1st house - Atlanta, GA

7 Replies

Hello everyone. I am new to the forum, and to real estate investing. I hope to learn enough to someday to be able to pay it forward.

I am planning to purchase my first house in the next six months, somewhere close to Midtown and East Atlanta. I've saved enough to for a 25% down payment for a $130,000 property, with some cash reserves. I planned to buy a duplex, but there don't seem to be many good properties available, so I might eventually buy a 3 bedroom/2 bath, single family home. 

My investment strategy is tostart with buy and hold, buy 1 or 2 more in the next few years, gain more experience and capital. After that I'd try flipping, and/or wholesale properties. My plan is to live in my first house and rent out the two rooms, pay off the house aggressively to earn enough equity then purchase a second, then third property.

I'm just curious about what the more experienced home buyer/investors think. Anything from tips to suggestions to buying the first property, things to be careful about, whether the plan sounds feasible, etc. any advise would help.

Thank you all in advance.

Eric

Put down 3% on the first property, buy a second quickly and go from there.

@Kyle Penland Thank you for the suggestion, Kyle. Would you mind elaborating on the reasoning behind that? 

Since I am just starting out, I though would go slow while I get some more education on REI. My original plan was to get a duplex/single family home first, pay 20% down, to keep the interest low. I'd get two housemates/tenants and start collecting rent. I'd save half of the rent for repairs/maintenance, the rest I'd add in my own payment and pay down the mortgage. Then when I'd saved for a second loan for an investment property, I'll pay down the 2nd house, and take out a home equity on it, pay off the first home, and pay down the mortgage aggressively.

By that time I'd have more experience, have more connections, knowledge, and the finance, then I can buy my 3rd, 4th, 5th properties fast and smarter. This is my five-year plan.

Sure, I believe are in a unique situation.  Owner occupy homes only need a 3% downpayment.  You will put 20-25 down on investment properties (that you don't owner occupy) so while you are in a situation where you can actually live in the homes for the time required, (check your local banks but I think it is a year) then you can use that down payment to purchase more properties and live in them commonly called here "house hacking".  Pardon the run on sentence.   With that said, do what you feel is best. but if you purchase a 3/2 rent out two bedrooms, it may take you longer than 12 months to save for the next property if you put 25% down...If I were in your shoes, I'd put 3% down, live there for a year, rent out the house fully in the year, and have someone ready to take your place and in month 9, start looking for your next property, put 3% down, rent out the other two bedrooms, rinse repeat type deal...With that being said, there will be some difficulty in finding a property that will cash flow at 2/3rds occupancy so keeping more of your funds liquid would be my suggestion...If you put the 3% down on property one, and 3 months down the road the Duplex you dreamed of comes up...you are ready and have the 20-25% downpayment and be good to go.  The real estate game is one where you are in or you are out most of the time depending on money...You have to be prepared to be in 24/7 so when the time comes where a great deal you want comes up, you can move and build your portfolio.

Originally posted by @Kyle Penland :

Sure, I believe are in a unique situation.  Owner occupy homes only need a 3% downpayment.  You will put 20-25 down on investment properties (that you don't owner occupy) so while you are in a situation where you can actually live in the homes for the time required, (check your local banks but I think it is a year) then you can use that down payment to purchase more properties and live in them commonly called here "house hacking".  Pardon the run on sentence.   With that said, do what you feel is best. but if you purchase a 3/2 rent out two bedrooms, it may take you longer than 12 months to save for the next property if you put 25% down...If I were in your shoes, I'd put 3% down, live there for a year, rent out the house fully in the year, and have someone ready to take your place and in month 9, start looking for your next property, put 3% down, rent out the other two bedrooms, rinse repeat type deal...With that being said, there will be some difficulty in finding a property that will cash flow at 2/3rds occupancy so keeping more of your funds liquid would be my suggestion...If you put the 3% down on property one, and 3 months down the road the Duplex you dreamed of comes up...you are ready and have the 20-25% downpayment and be good to go.  The real estate game is one where you are in or you are out most of the time depending on money...You have to be prepared to be in 24/7 so when the time comes where a great deal you want comes up, you can move and build your portfolio.

Would you happen to be talking about the FHA insure loans with the 3.5% down? If you are, I thought you can only have 1 fha loan in your name? I didnt know you could rinse and repeat the process after the one year requirement...

@Kevin Izquierdo

Since there are Multiple types you would need to consult a mortgage broker...Some do not permit you to ever rent out the home and some do.  Again, I am not a professional in this particular strategy because it doesn't work for me since I have a family and need to keep them stable.  Why I said above check with your local bank or broker.

@Kevin Izquierdo You can have up to 4 properties in your name where you are putting 3-5% down (living in it for 1 year). After that, you need to start thinking creative financing because the banks will not give you any more loans due to your debt/income ratio. Every property becomes debt even if you have renters. Once you start putting 20% down, do it through LLC. House hacking is an amazing concept for younger investors. You can easily have 10 doors in 5 years without putting too much cash down at one time.

@Eric Feng Make sure you leverage your liquidity. Do not put all your eggs in one basket, unless you have 20% worth of cash for multiple properties and you are still not starving. @Kyle Penland is absolutely correct with his approach. Put in 3-5% down into a property that has equity at purchase (this is the key). Ideally it's a duplex or a house with multiple rooms where you can have some cash flow. Note: YOU WILL NOT BE ABLE TO LIVE OFF YOUR CASH FLOW FROM ONE OR FIVE OR TEN PROPERTIES. Cash flow is just that, cash flow. This is not your net profit. 

Cheers,

Damir 

@Kyle Penland Thank you so much for the great tips! I will talk to a broker and see what the rules are and make sure I plan out how to allocate my finance for the next few properties.

@Damir Kamber Thank you for the input. Could you explain what you meant when you say "put in 3-5% down into a property that has equity at purchase?" Is it just simply buying a property lower than Market Value, or is there something more to it? 

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