Have a Plan(s) - Looking for Tips/Advice

[Keith Evans]

Just created my intro post, if you're interested in learning a little more about me than what is in this thread please check it out:

https://www.biggerpockets.com/forums/55-new-member-introductions/topics/114240-another-new-guy

To save you the time of reading my intro I will put the necessary points here. I am a married father of 2, I am 25 my wife is 23. Combined we net about $83,000/year. Our only monthly debt is our home, which we pay $1135/month on and is financed @ 3% for 15 years. We have about $50,000 in equity in our home ($155 ARV, $104 owed). Our area is booming to say the least, we have Exxon building their global headquarters 6.5 miles away, a new hospital just broke ground (Texas Children's, a specialty hospital) 3 miles away as well as other various developments going on within 15 miles of our current home. This becomes more important for plan 2, but applies to both as we intend to start locally.

Due to our limited income we only have about $10,000 we can invest at the moment. I am wanting to invest in SFR homes long term. The homes I would want to purchase for renting are in the $130k price range. So here are my two real options as far as I see it (other then waiting and continuing to save):

1.) Get a HELOC up to $30,000 and use ~$20,000 plus my saved investment money of $10,000 to cover 20% down and closing costs of a $130,000 home to rent out.

2.) Move to another home in our area hopefully in the $175,000 price range and rent out our current home. Judging by comps we could rent our home for $15-1600/month. Our yearly taxes are $3900 and our current insurance costs are $866/year. This would net us a positive cash flow of $3-4k the first year if my math and estimated expenses are accurate.

I am looking for opinions on the two above strategies and also hoping for new ideas I have not considered. Thank you in advance for any info and assistance you can provide. Also, if my ideas stink, don't hesitate to call me out, you would be doing us a favor in the long run.

[Liam Goble]

@Keith Evans Your take home pay is awesome. I GROSS just under $50k/year from my day job and have managed to pick up three rentals with a fourth under contract over the span of about 1.5 years. Now, that being said, I am maxed out at this point and I need to deleverage slightly before I can begin purchasing more, unless I can get another investor on board.

Your plans certainly seem reasonable. I assume you're taking into consideration everything for the homes: taxes, insurance, vacancy, repair reserves, expenses (CPA, utilities, permits/fees), property management, etc.

The way I have been able to purchase my investments in such a short span, is to purchase investments which need significant improvements, complete the improvements myself (I'm a contractor as my day job), rent the unit and then refinance to pull cash out.

In addition to doing that, I went to friends and asked to borrow money. When I asked to borrow, I gave them my preferred lending terms, so they knew I wasn't trying to simply take their money and run.

For my deals, I started with the cash from my friends to buy a house outright ($18,500 purchase; friends cash was secured with collateral OTHER than the house). I then refi'd the house to pull cash out, and bought two duplexes. I fixed half of one of the duplexes (ripped out subfloor, walls, rewiring, etc) and just completed the refi today. I already had a third duplex under contract, just needed the cash to close.

The only change I would make to your plan is that I am partial to small multifamily buildings (2-4 units). I find the cash flow from these units is significantly better than for SFH. Example: My SFH cash flows approximately $100/month after mortgage, etc. My improved duplex cash flows a hair shy of $400/month. When I improve the other side to that duplex, the cash flow should improve by another $100/month.