All Forum Posts by: Kerry Baird

It becomes a bit of a conundrum where you could use your income in several ways: save up next down payment or pay off debt to improve FICO.  My thought, having been in the same pinch is to look for seller financing, a tired landlord who wants to sell on payments. I have purchased a handful of properties this way.  

Since you have the experience of this first plex, you know you can do it again.  This is my thought if I were in a similar situation:

I’d save up down payment funds, while also using the debt snowball to pay off debt, and start looking for your next plex.  You could search for small multiplex owners in your local recorder and I use PropStream.  I hand write letters to owners who have owned for some time.  You know that 5 units and up are more difficult to get financing for, so that might be your target owner.  With my down payment, they could sell to me without having to fix up, and if they owner finance they would receive their profit over time which would spread their capital gains over time (rather than a big tax hit all in one year).  

I pay 6% interest only to my sellers.  It looks like this:  $400k purchase price.  I paid $100k down and they carry a note back for me of $300k.  I make payments to them of $2000 a month.  We close at a title company or seller’s lawyer.  I get insurance and do an inspection as with other properties.  

No agents in the middle, so I have to negotiate for myself.  But my FICO does not matter, and my closing costs are quite low because I don’t have origination fees, etc.  

Food for thought.  

While the new house will be your dream house, just hearing that you would be tight makes me squirm.  If you were to do the other first, you’d be set up in a better position.  Buying the new house will prevent you from buying another rental for a few years.  

Whereas you owner occupy a fixer in the same neighborhood with great school district, you definitely defer gratification for a little while. Buy OO with lowest interest rates and fix up over time. Stay one year to gather more houses. Stay 2 years to maximize capital gains tax, if you have a thought to sell within 5 years. Your journey could look like this:

Y1 Turn first house into rental. Buy second house now, with low OO rates. Harden the house (finishes that won't be easily damaged by tenants, i.e. less carpet, more LVP). Stay one year.

Y2 Buy 3rd house, turning the 2nd into a rental. Fix up 3rd house over the year.  Raise rents.

Y3 Buy 4th house, turning the 3rd into a rental.  Fix up 4th house over the year.  Raise rents.

Y4 Buy dream house, turning 4th house into a rental.  Raise rents.  Consider House 1 for sale, with capital gains exclusion or keep renting that cash cow. Buy 2 houses with the gains.  Consider using rents to debt snowball the first house instead.  Use extra from all rents and apply to lowest mortgage.  So many choices! 

Vs. you buy the nice house now and are tight for those same 5 years where you might be able to save up for your next rental.

For insight into my thoughts, DH and I have bought and improved 39 houses now.  We did the difficult thing when we were younger and are in our dream house now…and it is a $1M+ fixer in an amazing beachside location. Along the way, we discovered pre-foreclosures and probates that we didn’t live in, but fixed and sold or rented.  My houses are in my profile.

Navy Federal CU

Here are some thoughts. Keep that amazing rate. You aren't likely to find it again. An advantage is that your mortgage is paid down quickly, and you have enough equity to get a HELOC behind your 15 year mortgage. Interest from a HELOC on your own residence that is used for investment property is deductible. Once the house is remodeled, you can get it rented and look for a mortgage, which would put money back in your hands to pay down the HELOC. You can draw from the HELOC and do the same thing again. And again.

@Michael Baum me, too.

Merry Christmas!  And a prosperous New Year!  

I don’t have backup cleaners, because my main cleaner hired a team and she’s done very well at my properties.  I use Turno to find her, and also to pay her.  I have identified other cleaners on Turno, but I haven’t used them, so I am not sure what they think or feel about being my backup.  

Wow!  

Welcome to BP.  Nice to see the lessons learned.  Not a home run, but got you a base hit.  

@Shane Haas You have gotten some great advice here.  I am also investing in Florida and have the same conundrum...but I am 39 houses worth of experience down the road from you.  Half of the Baby Boomers have retired and half are due to retire over the next decade. 

---> Given the local demand in your market, do you think demand for your properties will increase or decrease?

If you take a harvest now, in the beginning of your budding investing career, you kill the golden goose.  I know, I've killed a few.  My advice is to rent it, ensure your rents increase year over year to offset property tax and insurance increases.  Find a way to get your next owner occupied house...improve over the year you occupy, turn it into a rental.  Now you have low owner occupied interest rates and have a nice improved house to rent.  Do this again and again.  Stay 2 years if you care about the capital gains.  In your area and in mine, we will have a lot of golden geese spinning off lots of...equity.  The wealth builder.