Self Employed w/ $40k to invest, looking for MFs, land or laundry

15 Replies

Hey BP community!

I’m a new member, and new investor looking to get my first deal on the books in 2019. Thanks to everyone on these forums for sharing your knowledge and experience, it’s given me the motivation I need to get into the game!

Here's my situation: 

  • In my early 30's
  • Based in NYC 
  • Self employed (for the last 1.5 years - paid by 1099)
  • Credit Score: 700+
  • No debt (other than student loans) 
  • Around $40k to invest
  • First time buyer

Here are my questions:

  1. What's a good market to look for multifamily properties/ land or laundromats that will get me started? (NYC is way too expensive)
    • Looking for cashflow or to start a BRRRR strategy in the next few years.
  2. I've heard getting financing as someone self employed can pose some issues... are there any special considerations I should make to have the process run smoothly? 
  3. Is $40k enough to get the ball rolling on any of these niches? 
  4. Is there a niche that makes more sense for a new investor to start with ? 

Any advice, input or suggestions are appreciated, Thanks BP!

- Stephen

If not NYC due to pricing then are there any other areas that you know pretty well? Maybe a place you grew up or vacation regularly? Maybe a place where you have friends and living? With $40k downpayment, going with tradition financing (20% down) you’re looking to find something for less than $200k. There are plenty of markets where you can get a decent property for that but you want to invest in an area you know or make it your mission to learn that area inside and out before buying.

Financing is definitely tougher with 1099 income compared to W2 income. Find the market then find a sample property and talk to a lender. They’ll tell you right away if it’s something they can do. 

I tell most of first time home buyers I work with who are looking to get into investing to try to find a househack. In my opinion, househacking is the best way to get into real estate. If you could buy a large apartment or small multi-family and rent out the extra bedrooms. $40k on a 3.5% down payment fha loan you’d qualify for over $1M. Can you find something in that price range in NYC that would generate good rental income? 

Hey @Stephen Anderson , I'm not sure about it being a good niche for new investors but a great niche to think about is the mobile home or manufactured housing niche.

Many experts agree that this is the only remaining real estate asset class that is approaching rather than passing its prime for profitability with the consolidation phase barely having begun.

Municipal zoning laws regarding new developments of this kind mean that owners of manufactured housing communities will have little or no local competition in the affordable housing market.

Market indications are that this asset class will become increasingly attractive to larger institutional investors with an expected dramatically positive impact on property values.

Should the economy face another downturn, the value of this asset class will still increase.

Just an idea.

Hey @Jonathan Bombaci Thanks for your response! 

It's a great suggestion to look into these types of locations! 

I've been looking into Philadelphia, PA, Winston Salem, NC and Upstate NY - I've spent some time in each of those places, know a few folks and most importantly, the math works out much more in my favor than it does in NYC.  Not sure if i'd consider moving to any of those places, but i'm learning as much as i can about the markets from locals and will plan visits to each as i build out my criteria for a sound investment. 

As far as NYC, if I househacked on a $1MM property, the math is intimidating. It doesn't follow the 1% rule - I'd likely get less than .5% of the purchase price as monthly rental income. I could find some one to put a dent in the mortgage but it'd still be pretty pricey ( in some cases - depending on area and desirability, one could find a 2 family for around $1MM but they're rare and getting rarer by the day.  The main argument for me however, is that's a lot of money to borrow on something that doesn't cashflow - and won't for a while time. 


When I consider if I borrowed that same amount of money, $1MM, in another market (Obviously I'd have to qualify, ha)  I'd be able to buy 3-5 properties in decent areas that cashflow almost immediately. T

My risk tolerance is better suited for a smaller sized loan that can hit my marks as a potential cashflow unit from day one. 

Are you working on any investment projects right now?

@Stephen Anderson that makes sense and since you know those other areas i'd say that ALMOST doesn't count as out of state investing. I definitely understand the risk tolerance issue and I did a similar thing. Instead of buying a 4 Unit Property in Boston for $1M I bought 3 Properties in NH for $800k with a total of 24 units. I believe anyone can invest in any market and make money but it's that risk tolerance aspect of it that tends to tip the scale on a particular location. 

I'm working to close on a 12 unit in Northern NH and I'm helping a few clients on projects right now. We have a client using a 203k loan to convert a mixed use property into a 4 family, and just closed on a 6 unit property for a client that was neglected by the previous owner and in desperate need of some TLC (but we paid appropriately for it). Real estate deals are fun, enjoy the ride!

Stephen,

I would suggest you find a good affordable market that will cashflow. I am partial to Texas as I have lived in 3 of the major cities. I am a lead investor and personally find(I should say create) deals with good COC returns in my local Houston market. Memphis,TN is reported to be good, parts of Arizona, and Alabama. Since you are investing outside of your market pick up one of the bigger pockets books that covers this subject. You will need a good property manager, partner, and/or someone on the ground that is knowledgeable and that you can trust to manage the deal.  Keep asking questions.  You will find the answers.  

James Polk

@James Polk Thanks for your input and your encouragement! 

I just picked up a copy of David Greene's Long-Distance Real Estate Investing - looks like I'll be doing some reading this weekend ;-).

Do you mind if I ask, what was your first deal like that got you into the game? 

Have an AWESOME weekend!

My first deal was a 2bedroom 2bath duplex I found in Fall of 2010.  My great uncle purchased it cash and site unseen.  I didn't realize he had wealth but i told him my ideas about real estate and he gave me a chance.

The deal dive:

Cost: $70k...wish i had bought more then

Repairs: $2k...i put in the labor.  Only needed paint and a stove.

Rents in 2010: $700

Cashflow: about $700

Hard to find deals like that these days, have to work harder.  I am buying one for $59k today but it has 26k in rehab and might require me to roll up sleeves and do the demo myself.

Why did you decide you wanted to invest in real estate?

Hi @Stephen Anderson ,

Regarding your question about resources for mobile home park investing. 

Here are some:

Books:

  1. Mobile Home Park 10/20 Investment System by Dave Reynolds, Frank Rolfe
  2. Mobile Home Wealth Part 2: How to Become Even Wealthier investing in Mobile Home Parks by Zalman Velvet, Stuart Silver
  3. The New Investor's Guide to Owning A Mobile Home Park by Laura Cochran, Erin Cochran
  4. The 21 Biggest Mistakes Investors Make When Purchasing Their First Park and How To Avoid Them by Charles DeHart and Kevin Bupp (available for free from www.mobilehomeparkacademy.com)

Podcasts:

  1. The Mobile Home Park Investing Podcast with Kevin Bupp and Charles DeHart
  2. Mobile Home Park Investors with Jefferson Lilly & Brad Johnson
  3. Mobile Home Park Mastery with Frank Rolfe

Websites/Blogs:

  1. Park Street Partners - http://parkstreetpartners.com - This is the investment firm run by Jefferson Lilly and Brad Johnson. They focus on mobile home parks and have solid educational content on their website.
  2. Mobile Home Park Investors - http://mobilehomeparkinvestors.com - This is the LinkedIn group led by Jefferson Lilly. It's the largest group on LinkedIn that is exclusively focused on mobile home park investing.
  3. Mobile Home Park Academy - https://mobilehomeparkacademy.com - This is the educational site that's run by Kevin Bupp and Charles DeHart. They also run an investment firm, Sunrise Capital Investors, that is focused on investing in mobile home parks.
  4. BP Member Blog - Mobile Home Park Academy- https://www.biggerpockets.com/blogs/9911-mobile-ho... - This is the BP blog maintained by Charles DeHart from the Mobile Home Academy. In various posts, he walks through the basics of finding and analyzing mobile home parks. In recent posts, he walks through case studies and outlines how to analyze and underwrite opportunities.
  5. Mobile Home University - http://www.mobilehomeuniversity.com - This is the site maintained by Dave Reynolds and Frank Rolfe. I recommend subscribing to their newsletter.

@James Polk that sounds like dream! 

Congrats! 

One thing I’ve learned is if you keep looking, luck will break your way eventually, so I'm gonna educate myself in the meantime to increase my chances, ha.

RE: Why Real Estate

Financial Freedom. 

I’ve seen my parents retire without a ton of income options and I want to have as many options as I can when I do.

I feel that I'm at the right place in my life - energy level, focus and ambition to commit to building my Real Estate portfolio.

How about you? 

@Stephen Anderson -- You've received some great advice, however, you said:

No debt (other than student loans) 

Unfortunately, student loans is one of the worst types of debt -- student loans and taxes are the only debts that will follow you even through bankruptcy! When you are doing mortgage affordability calculations, keep in mind your debt service because banks will care.

If you can get 2-years of consistent 1099 income, that will be very helpful. Banks are competing heavily for business. I always recommend making a list and then reaching out to as many local and regional banks as possible. Even Manhattan has smallish local banks.

@Stephen Anderson since you have 1099 income you might explore a Self Directed 401k. Set yourself up as a LLC, if not already done, and you may be able to use this to avoid taxes on both your and the 'company' contributions. Then invest the proceeds in real estate. LTV is lower, but since it's a 'non recourse' loan the source of your income doesn't matter. May or may not fit your situation but worth asking. I am a client of Sense Financial and they could tell you more, see if it works in your case pretty quickly.

I am not a CPA and you would want to check tax implications for your situation with a qualified advisor.

Best of luck...remember to breath and have fun!

@Stephen Anderson

How about you? 

Like a lot of people, Rich Dad Poor Dad showed me I didn't have stay in the rat race.

What product can you sell that everyone needs, doesn't ever go out of style, banks will like to loan you money on, the government allows depreciation write offs against your income, the buyer pays off your loan, the asset appreciates in value, rents go up as a hedge against inflation and it's a hard asset that should not go down to zero value.  Leasing real estate is a great asset.

Mobile home parks can be good investments.  If you see any let me know, I am interested in buying or partnering on one.

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