Refinance my investment property to work towards flipping my first home? Best major?

[Taylor Hughs]

Hello Bigger Pockets community, my name is Taylor. This is my first of many posts in this community, I can't wait to hear more and continue to learn through Bigger Pockets. I live in the Dallas area, more specifically Frisco. I am 18 years old and have just discovered real estate and it instantly felt like something I wanted to do.  I have preformed very well in school but, I want to take risks to earn a financially free life. I understand this doesn't come overnight. I am a hard worker and will do what it takes to get my goal. (i want a porche)

As of right now, I have began planning for the future day (hopefully my senior year of college) when I have the money to put towards a down payment on a duplex that I can house hack and continue my journey from there. Hopefully flipping a couple of homes to gain some more capital along side my fingers crossed temporary 9-5 job.

 I have decided since I am young, to spend the next couple of years reading, listening to the Bigger Pockets Podcast, and get a job or an internship with a local realtor when I go off to college in the next couple of months. I have had a couple of questions so far.

1. Is this the right blueprint as of now? I know this is the future and that real estate has many different options/paths to go down. I also don't have a great understanding of real estate yet but, I want to get a rough outline for my future goals. It makes me feel safer and more on track if I have a set of things to do.

2. Is refinancing my original duplex a solid plan for investing into a flip property a couple of months after this original investment? I see a lot of people suggesting hard money for flipping but, I don't know if I should refinance and then hard money, or what the right idea in general is.

3. Finally, what would be the best majors to go into real estate investing? As of now, I want to follow the more entrepreneurial side of real estate in the form of house hacking, flipping, and then eventually BRRRR when I have the capital. I still plan on getting a 9-5 out of college to earn money towards the down payment on my first house hack but, was wondering what everyone suggests. '

Thank you so much to whoever took the time to answer this. I really look forward to understanding more and continuing down this lifestyle. 

[Aaron Duthie]

Hi Taylor - so cool posting a plan like this at 18. You're in a coveted position to accomplish anything you can envision.

Like you said, there are many different routes to take in real estate. Plenty of good advice, proven strategies, and sound wisdom out there, but ultimately it's up to you to align your approach with your own personal style.

Here's my take on your plan, given this will be your first time investing in RE: 

1.) Absolutely house-hack (2-4 unit multifamily, or ADU's are trending now too). It will give you the foundational skills to pursue any other strategy in real estate. How to acquire property, how to add value through renovations, how to manage tenants, how to grow rental income, how to sell for profit. The best part is - you're actually living there, so all of your work will be self-inspired. You make it better because you want it to be better for yourself. You'll also have a lower risk of default/running out of money since you're likely financed through 30-year Fannie Mae/Freddie Mac. Starting out with a fix and flip using hard money will put you under the gun to move quickly, budget accurately, with less room for mistakes. Mistakes are good, since it's where you learn the most, so do everything you can to make the most room for potential mistakes.

2.) If you purchase the original property using FHA/Conventional, a Cash-out Refinance within the first year works if you've bought the property at a discount. Otherwise, there won't be any additional equity to pull from, unless the sub-market you're located in skyrockets on it's own. More than likely, you'll need to force appreciation through value-add renovations over time. But once you've built up equity, a HELOC or cash-out refi should serve you well to take on a fix n flip

3.) Majors - If your goal is to use a job to quickly feed your RE growth, then I'd recommend Finance, Engineering, and/or Business Admin. Find a career that you can get started in quickly, and double your W-2 income quickly. Doctors and Lawyers are big on the income potential, but they take alot more time/money to get established in. 

[Taylor Hughs]

Quote from @Aaron Duthie:

Hi Taylor - so cool posting a plan like this at 18. You're in a coveted position to accomplish anything you can envision.

Like you said, there are many different routes to take in real estate. Plenty of good advice, proven strategies, and sound wisdom out there, but ultimately it's up to you to align your approach with your own personal style.

Here's my take on your plan, given this will be your first time investing in RE: 

1.) Absolutely house-hack (2-4 unit multifamily, or ADU's are trending now too). It will give you the foundational skills to pursue any other strategy in real estate. How to acquire property, how to add value through renovations, how to manage tenants, how to grow rental income, how to sell for profit. The best part is - you're actually living there, so all of your work will be self-inspired. You make it better because you want it to be better for yourself. You'll also have a lower risk of default/running out of money since you're likely financed through 30-year Fannie Mae/Freddie Mac. Starting out with a fix and flip using hard money will put you under the gun to move quickly, budget accurately, with less room for mistakes. Mistakes are good, since it's where you learn the most, so do everything you can to make the most room for potential mistakes.

2.) If you purchase the original property using FHA/Conventional, a Cash-out Refinance within the first year works if you've bought the property at a discount. Otherwise, there won't be any additional equity to pull from, unless the sub-market you're located in skyrockets on it's own. More than likely, you'll need to force appreciation through value-add renovations over time. But once you've built up equity, a HELOC or cash-out refi should serve you well to take on a fix n flip

3.) Majors - If your goal is to use a job to quickly feed your RE growth, then I'd recommend Finance, Engineering, and/or Business Admin. Find a career that you can get started in quickly, and double your W-2 income quickly. Doctors and Lawyers are big on the income potential, but they take alot more time/money to get established in. 

 Thank you so much for taking the time to answer Aaron, I really appreciate it. You’re out look and suggestions make me feel a lot better about what track to be on and securing my financial independence goals. 

I did want to tell you a little more about myself so you would have a better understanding of what my more prominent traits are for real estate and which path you would suggest. I’m extremely hard working if it’s something I enjoy doing and aspire to get better at (such as this), I'm a very big people person, i like to talk and am good at making friends and interacting, i also have a more math type of brain. I have been financing my own money since I could drive, working to pay for gas etc. I play tennis on my high school team that was ranked #2 in the state for 5A and worked very hard to earn my spot and perform at that high of a level. I hope this gives a little bit of insight to who I am to help you better target these answers towards me personally. 

I did want to ask a few more things:

What loan would you suggest getting on this first house hack (I do plan on renovating a little bit to gain equity) , which would be my primary place of living.

Also, what would you suggest doing after my first year of house hacking and what type of money method would you suggest to accomplish that next part of the plan (cash out refinance, hard money, etc.)?

Right now I’m reading How to Invest in Real Estate by Joshua Dorkin and Brandon Turner. It has provided me with so much good information and I can’t wait to continue to read. So far, I have found interest in House Hacking (which I plan to do first), House Flipping (which I may do after this original house hack), the classic BRRRR method, and finally Multi Families / Apartments once I have done enough deals and gained enough capital .

On that note, do you suggest any other books? I’ve compiled a list of a bunch that I am looking forward towards reading such as a few mindset books, a couple on tax benefits, negotiating, etc. and on how to do certain flips, rentals, house hacks. 

Finally, will a finance degree benefit me at all in my real estate path?

I’d really like to continue down the entrepreneur path to become financially free on a more rigorous timeline. Not saying overnight but, I would like to buy and work towards that goal as much as possible instead of solely buying and holding.

Again thank you so much for taking the time to help out, this community is truly amazing. I can’t wait to start my journey. 

[Jake Baker]

@Taylor Hughs

I believe the best skills you can learn for real estate are sales and finance. Finance would be a great major with perhaps a sales type internship in real estate. In real estate, you have to be able to talk to network with people and underwrite deals. 

[Kerry Baird]

@Taylor Hughs, You have a scant blueprint, but the start of one.  Each of us will be different.

That said, this is what we did: 10 single family brick houses in a linear market in Texas. 5 medium sized houses in an expensive beach market in Florida. 1 super STR in an expensive beach market. The rents of the smaller houses support the big house.

We have steady income from the 10 SFRs and seasonal income plus appreciation (and great depreciation) from the STRs.

Your number 2 above: Buy as an owner occupant, and rent out rooms.  Do not refinance until you really have built up equity, probably 5 years.

Instead, during that first year you are going to paint and spruce the place up.  Harden things that might be damaged by tenants (no carpet in Dallas...you will replace it every 4 to 6 years, so do LVP).  Save up the down payment for the next duplex, but it as an owner occupied house, and turn the first into a pure rental.  Do that again, and again, leaving rented duplex units behind you. 

By year 6 you may have 5 duplex units.  Refinance unit 1 and buy one more (or two, if you have had a lot of appreciation) with this money.  Buy another with your savings.  Year 7, refinance the second house and buy one, but probably 2 more.  Year 8, buy one more with savings and refinance the 3rd house and buy two more. 

You are done by year 10. Buy the house you really want to live in, and you will already have your Porsche.  

[Taylor Hughs]

Quote from @Jake Baker:

@Taylor Hughs

I believe the best skills you can learn for real estate are sales and finance. Finance would be a great major with perhaps a sales type internship in real estate. In real estate, you have to be able to talk to network with people and underwrite deals. 

 Thanks Jake, I’ll definitely look into this. I was planning on going into finance due to the higher starting salary and the assist in real estate. Further more, I have RE connections at each of the schools I want to apply to so, I should be able to get a sales orientated job in Real Estate with a good mentor. 

[Taylor Hughs]

Quote from @Kerry Baird:

@Taylor Hughs, You have a scant blueprint, but the start of one.  Each of us will be different.

That said, this is what we did: 10 single family brick houses in a linear market in Texas. 5 medium sized houses in an expensive beach market in Florida. 1 super STR in an expensive beach market. The rents of the smaller houses support the big house.

We have steady income from the 10 SFRs and seasonal income plus appreciation (and great depreciation) from the STRs.

Your number 2 above: Buy as an owner occupant, and rent out rooms.  Do not refinance until you really have built up equity, probably 5 years.

Instead, during that first year you are going to paint and spruce the place up.  Harden things that might be damaged by tenants (no carpet in Dallas...you will replace it every 4 to 6 years, so do LVP).  Save up the down payment for the next duplex, but it as an owner occupied house, and turn the first into a pure rental.  Do that again, and again, leaving rented duplex units behind you. 

By year 6 you may have 5 duplex units.  Refinance unit 1 and buy one more (or two, if you have had a lot of appreciation) with this money.  Buy another with your savings.  Year 7, refinance the second house and buy one, but probably 2 more.  Year 8, buy one more with savings and refinance the 3rd house and buy two more. 

You are done by year 10. Buy the house you really want to live in, and you will already have your Porsche.  

Thank you so much for taking the time to respond Kerry, this insight is a very different route than what I was planning, a lot safer, less purchases. I'll definitely look into this strategy and have this as more of a safety. Im looking forward to the hustle so in that sense I want to house hack my first home and try to BRRRR and build my portfolio through hustle and deals per year. If anyone has advice on that, it would be much appreciated.

Again thank you so much, these replies from people that have walked the path already are truly inspiring and helpful.