All Forum Posts by: Will Bazile

@Will Bazile

That would require a dozen pages to answer. Let me just highlight one technique I used to further my education. You will hear over and over again that YouTube can teach you how to do anything. That is not exactly true. Often, YouTube can teach you a few dozen ways of doing something badly and maybe one or two of doing it passably well and a few tricks for how to do it really well. So in order to teach yourself new skills, you need to somehow curate a lot of the knowledge that's out there without knowing how to do it yourself. So I used a lot of print DIY books, The Black & Decker Complete Guide to Plumbing, etc, to learn the basics of a lot of stuff, and then refined that knowledge through YouTube, the rest of the Internet, and personal experience and experimentation. Ten years ago, you could buy a lot of three-year-old books dirt cheap for five bucks each, so I could assemble an extensive home repair library for not much money.

Nowadays, the three-year-old last-edition print books are a bit more expensive, but there are a lot more higher-quality videos out there, there are forums, and a lot of the stuff is simply easier to do than it was. Nobody needs to know how to sweat together a big brass shower valve with copper supply pipe and water hammer arresters, for instance, or how to mix deck mud and slope it evenly with a level to a shower drain. They have SharkBites and PEX piping, and they sell gorgeous big fiberglass pans in a million sizes. You don't need a steady hand with paper tape to get a good inside corner -- they have drywall edge tapes for that. The old ways are dying out and that's often a very good thing for a self-taught residential handyman who's trying to keep together his own little growing portfolio.

Hey @Will Bazile!

I currently own 160 rental units and left my corporate job 3 years ago. But, I was in a similar situation to you when I started out in real estate in 2011. I would not be where I am today if I didn't choose to get started using the house hacking strategy and taking that leap.

I graduated law school in May 2010. I had $115,000 in federal law school loans and another $20,000 from undergrad. I had a job lined up which started in August 2010, starting salary at $76,000. Like you, I was initially not thinking real estate. I was living at home when I graduated and my girlfriend and I were thinking of moving in together and renting until someone I knew suggested I look into buying a rental property. I started doing some research, read a couple of books and I was hooked on FI ever since.

My loans (which were significantly larger than yours) were initially on a 10-year repayment plan, which was the default. The monthly payment on those would have been astronomical. So, I immediately switched it to the longest repayment term they would allow. 25 years I believe. You should compare the options and if income-based repayment results in a lower monthly payment I would go with that. Your main goal is to give yourself as much room with your Debt-to-Income ratio as possible for house hack financing. The lower your fixed monthly payments, the better your chances of qualifying for an owner-occupied loan on a rental.

As I said, I started working and earning a paycheck in August 2010. I didn't really have much money saved at that point yet, so I it took me about 6-8 months of working before I saved enough where I felt comfortable being able to cover a down payment and closing costs. I then asked people I knew for recommendations of a good real estate agent and interviewed with a few different ones. I specifically settled on one who had done what I wanted to do -- he had house hacked 2 duplexes, was in the industry for 15 years, and really knew the market very well.

We then set out on the search process. Obviously, prices in 2011 were lower than they are now. But, honestly, it's all relative. Lenders coming off the 2008-2009 financial crisis were still skittish about lending and were much more strict with their qualification requirements. Also, while there were suitable house hack properties on the market in my area, there wasn't a huge abundance of properties that I felt like fit what I wanted.

My criteria at the time were: I wanted to buy a 2- to 4-family property (4-family properties were a lot more rare) in a safe (low crime) neighborhood and a good school district. Good school district would ensure that the property will remain desirable long-term and would appreciate. I also didn't want to buy something that needed a large renovation or something that was very old. I didn't know much about repairs or construction at all. So, I wanted to make sure I didn't get into anything too over my head on my first deal. 

After several months of searching, I eventually found a brick side-by-side duplex in a good school district and the property was only about 40 years old at the time. It was listed for sale at $265,000, but was on the market for a little while. Part of the reason was that the listing agent was lazy. They took really bad photos and they mis-identified the number of bedrooms in one of the units, so the information on the MLS wasn't as appealing to most buyers and they passed it up. They listed it as 2 bed 1 bath in one unit and only 1 bed 1 bath in the other unit, when in reality the two units were mirror images of each other.

We went back and forth with offers and counter-offers. The seller came down to $235,000 and I was ready to accept it, but my agent told me to give him another opportunity to negotiate the price down a bit more and, to my surprise, after another phone call with the listing agent he told me that the seller came down another $5,000. This just goes to show you how important it is to have a good, seasoned agent on your side when you're dealing with an on-market MLS sale. We ended up signing the contract and I closed on the sale around September 2011.

Some other important features of this deal that you could take something away from were that I really did not like the existing tenants at the property. Also, their rents were about $250 below market on each side. They were both smokers and had lots of cats (which as I learned later had fleas!) Their leases were month-to-month. So, I asked the seller to deliver the property fully vacant. This is may not always be easy to do, but this seller wanted to sell and agreed, which was great for me because I got to do some minor upgrades to both units and rented to an awesome couple who remained my tenants for the following 7 years. 

If you have the opportunity to select the tenants that will live next to you, I would highly recommend taking it. At the very least, if you do have to buy a property with tenants occupying all of the units, that at least one of them is on month-to-month lease and that you will be able to get them to leave within a short period of time (typically lenders will only give you 60-90 days from the date of the closing to move into the property for which they gave you an owner-occupied loan). 

With regard to the type of loan, I ended up going with a conventional loan at a local bank and put 10% down. I considered FHA, but decided not to get it primarily because of the extra financing costs and the requirement of mortgage insurance. Also, my credit and debt-to-income were well within the minimums required by the local bank. However, I think FHA is absolutely awesome for most people. The less you have to put down, the more you will have available for reserves and for future investments. So, 3.5% is probably the way to go. Also, as you may have heard, lenders are now offering 5% down conventional loans for 2-4 unit buildings (Fannie Mae recently changed their guidelines). If you are feeling ambitious and if there is inventory of these properties available in your area, you may want to consider buying a 3 or 4 unit property using a 5% down loan. You can also do that with a 3.5% FHA loan, but an FHA loan will also require the property to meet a "self-sufficiency test," whereas the 5% conventional option does not carry that requirement.

My first duplex allowed me to learn so much about real estate, being a landlord, managing tenants, financing, building relationships with contractors and other real estate professionals. I was able to use it as a steppig stone to buy more deals and eventually start using private financing and use the BRRRR strategy to scale.

I think you're in a great position now because you are already thinking ahead, you have some decent amount of money saved up, and your student loans (unlike mine!) are not astronomically large. 

If you have any other questions for me or want to pick my brain about this stuff further, I'm happy to chat. Just send me a direct message here on BP and we can connect.

Good luck!

Vitaliy

P.S.: I have a you tube channel where I cover a wide variety of real estate topics and talk about the different experiences I had. I'm not sure whether BP allows people to post external links. But, if you want to find it, you can just search for "Succeed REI" on you tube and it should come up or just go to my BP profile. I have included a link to it there.

Let me preface this by asking you to read my profile and by also stating that I live in half of a duplex that I paid $45K for a few years ago. I consider this the best money I have ever spent.

My first thought is that you've got a good plan, but only a limited amount of time to prepare. You don't lose much if, instead of implementing this plan this June/July/August, you opt instead to rent a cheap apartment for a year as near to your new job as possible, preferably walking or biking distance. Here's what you gain by doing that:

This will give you a year to check out the local real estate scene of this new city and learn some of the hyperlocal information you're going to need to make a good choice for your target location. You will also have additional time to learn a lot more about real estate and househacking. Don't just trust the BP forums for your education. Often, you get a much fuller and nuanced picture by reading books on the subject. Two you might want to look at are @Scott Trench's Set for Life and Craig Curelop's The House Hacking Strategy.

Granted, you may only be in this new city for four new years. But you'll know a lot more about that after a year in an apartment. You may quite simply hate your new job. It happens all the time.

After your first year is over, put your stuff in storage and move to a long-stay motel where you pay by the week or the month. Get all your banking information and qualification for a mortgage ready. When you find the place you want, strike. Worry less about finding a great deal than finding a place that doesn't need a lot of work (renovation is always a veteran specialist's niche in this field), is reasonably close to your work, and is purpose-built as a duplex. You don't want to be dealing with a messy conversion of a big old house (very common in Massachusetts), or the complexities of learning how to deal with multiple tenants in a triplex or quadplex.

Again, don't worry about making big bucks on this deal. Your first deal should ideally always be more of a single or even a bunt than a homerun. Even if it's an unmitigated disaster, you will find at least a dozen people on this website that turned a terrible first deal into a successful real estate career. This is one big learning opportunity, and the stresses you're going to be dealing with outside the househack with the still-new job and probably whatever will be happening in your personal life may be quite significant. I'd be conservative here.

Good luck, Will. Don't be a stranger here in the forums.

Definitely agree, glad you found BP!  I started my house hack search after graduation, but what I hadn't realized at the time is you can find and buy a property before even starting your job in some cases.  Working with a realtor that is investor friendly and looking for on-market deals is a great place to start!

@Will Bazile thanks for your post. Glad you have discovered this place and are learning about real estate. When analyzing a home to buy there are lots of things to consider...but the thing I would suggest given what you told us is that if you can commit to holding a property for a minimum of 3 years then owning a home should be a pretty safe bet. So, using a primary home loan, maybe even house hacking the property, buying off the MLS, using a realtor...all of those things have levels of protection in place to help you make a good decision. And if you can hold that property for 3 years, it should show a profit margin for you.

Hope all of that makes sense how I am describing it.

Welcome Will! Feel free to reach out if you need anything!