Pursuing first Real Estate Investment (Small-multi)

[Marcellus Jordan]

Hello Everyone. My name is Marcellus Jordan and this is my first post on Bigger Pockets. The purpose of this post is to document my thought process and also to share my current situation. I most recently graduated from university with my Master's Degree in Engineering Management (80k in debt). I currently have a job lined up in December working at Amazon as a software engineer and currently make money from freelance software. In the meantime, I will be back home in the Greater Houston Area.

As of recently, I've decided that I want to invest in the small-multi space (to cashflow). To do this I plan to try to get approved for a FHA or 203k loan. The idea being that I would live on the property and rent out the additional units. Would appreciate any advice as I get started on my property search. Also, would appreciate any insights into the process of getting approved for a mortgage. Lastly, I plan on purchasing pro membership soon, so that I'll be able to analyze more deals.

Looking forward to networking with you all.

[Alejandro B Yoon]

Hi Marcellus, congrats on the journey and that you are looking to househack. I currently am househacking in Houston and only paying $175 dollars a month and utilities to live in my home.

In finding a property, you just have to analyze as many deals that fit your guidelines that come up on the MLS, drive to the area, and look at the numbers. I believe that is the only way to do it since you want certainty in the protection of your investment and capital.

A lender will look at your debt, income history and credit to evaluate if you are capable of making mortgage payments with the current interest rate. They will then give you a pre-approval letter to show to sellers to prove you are serious. Since you just graduated college; you should be able to show your transcripts and an offer letter and void the 2 years of previous income required to qualify for a loan. I recommend talking to a lender about your current situation, he/she will tell you exactly what you need.

I have heard negative things about an FHA 203k loan. Since improvements must be approved by the bank over time, it requires the contractor to sign a lot of paperwork while working jobs. It can be a massive headache for you and contractors since banks tend to move slow and contractors want to finish jobs fast. MeetKevin's first deal was with a 203k loan and he regrets using the loan product.

I personally used a conventional loan; since I don't have to worry about PMI forever and I can buy a fixer-upper home without needing an FHA inspection before closing. I then renovated with cash savings and my income from my W2 job, since I am not spending much money on rent.