Real Estate Agent 路 Dallas, TX 路 Member since 2017 路 136 posts 路 141 votes
Help steer me in the right direction please.
I am a 25 year old school teacher who can currently save around 40k a year. Mostly from my salary, but I also own two SFH which I rent for $1300/month each with a mortgages of around $800/month, including taxes and insurance.
My goal is to retire by the age of 35 and focus my energy on either owning an apartment complex or commercial real estate. What road do you think would help me arrive to my destination?
1) Continue to buy and hold every time I save enough for a mortgage until I reach the 10 mortgage limit?
2) Go up to 4 mortgages then focus on paying the 4 properties off one at a time?
3) Take 1 mortgage out per year and invest the rest in index funds?
4) -Create an alternative road-
*Any year now I could fall in love, get married and have kids. This might substantially increase or decrease my savings potential.
Rental Property Investor 路 Dallas, TX 路 Member since 2018 路 12 posts 路 6 votes
7y
@Ivan Loza Congrats on you success! One correction for what you said. 20% down payment only applies for SFRs. If you want a duplex, triplex or 4plex (if you鈥檙e not house hacking/living in it) then the down payment is 25%. If you want a complex of 5 or more units the down payment is 30 - 35%.
@Ivan Loza I've been able to really take off as a realtor. However, not many do. It's like an 88% attrition rate where people fail miserably. I've only been a realtor for two years though - but it's safe to say I have a job that will keep me plenty happy for decades to come. It's not for everyone though and I highly discourage people to take my success and try to duplicate it. I just don't think it's possible for many if any (and I could write a book on that lol).
That's insane though that you're able to live off such a short amount of living expenses. I definitely could do better with my monthly expenses, but I've also began making much better money so I've enjoyed life a little more this year (tons of traveling).
I've been able to accumulate a lot of properties as primary occupant homes. I still believe I could get a home under 5% too with where interest rates are - but I wouldn't expect for long. Interest rates are at a great value right now. You definitely have a great setup and an absolute beast of a story to tell when you're in 30's. I'm 29 and hoping to be right there around 35 myself (50 doors by 35 is the goal.. and my brokerage also has a way of passive income too). Love the hustle though!
4-5% for a home mortgage and 5% for multifamily with 1.8% annual inflation isn't exactly what i call a great deal. That's an awful amount of interests
In europe you can find 1%-1.5% mortgage for investment properties or primary home any day with 1.7% annual inflation, which mean money is more or less free
Rental Property Investor 路 Bixby, OK 路 Member since 2017 路 18 posts 路 4 votes
7y
@Ivan Loza Sounds like you are doing very well and getting a great start in the real estate business. When you say you are living rent free with your parents do you plan to share your wealth with them or have you considered paying them rent based on your added income from real estate investing... just a thought since they are an integral part of your success...
Real Estate Agent 路 Dallas, TX 路 Member since 2016 路 432 posts 路 341 votes
7y
@Shelby Matson playing the game right. Buying right. Having reserves. I've been able to build a substantial amount of equity in each home quickly so far (won't always be the case I know). The gap between mortgage v rent though will only continue to grow.
Real Estate Agent 路 Dallas, TX 路 Member since 2017 路 136 posts 路 141 votes
7y
@Rick Roach it鈥檚 the norm not to move out until marriage in my culture; they鈥檇 be weirded out charging their son rent. However, I do assist financially in other indirect ways. But yes, I鈥檓 eternally grateful and giving back to them, many others and charitable causes is my biggest motivating factor.
Rental Property Investor 路 Brooklyn, NY 路 Member since 2015 路 16 posts 路 14 votes
7y
@Ivan Loza
I'm on a flight and very impressed by what I'm reading. Congrats on your choices of investing and not being caught up on wasting your money on trivial things. You're an intelligent individual. I read where one gentleman is worried about the real estate crash. But he seems to be worried about a lot. I have that personality. I pull the trigger in spite of the stress. I didn't grow up poor. I grew up lower middle class. You can do what is comfortable. You don't have to put down 20%. You can put in more if you would feel more comfortable. I wouldn't suggest it but, you could. Think about partnerships with like minded ppl or friends even. Access more rental income. 50% of something is better than 100% of nothing. Love your mindset. Markets crash and ppl flee. True investors capitalize on blood in the streets unfortunately. Money doesn't disappear, it just shifts to the financially knowledgeable. Best of luck to you. You're on an excellent path.
Rental Property Investor 路 Sedan, KS 路 Member since 2016 路 125 posts 路 92 votes
7y
@Ivan Loza per personally I am using the BRRRR method with a twist. In my area people dislike or are affraid of banks for some reason. I live in the sticks. I can flat out tell someone to go to the bank and save money but they would still like to buy "rent to own" owner financing. Well, that is fine by me. By all means charge yourself higher rent AND take over repairs if you truly want to. There is always risk they will trash the place and leave. But there is equal chance they get it nearly paid off and for whatever reason need to give it back. Then i can fix it up and sell it all over again. Sure at some point i lose the asset. But i dont really care since the numbers are substantially higher and the risk substantially lower. People tend to take better care of things when it is theirs. And to be honest if i see one more water leak i may lose my mind.
Real Estate Agent 路 Dallas, TX 路 Member since 2017 路 136 posts 路 141 votes
7y
@Andrew Cornstubble Rent to own is my favorite strategy of all, unfortunately it's illegal in my state (Texas). Hopefully through partnerships I may one day practice it in other markets. Yeah I'm hearing great things about BRRRR, I just ordered a copy of the new BP book on it.
New to Real Estate 路 DFW, TX 路 Member since 2018 路 56 posts 路 12 votes
7y
@Ivan Loza Have you ever considered house hacking a multifamily? Easily qualify for a FHA loan, get out of the parents house and have your mortgage paid........ You have the down payment for a relatively nice triplex or quadplex, plus it should help prepare you for your multifamily goal. After you could pool all your properties together for leverage.
You should come to my meet up in Frisco I am trying to get off the ground. Have a beer and chat.
Real Estate Agent 路 Dallas, TX 路 Member since 2017 路 136 posts 路 141 votes
7y
@Chris Reynolds Yes I have, it鈥檚 one of the strategies I鈥檓 strongly considering for my next investment. I鈥檓 just very wary about involving the government with an fha loan given that I already have a primary residence loan out.
Sounds like a productive way to have a beer, just let me know the details.
@Account Closed I have a 3.75% mortgage on my MFH. This also isn't Europe nor do I have any desire to invest in Europe.
So yes - the interest rates I have on my homes - are great. But thanks!
maybe you should; most serious investors nowadays are global and look everywhere in the world where it makes sense; and interest rates / cost of money is a major determinant for them. Lots of big money is pouring in the EU right now as returns in certain countries are much stronger and their markets less inflated than in the us
Real Estate Agent 路 Memphis, TN 路 Member since 2019 路 261 posts 路 253 votes
7y
@Ivan Loza I think the idea is to get a $1,750+ rental for a fraction of the market value. Their goal was to put 25 high-end rentals on 30-year gov-backed mortgages with 5% down.
@Michael Ealy wow you鈥檙e killing it out there, congrats on your massive success! Interesting, I didn鈥檛 even know there was such a thing as 2-4 unit apartments. But I just googled it and there鈥檚 a ton. Thanks for helping me think bigger!
Ivan, this made me smile. I thought everyone know that but I guess not :)
I am glad though that I've made you think bigger.
You can think even bigger than that but one step at a time (LOL)
@Tom Makinen But in a scenario in which a home鈥檚 value goes down to 5k would you rather foreclosure and loose your 20% equity? Or all of the funds poured into an all cash deal?
And well since my strategy is to hold regardless of the market, I鈥檓 not too concerned with rents decreasing in my city of Dallas, the fastest growing metroplex in America.
I do want to continue learning though, so if you have a list of risks involve with multiple mortgages that aren鈥檛 also present with cash offers please do share.
I know a lot of folks on this board push hard on the concept of OPM, or leveraging up as much as possible.
IMO leverage increases risks AND it increases losses. Its not just an always positive tool.
From reading thru the posts around here, the long timers who have made it thru a few cycles all seem to use modest to no leverage, and that allows them to either survive or to buy/make a killing during the downturns.
If you lose a house to foreclosure, and its not your primary residence, then the banks will come after you for the shortage. You might find your whole portfolio being pulled down if things get rough in the next recession.
We typically have been trying to buy about one or two properties a year. Get them stabilized (we typically do some rehab) and move on to the next deal. Now I will say we aren't finding anything we like at the moment in Dallas. But we are also content to sit on our hands until we find a deal we like.
I would rather go nice and easy and live another day if (when) we make a mistake, than to push all of our chips on the table on every deal we do.
Pittsburgh, PA 路 Member since 2019 路 1 post 路 0 votes
7y
@Ivan Loza Ultra newbie here, I have a very similar goal to yourself of retiring early and generating passive income long term in Apartments or Multi-family housing. This thread has been very informative and a great read. Such a helpful community here. Wish you the best of luck in meeting your goals.
In regard to @Bart.H comment about the banks being able to come after your assets, it reminded of some advice I've read that as you grow larger, it is better to create an LLC even if it's only 1 employee to shield your personal assets from your investments and to gain some tax advantages.
@Josh Bast One note thought I'd add for you as I've been researching stock investment for a while as well (you may know this already). If you sell your shares before owning them for 1 year, your gains will be taxed as short term capital gains (ie. taxed at your highest income bracket). Just thought I'd give you a heads up so you're not surprised come tax time :)