Portfolio Scaling/Long Term Goals

[Michael Vacha]

Hello everyone! I am new to real estate investing and have set the goal to have 120,000 in cash flow by 2035. I have $11,500 in investible assets and am going to continue saving at about $1,000/month. My current Investment Thesis is to focus on my local markets, Kalamazoo/Portage MI, and Battle creek MI while starting some property management for a local investor and continue my w-2 job which only pays $40,000/year. I'm currently interested in House Flips and Rentals for SFR or Multi Family homes. Since I am working with low w-2 income my goal is to focus on value add and BRRRR to build equity in the next five years to scale. After I "prove my salt" locally I'd like to target the same types of deals long distance as well. I am reaching out to see if anyone has had success scaling in a similar way and if they have any advice/wisdom to share!

[Drew Sygit]

It's going to be tough with your low W-2 income.

Let's assume you are living with family or renting now.

You're $11,500 can get you a $250k+ property with FHA 3% down, but your income will only support about a $1,000 PITI (mortgage P&I + property taxes + insurances).

For a SFR that's really only about a purchase price of around $115k.
NOTE: translating your max PITI to purchase price is dependent on interest rates and actual propety taxes.

If you go this route, you'd probably want to explore fixer-uppers and use an FHA 203(k) loan to include the cost of rehab in the purchase mortgage.

You could then HouseHack other bedrooms via LTR, MTR or STR, to cove part of your PITI and save for the next purchase.

Or you could flip it and use any proceeds to put down on a more expensive flip or rental.

Difficult to make assumptions to look at a 2-unit, but you would qualify for a higher purchase price IF the other unit was already rented out - the lender would recognize that rent as more income for you.