New investor trying to find the right path...

5 Replies

I'm in need of a little help in figuring out the right path to take. I've studied real estate since I was 13 (11 years ago) and I've always wanted to be a landlord. (Or have a management company that I own do it for me preferably). I'm actively licensed in Florida as an agent but I don't have my license hung with a broker. I'm going back to school to finish my bachelor's degree at the moment. As of right now, I barely have any money, my credit is teetering on a 600, and I just recently got a good job as a server at Bubba Gump Shrimp Co. at Universal City Walk in Orlando, FL. My tax return for this year though won't show much because of just getting the job, and having awful jobs before it that I barely claimed anything at.  

I've listened to the first 20 BP podcasts and taken all of it in. They are right, starting out in investing is definitely NOT easy. I attended my first REIA meeting last night in Orlando and it got to me a little bit. There are investors out there that have been doing this for 1, 2, 5, 10, and even more years. When a good deal comes along, how am I supposed to compete with someone who has cash in hand and who can close without even seeing the property?

The advice that I would like to have is about my idea on where I should go with real estate. I've already spoken to my lender and he says that he can get me a loan right now with where I stand. I just need to show him a proof of income which I could show in January and buy something after that. (Probably for less than 60K because if I did my math correctly, that's about all I could afford)

My question is this...do I wait until I have more income and better credit to buy a multi-family property that I can live in 1 unit and rent out the other 3 or 4 (MF's are where I want to end up in the future), or do I buy an awful SF home in a depressed area for 15K or 20K, put a few bucks into it, and hope that I can turn a profit? 

Start small, and try to make small profits until I can afford bigger and better properties...or wait until I can afford bigger and better properties from the get go? Any advice would be awesome.   

@Jeremy Carl  

Hey Jeremy! When you're young and thinking about how to compete and seeing how everyone has so much money and such a large network it sometimes is easy to become hopeless in a new endeavor. There are a few things to think about. First at some point everyone one of these people that are real estate demi-gods were completely ignorant and knew no one. The second is a quote from Steve Jobs as follows:

“Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use. Once you learn that, you'll never be the same again”

If you don't mind dealing with crazy people and crazy problems I'd say grab a fourplex and rent the other three out. You'll most likely cover your mortgage and keep extra. Check out BP's Ultimate beginners guide to RE investing.

Good luck friend!

House hacking, Brandon Turner's term for what @Dave Bingham  described above is an excellent idea to get started.   

Here are three things I would do to get there.

1)Figure out what is impacting your credit score the most and fix that, then fix the next one and so on as part of this I'd contact a mortgage broker and start working with them to repair your credit and to figure out the minimum score needed to get an fha loan (640?). 

2) Ties in with the first one, but I would work extra hours and maybe find another job in order to pay off old debts and to build the 3% required to get an FHA loan on a duplex, triplex or fourplex.

3) I would consider delaying finishing your degree.  If you are truly passionate about real estate and unless your degree is highly relevant to re investing, then it is likely not needed to accomplish your re goals. This is money you're spending or worse going into further debt for that may not be worth it to you in the end.  I have a master's degree and it was great when I was working in a relevant field, but it doesn't do me almost any good in the RE field since it is not RE related. 

Welcome to BiggerPockets @Jeremy Carl  

I was in the same position as you were a year ago. I had no money, horrible credit and wanted to do Real Estate. Yes the experienced people can overwhelm you but you'll actually be surprised at how helpful they really are. Figure out what your exit strategy will be and what you expect to do after and work backwards. That will give you a better picture of whether to wait or start now. Also remember that even if you buy a house in pine hills it'll give you extra income monthly compared to your money just sitting and waiting.

@Dave Bingham  

Dave, thanks for the advice. That's kind of what I'm leaning towards! I think the 4 plex is going to be my route.

@Cal C.  

I've been working on the credit score. I've already gotten it to go up a little since I posted and I'm getting some of my negative factors paid off in the next few weeks. Already have a lender from when I sold real estate. He was my in office lender and he can go as low as a 580 so I'm already set with him. As for the 2nd job, I want to get one but I want to work for another investor in Orlando if at all possible. One who has been doing it for a while, that I could provide a service or help to, and get paid plus get experience in return. My current job I bring in 40K/year as a server so it's not terrible. As for finishing the degree, I have less than a year left. I wouldn't mind having it just to see if I could find a salaried position because then I can use a guarantee or welcome letter and my first pay stub as proof of income for my lender and get in a lot quicker. I also have financial aid which pays for my classes and books, (and I actually get money back usually), so it's not an expense. 

@Christian Marin  

Christian, excellent advice. I've got my end game in sight...I've never written it down or anything though. I was wondering; however, that since you live in Orlando; would you be willing to meet sometime and discuss with me what you have done over the last year since you were in the same position. I'll buy you lunch or a beer, or both! I'd love to hear what you have been able to do though, even if it's only 1 or 2 things. If they can help me, it's worth it to me. PM me if you would be okay with that

@Jeremy Carl  I have a real nice 4-unit that I know is coming on to the market.  It is built in the mid 80s and is located 2 miles south of UCF.  Each unit is just a little over 1100 sq ft, 2/2.  3 out of the 4 are rented for an average of $800 and the 4th one is vacant due to owner selling and moving away.  There are no major issues with the property besides cosmetic updating.  

The asking on that is $300-325 for all 4 units.  In running your numbers, I feel that after all is paid, you will have a cash flow of $250-300 per unit.

PM me if this is of interest to you and I will get the details for you.

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