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Best way to buy Rental Property if your young
Posted on 2/19/19 at 1:47 pm
Posted on 2/19/19 at 1:47 pm
What’s the best way to buy Rental Properties if you are young? I’m trying to get into that. Don’t have much money though.
6
Posted on 2/19/19 at 1:54 pm to Tigahhs97
quote:
Don’t have much money though.
That's gonna be a problem, you will need typically 20% down.
What alot of young people do is buy their first property as their primary residence, with minimal down payment.
Then a year or two later, do the same with another property. Problem is it is harder to get away with that now, the lenders see that other mortgage on your credit report and ask lots of questions, and you can lie about it, but I know at least one person who got caught doing that and got foreclosed. That was a long time ago, not entirely sure how they handle that now.
Posted on 2/19/19 at 1:56 pm to deeprig9
As long as you can cover both notes with your income not including future rents (hopefully steady and we’ll established), and have lived in the first home at least one year, going this route is a popular one.
Posted on 2/19/19 at 2:08 pm to Tigahhs97
quote:If my young....what?
if your young
Posted on 2/19/19 at 2:11 pm to Tigahhs97
1) get a loan or use a LOC or a HELOC for the DP
2) partnerships
3) see if seller will finance (remember there are pros and cons to this for both of you). could be smaller DP but higher interest if you have bad credit. so many variables. the terms of these must be thoroughly reviewed.
this might help
Posted on 2/19/19 at 2:18 pm to Fat Bastard
Listen to Fat Bastard, he’s one of the goat’s on here regarding real estate.
This post was edited on 2/19/19 at 3:39 pm
Posted on 2/19/19 at 2:30 pm to Tigahhs97
quote:
What’s the best way to buy Rental Properties if you are young? I’m trying to get into that. Don’t have much money though.
Buy a cheap duplex (but make sure it's an area you'll be able to get consistent rent income) and live in one side and rent the other. Your rental income will cover probably 80% of your expenses. From there, you build up an account to buy more property.
This post was edited on 2/19/19 at 2:31 pm
Posted on 2/19/19 at 3:07 pm to Tigahhs97
quote:
What’s the best way to buy Rental Properties if you are young? I’m trying to get into that. Don’t have much money though.
Ask around. Look for cheap properties.
This is how my buddy got started (he's 35 right now). Now he's single, no kids, earns from his job about 100K a year.
1) Bought a house at age 25.
2) Lived in it for 2 years. Moved out into an apartment. Put house he owned for rent.
3) Saved up like 75K from age 27-30.
4) Bought a house using owner financing, 25% down, 5% interest (House was like 80K selling price) Kept saving like 25K a year.
5) Got his break. Through a work connection, found out about someone that had 6 smaller houses, all out of state, using a management company, all rented, guy owned several apartment complexes and these were his last single family homes.
Bought the package of 6 houses for 375K total. Financed through an LLC he created. Put down 75K. Financed 300K through a bank - who lent to him based upon his track record of owning two rentals as well as the track record of the new rentals he bought. He had to sign a personal guarantee for the loan.
Since then he's bought two more and is now up to 10 properties total.
Posted on 2/19/19 at 6:03 pm to Tigahhs97
Buy a 4 Plex with an FHA loan. Live in 1 and rent the other 3 out. Run far away from single family houses, even though they may be tempting.
Posted on 2/19/19 at 6:21 pm to nugget
Either way is good. Many tenants prefer SFH for many reasons. No need for him to run away from anything. Now I like SFH AND MFH and have both but people also know MFH are just for renting thus you rule out possible home owners if you wanT to sell plus other factors. Now should it be great as long as he has a tenant or two? That way he never has to worry about being completely vacant like a SFH? Sure. that’s a positive. But I really don’t have an issue with vacancies in any of my SFH either. I’m not going to go into all the metrics but a beginner stepping right into a MFH May not be for him. We don’t know his education or experience which it looks like slim to none. Good luck to him regardless.
Posted on 2/19/19 at 6:54 pm to Fat Bastard
Bastard,
Do you put more emphasis on equity return or cash flow?
For a beginner, specifically. I assume a portfolio balanced between equity play and cash flow is ideal, but for a first time investor?
Do you put more emphasis on equity return or cash flow?
For a beginner, specifically. I assume a portfolio balanced between equity play and cash flow is ideal, but for a first time investor?
Posted on 2/20/19 at 3:28 am to Fat Bastard
Speaking of owner financing. 2019 will be my first year I’ll be the seller for owner financing. Do you have any advice for tax preparation? Thanks for you help
Posted on 2/20/19 at 7:13 am to deeprig9
quote:
For a beginner, specifically. I assume a portfolio balanced between equity play and cash flow is ideal, but for a first time investor?
Not FB, but to me it depends on the amount of risk you are willing to push and what kind of unit/setup you have early on. I prefer staying cash heavy until I get a handful of units. Then I'll probably attempt to pay off the lowest note or highest interest first to get more cash flow and go from there. In an LLC mortgage, you have to be 20% in anyway so it's a decent built in buffer of equity.
So really it comes down to your comfort level. You need to make sure you have sufficient funds for repairs first and foremost before doubling down on principal or more units. Take the calculated risks you think are worth it in the long run. I don't see a perfect answer to your questions as there are a multitude of ways to manage property to go with the types of property, but this is how I view it from experience.
Posted on 2/25/19 at 5:32 pm to MrJimBeam
quote:
So really it comes down to your comfort level.
absolutely
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