All Forum Posts by: Jody Sperling

Househacking is the most powerful first investment as it turns what is traditionally a liability into an asset. You win even bigger if you can find a property that needs a live-in rehab but is nice enough to rent a room. Then you get the BRRRR mixed with the hack.

Honestly, though, anything you choose to do will reward you in real estate investing. Even if you make a bad first buy, you'll learn so much. The only thing you can do to fail is fail to act. Best of luck, and thanks for the work you do. Front lines against COVID takes more bravery than I'll ever have!

Find a local bank in your area, not a national bank. A google search will help if you're unsure where to start. Call at least five local banks. Explain your situation. Share your finances and your goals. At least one of the five bankers will say the magic words, "We can help you." 

If you've been in your current residence for at least one year, you qualify for a primary loan, which will have better interest rates and require a much lower downpayment for purchase. Avoid the FHA thing in the future if possible.

You will have to refinance out of the FHA loan to qualify for the primary, but that should be a benefit to you anyway. You'll save on monthly payments, lower our interest rate, and get rid of PMI, which on an FHA loan you can never pay your way out of. If the refinance gives you extra cash, all the better to buy your live-in-flip.

Less than a year ago, my family was in your same situation, and we now own two rentals and will be purchasing our third by June. I was overwhelmed by finance questions, and my wife was terrified of taking the step. But once we finished rehabbing our personal home and renting it, after buying a new personal home, we were so grateful.

Don't let fear slow, or hinder you. Best of luck!

Without knowing how much money you have saved, it's hard to be specific, but I'll share what works for most, and what's worked for me, as well as what I wish I knew before I started investing.

1. Don't be in a rush to pay off school debt or primary home loans. You'll benefit more from putting energy into asset acquisition than debt paydown.

2. Housing will never be cheaper than it is today. Don't try to time the market or wait for a crash. You'll only waste valuable investing time. Buy at the earliest date you can.

3. Don't be afraid to partner. Brandon Turner says it all the time, and it's true, 50% of a deal is better than 100% of no deal.

4. Create a place for liquid money. I use a HELOC, but if you don't have a home to put a HELOC on, you could look at Whole Life Insurance, credit cards, or high-yield savings accounts. The point is, you don't want to sit on cash. Make cash always work, even if it's not much. Nothing is worse than 0% return.

5. Give. Give. Give. Probably, I should have started with this, but no one likes to see it and they stop reading. Give time, give money, give hope, give answers. If you give, even when it seems not to be paying off in tangible ways, something happens in your core that enables you to succeed, so give and don't doubt it's worth every effort.

Best of luck!

Bryan, I think you're making it too complicated, and that's what's confusing you. Think of it this way: An investor finds a house for 70k, must pay cash. ARV on the house would be 140k. The investor acquires the home with his own cash and completes the rehab for an additional 20k, so he has 90k cash invested. He rents the property to tenants then approaches the bank to refinance. The bank give him a loan for 75% of the appraised value, which is $105k. So not only did he cash out the full amount, but he earned an additional 15k for his efforts.

He now has 105k to purchase another property and if he is fortunate can repeat the process infinitely. Each property will have a bank mortgage with 20-25% equity in the home, but none of the equity will be the investor's because he finds deals that refinance out 100% of his money. Hope this helps clarify what's happening with a BRRRR. It's a powerful tool. Best of luck!

Mortgage insurance is definitely costly, but consider it this way. The 14k extra you'll pay over the life of the insurance is far less than the gross earnings from even one rental, so if saving the 15% to put on another property results in one extra purchase, you earn your money back many times over in a 3-8yr. period. Best of luck!

Yes. No 401k. No IRA. No pension. Only rentals.

@Michael Bultena Jr., what makes mortgage insurance so bad is that it's a cost you can never recoup. Insurance and taxes are necessary, but finding safe, legal ways to avoid them is one of the most future-lucrative investments you can make. PMI won't cover a claim if the house is damaged. It's not your insurance, it's insurance for the bank because you're a riskier borrower on an FHA loan. You pay for their comfort, in that case, and that's a bad deal.

@Joshua Noth said it best, $1 saved isn't necessarily just a dollar. Don't do the bank any favors.

I will retire on rentals alone in the next three years. Retire, though, means something different to everyone. My definition of retirement is having enough income to pay all my bills/expenses without clocking into a W-2.

The rentals require management, which I do myself, and if I want to experience more—say travel the world, or buy a nice car or a giant clawfoot tub for my wife—I have to find more cash to fit those things in the retirement budget.

As for an account that pays for occasional repairs, if you can find it, there are companies who will give you HELOC Sweep accounts on as many as three properties combined. These accounts replace the amortized mortgage loan on three homes and connect directly to your checking. As you run all your income through the checking, the excess is swept into the HELOC at midnight, chipping away at the owed balance on the HELOC. When you write a check for expenses/bills, the money is immediately drafted from the HELOC. As long as you live even 1$ below your means, this allows you to build a net of available funds while paying down your debt.

And you can use the revolving balance on three homes, which tends to be enough for any improvements you'd need to make.

You can't legally be the sole signer of a contract yet so that's going to be your biggest setback. Also, avoid FHA loans as they require you to carry mortgage insurance for the balance of the home loan.

If I had found and determined to use real estate investing at your age, I'd be a millionaire many times over now so kudos on you for thinking about this so early!

I imagine you live with family. Use the time to save every penny. If you make 15k, learn to live on 5k. Save the difference. If you have any debt, especially car debt, sell the car, get something you can buy in cash. At 18-yo. you can buy a property, and if you save aggressively, you could have as much as 20k, more if you learn to take gig work online. 

Use that money at 18 to buy real estate out of state because Colorado is too expensive for your budget. (I'm a native Coloradan, so deeply familiar with everything from Co. Springs to Ft. Collins and between.)

Since you have 13+ months to learn remote real estate investing, read David Green's book and watch every YouTube video you can find on remote investing. Get so comfortable with it you can't imagine another way. Best of luck to you!

It would be wasted to pay extra money on your home. I'm a conservative investor in terms of debt load, so I'll do things other investors consider unwise, such as pay a large lump-sum toward an investment property to get the total monthly payments lower, but once the loan is written in ink, pay the exact terms and no more. Trapped equity does you no favors. At least if you saved that 150 and paid extra on the downpayment of the investment property you could owe less each money and improve your cash flow. Best of luck!