Seeking advice/feedback on my thoughts!

13 Replies

Hey Everyone!

   My names Joe and I am excited about becoming part of the community! I am hoping that y’all could give me your thoughts/feedback on what I am currently thinking. 

In 6 months I will be relocated to the Oklahoma City area for Work. I’m currently 22 and at the time of moving should have ~40-60k to invest with. I have good credit and a good full time job. Just to give y’all background information I also have experience with interior renovations working with my dad at a young age so I am confident I can do some of the work myself. 

My plan is to buy a foreclosed, wholesale, or undervalued home in a growing neighborhood. I’m trying to do research on growth rates, schools, safety etc and select a few areas that I can see being desirable. What I want to do is buy a property that requires work and Work on it some prior to my relocation and then live in it and work on it during this time period. In about 4-6 months depending on renovation requirement I’d find another property and flip this one. If I can’t find another deal in time I have friends to stay with so I am not concerned about not having a place to stay. How do y’all go about finding foreclosures or similar properties and is there any way to really tell what kind of shape they are in? 

What are yalls thoughts on this kind of approach? Any advice? Any Okc investors with insight on areas to target etc... 

Thanks so much! 

Have you considered the BRRRR method?
Why flip the property if you refinance the property, get your investment back, create cash flow, hire a property manager and do it all over again?
A second thought is to do this with a duplex, triplex, or quad.. add value while living in one of the units.
Food for thought - good luck!

Hey @Joe Miller , glad to here your moving into the Oklahoma real estate investing market. I would definitely consider @Adam Sheren 's idea about the BRRRR method. It is a much better move to create long term wealth and income. I work with New Western Acquisitions here in Oklahoma City and we have a good amount of discounted off market deals every month. These could be good purchases for flips or rentals. I will message you directly to get your information. Welcome to OKC

@Joe Miller I would strongly consider house hacking. If you can find a multi family that needs some work and has a lot of value add I think it is one of the best strategies. You can use an FHA 203(k), which is a renovation loan, and they will finance based on ARV (after repair value) plus finance the renovation. This typically is a 95% or 96.5% LTV (loan to value) loan. Of course if you buy a property for 200k and the ARV is 400k it doesn't mean you have to take out the full allowable loan amount. This could be a great tool to build great equity in a home while having your mortgage reduced significantly, or even paid in full, by other renters. This allows you to free up a lot of your budget to reinvest elsewhere. You would also still have a large amount of cash in hand to flip with. You may be able to even pull off a deal where you are being paid to do this since the loan is based on ARV and could essentially be a BRRRR without having to refinance. The "catch" is you have to live there for a year. Although I hardly consider this a downside since you're housing expense is covered.

@Michael Minor

Although the FHA 203K loan is a good tool I do not think it will help @Joe Miller since he plans to do the work himself.  He would need to be a licensed contractor in order to perform the work.  

@John Leavelle that is a very good point. That being said I still would recommend it to anyone starting out. He may not be able to do the work himself but it is extremely hard to match what the 203(k) can offer. It is a tool that essentially allows you to create cash flow and equity from almost nothing. He would be able to accomplish his goal for his first property with almost no money out of pocket at the cost of not being able to do the work himself. He could then find another deal with the remaining amount of money and do it however he likes. Not saying that @Joe Miller has to take my advice. I am just making sure that I give what I feel is the strongest advice. I am not an expert investor by any means but I did make 60k on my first live in flip and my current house I am about to list has an estimated 50k in equity. I am actually moving to follow my own advice with the only difference is I am going to be using a VA renovation loan instead of the FHA 203(k). I however think that no matter what you decide to do educated action is better than no action and no action is better than uneducated action.

@Adam Sheren I spent some time and read about the BRRRR method and had a few questions. If I'm understanding it correctly the idea is a buy a house and get a mortgage on it from wherever. Renovate the property and then rent it out. At this point i would have an appraisal done and go to a (different or same bank/lendor??) and refinance based on the value. This would in turn allow me to pay off the current mortgage and basically use the extra loaned money to pursue another property. Is this the correct thinking? Also based on this you must now pay the mortgage for the higher value thus more monthly out for that property so when determining a good vacation poor deal you should figure you're mortgage payments off this values is that right? I think inn understsnding it but any additional help would be appreciated!

@Michael Minor Thanks for the reply! So if i understand it correct the 203K loan is a single loan based on what the lender thinks the property could be worth. This money is used to purchase the property and then for renovation expenses through a liscenced contractor. The advantage to this is besides the deposit for the Home I’m not paying out of pocket which would allow me to potentially invest in another property right?

The basics of the BRRRR strategy are (buy rehab rent refinance repeat). Probably my favorite sustainable strategy, my favorite starter property I mentioned above is to house hack. The idea is that you buy a property that needs work at a significant discount to the ARV (after repair value). You then rehab the property and get a tenant in. The hard part is finding a property that generates enough rent for a cheap enough price that you can do the next step. When you refi you typically will get 70% or so LTV (loan to value). You need to make sure the property still cash flows after you refi. After you get the hard part done you should have all or most of your cash back in your hands and ready to get another cash flowing property, this is the final step of repeat.

Originally posted by @Joe Miller :

@Michael Minor Thanks for the reply! So if i understand it correct the 203K loan is a single loan based on what the lender thinks the property could be worth. This money is used to purchase the property and then for renovation expenses through a liscenced contractor. The advantage to this is besides the deposit for the Home I’m not paying out of pocket which would allow me to potentially invest in another property right?

Yes, the 203K would be a single loan. There is a max amount that you could borrow and it varies by location, and I think the max allowable amount for rehab is 35k (I could be wrong here). They have appraisers that are trained to appraise based on the ARV (after repair value). My understanding is that contractors are paid through the escrow account and have to be approved to do the work. The advantage is definitely that you would have minimal cash, if any, tied up in the property while also being able to possibly have your housing expenses paid for and be gaining equity in the process. Whatever money you have left over in your account is yours and is free to be spent however you like, including investing in new properties.

@JoeMiller @MichaelMinor - The 203k would be a very good solution and while @JohnLeavelle you are correct, he would not be able to do the work himself. I do agree with Michael that if he's creating enough equity, having a contractor to do work is not horrible decision. Also you can do the minimum property requirements and use the 203k and then use the cash that Joe has to do the work outside of the 203k since he has 40-60k to invest with. FHA 203k is a great idea for initial investors starting out and definitely for one who's considering the house hacking method. It really all depends on what renovations are needed and then trying to divide out what fits into the 203 and what can be done by Joe himself. I hope this helps. Good luck in your investing future.

Originally posted by @Adam Sheren :

@Joe Miller

https://www.biggerpockets.com/renewsblog/brrrr-buy...

This blog by @Andrew Syrios would be a great read for you and I think help you understand the method a bit further.

For 'newbies', or anyone really, this is a great way to start building wealth and positive CF, while minimizing your long term out of pocket expense.

Thanks for the hat tip Adam!

Thanks for all the responses y’all have definitely given me some things that i want to read about further! Really appreciate the guidance 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here