Looking to getting started in investing

[Johnny Reyes]

Hello everyone, my name is Johnny I live outside of the Orlando area and its been a long dream of mine to get into real estate investing for a long time now, it has taken me this long to start because I thought you did need money to start, or needed good credit and also because I had so many questions I didn't know who or where to turn to for answers. I have been following bigger pockets podcasts for a year or two now and also other real estate podcasts or just basically anything related to real estate and even have purchased a few books here and there. I know now I don't need money of my own to start or have to have good credit to start. 

My current situation that is preventing me from moving forward is I am a home owner and I am debating if I should sell and get the equity from my property to invest in another property or just rent out my current home and buy another one to live in. I understand I can either sell, refinance or take out a Heloc, I cant refinance because that would cause  a higher interest that I can't afford, I dont earn much at my current job, not even with a combined salary from my wife. I already had talked to a real estate agent who is also a invester and ran the numbers and he said I would have to either come up with more cash or make more money to be able to afford a new mortgage on a second home if I were to rent out my current or sell it. I already work two jobs and its just not enough, my home insurance and taxes on the property has gone up along with everything else, so I am basically living paycheck to paycheck trying to make ends meet to provide for my family. 

I thought about a Heloc loan, but I was just on a disaster forbearance program through my mortgage lender and from what I am researching its a modification on my loan and therefore it may be hard to qualify for a heloc, not sure if this is true or not. Even if I did qualify I am still worried about being able to make these extra payments on the Heloc, I understand the tenants will pay for it along with the rent on the second property I get but in order for that to happen my mortgage payments can't be too high otherwise no one will want to rent but if its not high enough I cant cash flow.

I was looking into house hacking getting into a duplex or triplex which are hard to find in my area in my opinion. However the cost of a duplex even if I rent the other unit and live in the other my payments will be more than what I can afford. So I am just stuck and dont know what to do. I  hear so many stories of people getting several properties without any money of thier own, which I know you have to have some money if you are partnering with someone else but the point is it cant be this hard just to get into another property.

I also would like to know if my wife is able to apply for a traditional loan Fha under her own name, our current home is under my name only. I know she doesn't make enough to qualify for a loan but I can put the down payment for her and we can live in this property for one year and rent my current one, then use the equity from my second to get another home, at least thats what I would like to do, is this possible? I hope all of this makes sense I am just over whelmed with everything. 
Thank you. 

[Randall Alan]

Quote from @Johnny Reyes:

Hello everyone, my name is Johnny I live outside of the Orlando area and its been a long dream of mine to get into real estate investing for a long time now, it has taken me this long to start because I thought you did need money to start, or needed good credit and also because I had so many questions I didn't know who or where to turn to for answers. I have been following bigger pockets podcasts for a year or two now and also other real estate podcasts or just basically anything related to real estate and even have purchased a few books here and there. I know now I don't need money of my own to start or have to have good credit to start. 

My current situation that is preventing me from moving forward is I am a home owner and I am debating if I should sell and get the equity from my property to invest in another property or just rent out my current home and buy another one to live in. I understand I can either sell, refinance or take out a Heloc, I cant refinance because that would cause  a higher interest that I can't afford, I dont earn much at my current job, not even with a combined salary from my wife. I already had talked to a real estate agent who is also a invester and ran the numbers and he said I would have to either come up with more cash or make more money to be able to afford a new mortgage on a second home if I were to rent out my current or sell it. I already work two jobs and its just not enough, my home insurance and taxes on the property has gone up along with everything else, so I am basically living paycheck to paycheck trying to make ends meet to provide for my family. 

I thought about a Heloc loan, but I was just on a disaster forbearance program through my mortgage lender and from what I am researching its a modification on my loan and therefore it may be hard to qualify for a heloc, not sure if this is true or not. Even if I did qualify I am still worried about being able to make these extra payments on the Heloc, I understand the tenants will pay for it along with the rent on the second property I get but in order for that to happen my mortgage payments can't be too high otherwise no one will want to rent but if its not high enough I cant cash flow.

I was looking into house hacking getting into a duplex or triplex which are hard to find in my area in my opinion. However the cost of a duplex even if I rent the other unit and live in the other my payments will be more than what I can afford. So I am just stuck and dont know what to do. I  hear so many stories of people getting several properties without any money of thier own, which I know you have to have some money if you are partnering with someone else but the point is it cant be this hard just to get into another property.

I also would like to know if my wife is able to apply for a traditional loan Fha under her own name, our current home is under my name only. I know she doesn't make enough to qualify for a loan but I can put the down payment for her and we can live in this property for one year and rent my current one, then use the equity from my second to get another home, at least thats what I would like to do, is this possible? I hope all of this makes sense I am just over whelmed with everything. 
Thank you. 

 @Johnny Reyes

You seem to know your options, as you listed them out quite well.

It seems like you have a couple of things going against you:

Number 1: the housing market in general… to your point, interest rates are high right now and anything you try to do with a new loan (of any kind) will be more expensive now than a year ago, or a year from now (if I had to guess about the future).  So that is what they call “bad timing”…, but with time  it improves.

Number 2: your financial situation.  Congratulations on owning a home in the first place… you are ahead of many other beginners in that respect. 

There are a few ways to accomplish your goals, but as you know they will take some money.  You only need 3.5% down to by a new primary residence.  How you play that is determined by how willing you are to move more than once.  You could  either buy a property you could rent part of it out ( be it a room, or a multi-family property), or buy another single family property and rent out your old house… but I don’t see that happening for you before rates come back down into probably at least the 5% range (mainly just because the numbers don’t work very well at 7% for much of anything! 

I went to a seminar some 20-25 years ago and the speaker made a profound statement that I remember to this day:  “You are where you are because you choose to be there.”  His point at the time was about not being in a position to act on your desire to improve your situation.  Obviously I know very little about you or your situation… but I would encourage you to evaluate your circumstances.  The fact you need two jobs to live paycheck to paycheck is obviously an issue in the way of you being successful in real estate (ie. Making enough money to have discretionary income to invest in real estate.)  So I say to you:  You are where you are because you choose to be there.  

The day after that seminar a long time ago (I was in my early 20’s), I quit my job working for my employer (it was at a photo shop where we printed pictures and had a portrait studio) and I decided to work for myself and started my own photo studio in another city.  What I knew was I would never get ahead working where I was working, so I changed my circumstances to allow me to get ahead. 

I’m certainly not telling you to quit your job on one days notice… but what I would encourage you to do is to evaluate how you can change your ‘life circumstances’ so that you can achieve the goals you have for yourself.  This very likely would mean taking a different career path that will ultimately lead you to being able to make more money than you do now.  

It’s a big leap of faith… but it starts with introspection and a plan… maybe it takes more education… look at your skill set and what interests you.  Look at what pays well in your area…. Figure out how to make those two things intersect.  This is probably not a short term goal… but maybe it could be… it just depends on your circumstances.  

Dreams usually become a reality through a lot of hard work.  Ask yourself how you are going to find the discretionary income to be able to buy your next house… without using the income from your present house (ideally)… because anything you do there is likely going to crater your debt to income if you take on more debt to finance your next deal (unless you sell your present house)… to which it would only make sense to do when rates come back down and you could find a multi-unit property to live in one side and rent the other.

Figure out exactly how much you would need to buy that property and start saving up for it.  If you can’t save up for it, you need to change your circumstances… that could be more income or less debt.  If you are committed to achieving your real estate goal you will figure out the changes you need to make to make it happen… otherwise you will continue to dream about being in real estate.

Wishing you all the best 

Randy 

Lakeland, FL

(37 doors & 6 flips in 5 years starting at age 47)