Zero to 3k in cash flow within 5 years? Weight of the first deal?

6 Replies

Hello everyone, I'm very close to closing and I'm having last minute second thoughts on whether this property is truly the wisest first choice. I hope you guys are having a nice Sunday and can give me your thoughts and opinions.

Brief About me: I'm Kenny, from Massachusetts. Diesel Tech at Brink's , 60k saved ready for investing, zero debt. Prior military. Good credit , single , no children. My short term goals is to acquire 5 multi-unit properties or about 3k in passive income as fast as humanly possible. I'm 31.

What began my doubts was when talking to my lender about my future financing options for my next deals. I'm not sure I'll be able to get 3% or 5% down on my next property even tho I plan on house hacking them, ill be forced to go with 25% down. In that case, I believe it may be smarter to buy a three family first over my initial plan of buying a duplex. Being a duplex I'll be house hacking out of pocket around 500$ a month. Triplex would be nearly zero, I could save at a faster rate for the next 25% down.

The question is, should I walk away for this reason?

86 Woodward Ave East Providence 02914 RI is the property in question.

I am very close to closing, inspection and appraisal just finished. The numbers do work out to be a fair deal in this market. Duplex 314k has one tenant for 1300( top market rent) that will stay. I will owner occupie. using a VA loan with zero down with a interest rate of 2.5. property will have 5% cap when fully rented at current rents. Cashflow about 370 AFTER vacancy, maintenance and property Management accounted for. ( I plan on doing my own management as long as I can but I account for it anyways)

314k is the appraisal price so I believe I will have zero equity initially. 9k in closing.

Taking into account it's close proximity to the city and the colleges, the money that's being put into area, the potential for appreciation/location, C+ average middle class area on the rise. The house is in great condition nearly Turn-Key other than the top floor needing the bathroom to be redone along with miscellaneous cosmetic touch-ups because the owner decided to renovate it himself.( Professionally estimated 3,100$ repair for just the bathroom) I'm very handy so I'll be doing most of the stuff myself.

As a new first time investor this property will slow down my savings but will allow me to start being a landlord comfortably and learning. Is that worth it? Or should I go big or go home, what home.

All that being said another part of me thinks that maybe I should keep waiting until i get my real estate license, work then find off-market deals or go to a tax auctions for my first deal.... I love real estate and this entire process and I plan to make it my business.

Analysis paralysis thinks I should just stop thinking and pull the trigger. There seems to always be a smarter decision to be made. learning never ends.

What Future lending options are truly available after first purchase?

What would you do in my position?

Bonus: If you could start all over, what would you do differently with 60k in today's markets?

Thank you all you for your time here. I greatly appreciate any input and advice.

Hi @Kenneth Gore , based on what you’ve said, if it were me I’d just move forward with the deal rather than backing out.

The numbers are so-so but good enough for your first house hack IMO and I think there’s a lot of virtue in overcoming “analysis paralysis” and just pulling the trigger.

I think what you wrote about this deal helping you “start being a landlord comfortably and learning” is spot on.

@Kenneth Gore usually what people do is, buy with an owner occupied, 3% down loan, then live there for a year or two and do it again.

I think after the second time the lenders start to wise up and it becomes harder to do the third time, at least that's what I've heard - it's not the route I personally took so I'm just going by what other people have said.

If I were you, I'd go through with your current purchase, live there for a year, and then look around and see what your options are at that point.

@Kenneth Gore I lived in one unit in a large multi (more than 5 units) owned by a relative, managing the building for several years until I was able to purchase it with a partner, using a commercial loan (25% down).

I did buy a property once, in the late 90s, with 3% down, but that was a primary residence and not a house hack. I think that may have been the only time, but it was a good introduction to what most people care about when buying a property: 1) How much do I have to put down? and 2) what's my monthly payment? 🤣

Glad to still see you on here, @Anthony Thompson , some time ago we spoke about the market outlook from the perspective of a newly graduated couple. Your insight helped out a lot at that time. Figured out then that my wife and I needed to establish credit and save an emergency fund and enough funds for a down payment, plus closing costs if we wanted to own our own home in a decent area of RI. Two years later and we're over 740 CS's and have what we believe is an adequate nest egg to start exploring back into the markets.