How I Bought Two Houses At Age 23 on a 35K income
A cousin of mine mentioned BiggerPockets to me my sophomore year of high school and ever since I have followed the BP network religiously - listening to every podcast, scrolling on the forums, and networking as much as I can. I have read numerous books they have published along with many other sources of self-education on real estate and financial Independence. Fast forward to 2020 - I was able to purchase two single family homes in Kansas City, MO in the 2019 year using much of the information I learned over the years. I now work full time as a Registered Nurse at St. Luke's on the Plaza. My W2 in 2018 was 35k as a Nurse Assistant in my last year as a student.
This is how the story goes:
I graduated from Missouri State University in May 2019 - I knew I was going to be coming to Kansas City after graduation and knew I didn't want to rent after all the education I put in. The term "House Hacking" had been in the back of my mind for months as a way to get my foot in the door. I had a couple buddies who went to Rockhurst University and were needing a new place to love - LIGHT BULB moment. BINGO. I came to KC for a visit before graduating to view some houses with a agent I had connected with. I found a single family house that was going to be very close to my work, would accommodate the three of us perfectly, and was a newer house so I wouldn't have to worry about unexpected repairs (hopefully). After reading Brandon Turner's book, "How To Buy Real Estate with No or Low Money Down" I began searching different mortgage options. I ended up getting pre-approved for a 3% down conventional loan at 4.25 rate. Yes, 3% down! I knew a range of what I could charge my friends rent and the monthly total PITI payment was going to work! Negotiated the price down on one specific house, and next thing I knew we were under contract. The sellers ended up making some repairs I requested and the sellers paid my closing costs! At closing, I brought a check for roughly 4k and I was being handed the keys. I now owned a 115k SFH for 4k out of pocket. I bought a new fridge and a used oven for the house and we were all set.
Fast forward: I have now owned that house for over a year and it has worked great. No repairs have been needed, and I have added some value by finishing the basement and adding a privacy fence, and also buying the 6,000 sq ft vacant grass lot next door for $75.00 through the KC Side Lot Program through KC Land Bank. Yes I paid seventy-five dollars for a 6,000 sq foot lot - pretty sweet deal!
The Numbers:
Monthly payment: Total PITI - $833
Monthly rent: $450 x2 roommates = $900
We split the utilities three ways
Through House Hacking I was able to obtain a house and live there for 8 months-1 year for roughly 40-50$ out of pocket a month while getting the tax benefits, and building equity.
8 months after purchasing that first house, I had saved up enough for another Single Family House by cutting out my biggest expense - living costs. This time I was more prepared and had 8 months of homeownersnhip and landlord experience under my belt. Because I was able to show the bank that my first house was fully leased out covering the whole mortgage by my roommates, I was able to get pre-approved for another owner occupied loan. This time I did a 5% down conventional loan at 4.25% rate. I had been dating my girlfriend for roughly 6 years at the time (we are still together) and her lease was ending on a house she was renting. It was a good time to move in together and so I pitched her the idea of doing a live-in flip but nothing too crazy - cosmetic upgrades needed. The search was on to find the house that I could purchase with some equity in it. After a long search, and numerous showings I ended up going under contract on a SFH through a wholesaler just down the street from the house she was renting. The house had some hoarders living in it and they couldn't afford the mortgage on it anymore. Fast forward, made it through to closing and was handed the keys a couple weeks before Christmas while representing myself through the whole purchase with constant communication with the wholesaler and the title company. Fast forward a couple more months - we cleared out the house, all new appliances, interior paint, painted kitchen cabinets and tore some out while adding open, floating shelves, new landscaping - all new sod in the backyard and continuing to update the house through the weeks.
Purchase price: $125k - 5% down conventional
Rehab - About 5-7k to date to make the home updated and more modern
Monthly payment: Total PITI - $880
Girlfriend pays me $450/month in rent
Plan- After 6-8 months Refi out of the Private Mortgage Insurance (PMI) lowering the costs and possibly pull a HELOC (Comps are in the 135-165k range within 2 miles)
After that, either stay in the house for 2 years to take advantage of Section 121 tax law - avoiding capital gains or move on to another house after 1 year and putting a tenant in this house
My first house remains rented out and I plan to either utilize the house as a Air BNB when my tenants move out or try the Section 8 strategy
What's Next?
-I am attending class to get my realtors license in a few weeks and plan to start helping clients buy/sell houses as a side gig as I continue to work full time as a nurse until my network is large enough to work as a nurse part-time
-I plan to continue to add buy-and-hold rentals to my portfolio by seeking properties that I can walk into with significant equity
-Hopefully obtain some properties through creative financing options such as owner financing or utilizing the BRRRR method with private investors capital
If you are in the KC Area, feel free to reach out - always up for networking and even partnering on a deal possibly! Thanks for reading.
I highly recommend house hacking if you can and yes, there is such a thing as buying real estate with low down payments!