, a slew of pets, and two properties. Our previous home is now being occupied by family members who pay the mortgage, nothing more. Not an ideal situation but it is what we agreed upon with child care and the situation that was at hand about four years ago. We want to retire my husband ASAP, knowing full well that will take a few years. I enjoy my work very much so I don't feel so strongly to retire necessarily as soon as possible but would definitely like to acquire financial independence ASAP.

My husband was the one who first brought up the idea of rental properties and/or flipping about four or five years ago. I wasn't able to 'hear' him at that time or understand what he was even so worried about. I started my education into this endeavor about six months ago after having the realization that my husband had years before; I do not want to work until 65, I want to be available to the ones I love, I want financial independence, I want freedom, (and so many more reasons) and I knew the path we were on wouldn't get us there. I've been reading Robert Kiyosaki's books, podcasting, and generally trying to read and absorb as much as I can. Now we are thinking more about rental properties and BRRR strategy as apposed to flipping.

Finances, here we go. Currently we have $8,500 in credit card debt, way better than the $20,000 we had in the spring. All of which is currently 0% interest after a balance transfer we did earlier this year. Both our vehicles are paid off but are going to need another one soon. We do not have any savings. We have basically been working paycheck to paycheck for years, certainly while we've been trying to pay down the credit cards. I have about three years worth of money tracking that I've been watching to see where money is going and make changes etc. We both have great credit scores so approval for mortgages and loans won't be an issue I believe. However we currently don't have any money saved for down payments or what not.

My biggest concern is that I feel like I'm missing some sort of baseline knowledge. I read and listen and frequently I feel like I don't understand terms, acronyms, or concepts. Truth be told, contracts and all the verbiage just get me confused. I don't have a strong understanding of equity or ROI or how to even tell if a deal is good or not. (I'm aware a lot of people have these same question.) Being that this is so foreign to me, it is very possible I'm just psyching myself out and actually know more than I think. Or I truly do need a real estate investing for dummies book.

Another confession, today is the first day I have gotten on BP website and not the mobile app! The mobile app is great but doesn't even compare to the online page so I will be going through the forums and blogs since this is such an easier way to maneuver around. Any tips would be helpful. I'm still trying to understand how this site works.

Sooooooo many times the advice guests give on BP podcasts is just do it, take the first step, stop letting your fear stop you, I wish I would have started earlier, learn from experience. I'm ready to take that first step and would love to buy a rental property by the end of the year.

A few questions I have:

Should we pay off the debt before trying to get a rental?

What about turnkey? I've gotten a ton of info from the epic real estate investing podcast and cash flow savvy.

Is it realistic or feasible to buy a house by the end of the year?

Should I find a mentor?

What is the first step or thing I should do?

I've gotten mixed recommendations with seminars and meetups. Some people swear by them and other people don't. What do you think?

Lastly, I'll tell you a secret. This is my first step. This is my daily goal. I'm sitting here already excited and wondering what responds I will get. I'm trying to have patience and understanding for myself and realize that this is a process and I have already learned so much in a short time. I am capable of doing this and I am just so incredibly thankful that there are these books, podcasts, websites, and people out there to learn from. I know this was a long read and I thank you for reading it. And thank you to Bigger Pockets for everything. I am excited for the future and there is no way I could have learned everything I have without Bigger Pockets.

I'm happy to answer any other questions anyone may have!

Pay off the bad debt 1st. No point in spending money to earn a 8% return if you've borrowed other money at 25%+. Once you've gotten out of all the bad debt start saving up for your 1st down payment and get yourself into a some good debt with a 30 year mortgage.

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looking for advice, starting out

looking for advice, starting out

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