Diving In Head First - How does my plan sound?

[Austin Lynk]

Hey all - I'm starting my trek into REI! I've been listening, reading and brainstorming, and have a few ideas to get started. I wanted to validate some of my thoughts, gather feedback, and potentially make some mutually beneficial connections. I'm not listing every detail of the plan here - mostly just the high level to make sure I'm not marching in the wrong direction. I genuinely appreciate any thoughts, feedback and guidance, and look forward to giving back to the forums as I continue my journey.

My situation: 26, considering Charlotte, NC and surrounding markets, no debt, moderate savings, high credit score

Short-term Goal: Secure somewhere to live, gain 5-8 doors in 2021 and generate around $600+/month cash flow, and not completely deplete my savings in down payments + reno.

Vehicle: 1 owner-occupied single or multi-family, 1 non-owner-occupied multi-family

The Plan:

1 owner-occupied single or multi-family

Well, I need somewhere to live. The reason I haven't designated single or multi-family is due to the area I'd like to live in Charlotte and it's unlikely I will be able to find a multi-family in my price range. If I can, the plan would be to take a 5% conventional owner-occupied loan for the multi-family, house-hack by living in a unit and renting out the rest and maybe polish up the cosmetics (not spend much, since I won't be getting it back except through a potential minor rent increase). After 1 year (the required period for the loan), I'd move out and rent that unit). If I can't find a multi-family, the plan would essentially be the same, except I wouldn't be collecting rent during the 1 year I was living in since in a SFH. Quality of life and living quarters is important to me and my girlfriend, so we're willing to make this sacrifice even if it slows things down a bit.

1 non-owner-occupied multi-family

This will be a pure investment property. I'm currently generating leads, but depending on the deal I find, this could either be a BRRRR or something closer to turnkey (I don't mind making minor/cosmetic improvements, getting new tenants, etc.). On the BRRRR side, I'd secure money from a HML or family (unless anyone has a better idea), and engage a long term lender beforehand to ensure the refi will be good to go. I realize a lot needs to go well for this to work - but I'm interviewing agents and lenders, engaging with a trusted GC, and practicing deal analysis and reno estimated to give myself the best chance. If I determine I want to hold off on the HML and find a property that doesn't need much work, but will cashflow (trying some direct mail, craigslist for rent calls, MLS searches, etc.), I'd likely take the smallest down payment loan I can find with good terms (is this 20%?), make some minor improvements if I think I can raise the rent, and begin the fun of landlording (and save the BRRRR for another day).

Questions:

• Is there a benefit to completing one purchase before the other? Maybe the owner-occupied first with 5% down so that D-T-I will look better for qualifying for the multi-family?
• I'd be good for a 5% conventional, owner-occupied loan for a multi-family (let's say quadplex) if found one in my range, right?
• Any Charlotte specific knowledge out there that may help guide me?
• I'm currently working with a few lead gen companies that are advertising off-market properties, has anyone explore these as leads before?

Any other thoughts, feedback or "You are crazy!" certainly welcome!

Thanks in advance, Austin.

[Grant Wilsterman]

Hey Austin! I really like the aggressive plan and sounds like you are financially set up to take on a project like this which is great. As someone who is also looking to purchase my first home with my girlfriend and buy another rental this year, I am in a very similar boat as you. I recently sold my property in Greenville to prepare for this. I have helped enough people buyer and sell here in Charlotte and am ready to do so myself. 

My first comment would be to budget some money and TIME for finding a multi deal here in charlotte area. It has become very competitive in the CLT area for multi's over the last couple years. I look at every one that actually hits the market even though I am not personally in the market for a multi. 

The only benefit to completing one purchase at a time would be reducing the risk of mortgage issues. Since you would likely be working with 2 different lenders for a personal residence mortgage and multi-unit mortgage, the lenders my require a lot of documentation or straight up not lend to you while doing 2 deals at the same time (especially if you a pushing you DTI ratios). That being said, a 5% down on a quadplex or smaller is considered a residential conventional mortgage and shouldn't be an issue. Once it has 5 or more units, it is a commercial building and will require a commercial loan with more like 15-20% down minimum.

I would love to help you in choosing an area of charlotte to start hunting for both these purchases. Sending you a DM now!