Realtor · Sarasota, FL · Member since 2018 · 18 posts · 2 votes
I'm trying to decide if my first property should be for personal to begin the BRRR method or if it's too much a liability.
I'm a W-2 employee (new construtction luxury property management) about 60 days from going 1099 (licensed real estate agent). I have about $50k in reserves to invest and 6 months worth of income to pay bills.
My business plan is to buy under $75k but my personal property would be $200k+ range. I have no interest in house hacking because it makes my daughter and husband uncomfortable.
Should I rent and start with creative lending?
Or will it be easier to get started to BRRR for personal then using HELOC?
Rental Property Investor · Orlando, FL · Member since 2017 · 138 posts · 51 votes
7y
Hi @Cheri Castro -- sooooo happy that you mentioned you have money for investing in addition to 6 months of savings!
I have a family also, so house hacking is not the easiest thing to accomplish under normal circumstances. The way to get around that is a separate dwelling unit that you can rent out. For example, try to find a SFH for you and the family that has a garage studio, converted garage, or studio in the backyard with a separate entrance. They might be referred to as ADU on listings.
Once you figure out your target property/market, I think BRRRR might be a good choice. With your personal savings, you're hedging off some risk.
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Cheri Castro First... Congrats! Savings and reserves. Nice! As far as purchasing a personal residence vs BRRRR... that's a tough call. I like starting with a personal residence (b/c you can get in with low money down). The issue, is it can make it tough to qualify quickly for the next investment property due to debt to income. Also, you are about to go 1099... so that means you will need to probably have 2 years under your belt to personally qualify for a loan (not sure what your husband's situation is). What is you did a live-in flip? Bought a home that needed some work... fixed it up to drive up the equity... then refinanced out some cash... and then put in a renter in it... and moved on to the next project.
Realtor · Sarasota, FL · Member since 2018 · 18 posts · 2 votes
7y
@Whitney Hutten Great points! I'd like not to move again for 2 years if possible. Im so lost. If I buy as a personal residence, fix and flip may not work because I will be 1099 after reno.
If I start out buying through commercial I may pay too much up front.
My husband is W-2 and earns enough to support the family. However, My savings will cover my portion to protect our current lifestyle. We slowly have been modestly reducing expenses to work toward financial freedom.
The financing options are what is making my head spin.
Investor · Richmond, VA · Member since 2013 · 347 posts · 191 votes
7y
Hi Cheri -- I remember many years ago hearing the advice "to really understand real estate investing you have to understand financing". And my thought was "ugh ... I don't want to have to think about that". But, it's true. So the good news is that you are seeing this now for yourself early in your investing career. Many new investors ask about whether or not they should buy in an LLC with a focus on liability but they never stop to consider what that means for your financing options. I'd suggest calling two or three small local banks (i.e. the banks you've never heard of) and talk with them. They are likely to be "portfolio" lenders. When I first heard that term I thought it meant they loan on rental portfolios but actually it means they keep their loans in their own loan portfolio rather than selling off the loans. Since they don't sell the loans they can be more flexible on their requirements. Best of luck!!
Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Cheri Castro, if your husband is still at a W-2 and can qualify on his own, purchase that way... You then only use up 1 conventional spot and then you can build your 2 yr hx up as a 1099 and be ready to rock your 10 conventional slots ;)