22yr Old First Real Estate Investment: House Hacking In Dallas TX

17 Replies

Hello BP family,

Investment rookie here, recent computer engineering grad (just this August!) hungry to learn and grow my portfolio. I currently have around 10k saved up and a credit just shy of 800. I'm looking for a property to reside in for at least a year that makes sense to house hack and is in good shape (4+ bedrooms in a decent central location attractive to other working professionals somewhere around farmers branch/addison/richardson) in the 250-300k range. I'm not really looking for any heavy restorations as time and focus at work will not allow. I've been listening to the podcast and doing a lot of research on where and how to get started but am at the deer in headlights stage paralyzed with excuses. One of the biggest being 10k not being enough of a cushion for down payment + closing costs/fees in a case of emergencies. Furthermore, I still have some more research and planning left on my house hacking strategy, talking to a CPA about house hacking, the tax implications behind the passive income, and so on. My question is the following: should I wait a bit more until early/mid next year? I will have a bit more of a financial cushion when MBO bonuses at the company I currently work for are awarded, more time to research, plan, network and connect, and overall more prepared in general.

Lastly, any books, podcast #s, or any insight on finding good deals in the dfw for a rookie in the area?

Any and all advice is welcome and very much appreciated.


Thank you very much in advance!

Hi Mario!

Looks like you are taking some good steps. For some encouragement, I bought my first home (10 years ago) with 11k, second for 9k and third for 7k. I was able to do this by doing 5% conventional loans while rolling in all the closing costs to the sales price with the seller. 

Also, I am looking to sell one of our properties in Richardson this coming year. 211 Wake Drive. It's 3 bed, 2 bath but has a converted garage. Take a look, maybe we can work something out!

Hey Mario! I recommend reading the House Hacking strategy by Craig Curelop. It will teach you a lot about the different types of house hacking you can do and some overall good knowledge on the process that comes with it. It goes over a variety of strategy and important things to know. You can check out his episode on the BP Real estate podcast  show 252.

@Mario Bolivar Mario, I’m an agent and CPA in Plano and help a lot of first time investors get into their first property. Send me a direct message if you wanna hop on a call and chat i can talk to you about the tax implications as well on a house hack. You’re getting started early so congrats on that!!

Originally posted by @Richard Helppie-Schmieder :

Hi Mario!

Looks like you are taking some good steps. For some encouragement, I bought my first home (10 years ago) with 11k, second for 9k and third for 7k. I was able to do this by doing 5% conventional loans while rolling in all the closing costs to the sales price with the seller. 

Also, I am looking to sell one of our properties in Richardson this coming year. 211 Wake Drive. It's 3 bed, 2 bath but has a converted garage. Take a look, maybe we can work something out!

Hi, Richard! I love the decreasing upfront capital over time in your investments! Rolling up the closing costs in the sales price is so smart, is that a common strategy you like to use? In your experience how willing are sellers to agree to that or is that more so an agreement with your lender(s)? Thank you so much for your feedback, encouragement, and advice.

Thanks again! Have a great start to your week.

 

Originally posted by @Jabbar Adesada :

Hey Mario! I recommend reading the House Hacking strategy by Craig Curelop. It will teach you a lot about the different types of house hacking you can do and some overall good knowledge on the process that comes with it. It goes over a variety of strategy and important things to know. You can check out his episode on the BP Real estate podcast  show 252.

Hey Jabbar! Thank you so much for the recommendations. I ordered the book by Curelop last night, to be delivered Wednesday; very excited to read and disect it!! I'll listen to #252 in the gym and while cooking dinner later this evening. Thank you again for the recommendations. All the best! 

 

Originally posted by @Harrison Sharp :

@Mario Bolivar Mario, I’m an agent and CPA in Plano and help a lot of first time investors get into their first property. Send me a direct message if you wanna hop on a call and chat i can talk to you about the tax implications as well on a house hack. You’re getting started early so congrats on that!!

Hi, Harrison! Thank you so much for reaching out. I would love to get together with you and will DM you later today. I really appreciate your help!

 

@Mario Bolivar . Have you thought about partnering with someone? You are right $10k will not be sufficient for a down payment , closing costs and a heavy restoration for a $300K property.

Didn’t finish ( oops on my phone )

You are going down the right path in doing the research and running numbers. You might just need to tweak the area or criteria if you don’t have someone to partner with you on your first deal.

Mario,

How are your other debts?  The following is not advice but food for thought based on personal experience.

As a new couple ready to start a family, we desperately wanted to buy a home. We discovered that mortgage debt has a maximum allowable DTI ratio and that there is a separate, higher, DTI for overall debt. What that means is that, if you have no other debts, one thing you can do is get a personal loan from a bank (or... a cash advance on a credit card...). Don't spend the cash. After three months in your account, it seasons and the banks do not consider it as "borrowed for mortgage" purposes.

Example: Say you make $100K per year. I believe FHA is now allowing a maximum DTI of 45%. That means that your debt payments can be as high as $3750 per month. However, the maximum mortgage DTI is 38%, or $3167 per month. The difference between the two is the maximum that you can be paying per month for car loans, credit cards, personal loans, etc., and still qualify for the maximum mortgage. $583 per month.

With your high credit score, you can probably borrow $20K fairly easily and still have payments under $583 per month.  Wait 3 months after borrowing so that you have $30K sitting around in a bank account for 3 months and... problem solved.  

Again, I am not "recommending" this.  But, this is how our family bought our first home.

Welcome to BiggerPockets and congratulations on your recent graduation, @Mario Bolivar . You'll find a ton of valuable information and advice on here from industry professionals. Best of luck on your REI journey.

@Mario Bolivar I have never had any pushback and did it early on in my investing career. It is not something I negotiate up-front but typically about a week from closing after appraisal numbers are in and before the HUD has been finalized. It's a pretty casual conversation and as long as it is positioned where the seller is receiving the same amount, its a non-issue.

@Mario Bolivar

Hey Man, congrats on getting started early.

I was in a similar situation last January in which I had about 8k cash which I was planning on using as a down payment for a 3% conventional loan.

Thanks to down payment assistance, I ultimately ended up paying only 1000 to purchase the property while using the other money to invest into rehab on the home.

Might be worth your time to look into this!

GL!

@Mario Bolivar

House hacking makes your tax situation more complex.
You purchased a property that is treated as both an investment property and a personal residence. As such, payments that you make need to be prorated between business deductions and personal deductions.

Payments that you make normally fall into one of 3 buckets
100% of the payment can be factored in somewhere on the return
Partial payment can be factored somewhere on the return
0% of the payment can be factored in somewhere on the return

House-hacking also has considerable tax implications in the event that you want to sell this property.

You can potentially defer a portion or all of the gain on the investment property with 1031 exclusion.
You can potentially exclude a portion or all of the gain on the personal residence with section 121 exclusion