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Updated about 1 year ago on . Most recent reply

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First Time Investor: Smart move or risky move?

Posted

My main goal of 2024 is to purchase my first investment property (2-4 unit). Currently I own a home which I purchased at the end of 2020 with a conventional loan, 2.62% interest rate and 20% down. I have about $30k in the bank with approximately $80k that could be pulled out of my primary home with a HELOC.

The main reason I am looking to invest in real estate is to escape the rat race, get out of a traditional W2 job so I can spend more time with my family and become overall financially free. My current income is around $60k a year with limited time off per year and 50 hour weeks.  

With my long hours and non flexible schedule, it has been taking time/energy away from what is most important in my life; my family. I have considered changing paths from running a team at a warehouse to becoming a real estate agent. Though I know real estate agents aren’t hourly/salary based, I am great at building relationships and relating to people which seems to be a must if you’re looking to become a successful realtor.

The benefits (or possible benefits) I see with the career change like this is

  1. 1. I would be leaving a stable job with good benefits. However I would be able to get a job with similar pay if I needed to get back into that W2 lifestyle after leaving (Minimal risk in my eyes).
  2. 2. Having a much better work/life balance instead of having such a militant schedule to where I feel I am unable to enjoy my life outside of work.
  3. 3. As I am making money I am learning more about real estate and also building relationships with people in the industry which in turn would help me become successful in my long term goal which is to be a full-time real estate investor.

With such a big change in careers, my idea was this. Instead of using my $30k saved up to use as a down payment for my first 2-4 unit, I would keep that as my financial cushion while I make the switch to becoming a real estate agent. I understand that I may not make much money the first few months so I feel it is important to have a bit of a financial safety net. I would then use a HELOC to fund the down payment of the first investment property while still at my W2 so I am able to still get a loan from the bank.

***I have ruled out FHA loans due to it or working with my family situation


What do you think about this plan? Would this work? Is this the smart or best route to take? What are the pros/cons? I’d love to hear everyone’s thoughts.

Thanks everyone in advance!

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Jason Wray
  • Banker
  • Nationwide
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Jason Wray
  • Banker
  • Nationwide
Replied

Brett,

First off great idea and its very possible to make that all happen with a plan. Second you only need 15% down for an investment even up to 4 units. Do not put more down if you can save it for renovations or to keep as an asset since its better to be cash fluid. The more properties you buy the more "liquid reserves" you will need to satisfy the PITI reserve underwriting requirements.

Once you quit your W2 job or go to part time you can use a DSCR or Bank Statement loan to buy more investment properties. Depending on where you are looking to buy location can help increase cash flow. If you can buy in an area where STR like VRBO/AIRBNB is popular it can maximize your ROI/cash flow. Some STR's can quadruple the cash flow versus LTR - long term rentals.

If you can find a good deal on a 2-4 unit the more doors the more cash flow to set up a better ROI. Luckily mortgage rates are starting to drop so as you shop or pull out cash it should become good timing. The other thing is try to avoid turn key if you have inventory that can pass an appraisal but needs some TLC. Since you have access to funds and a Heloc it might make more sense to buy something and do some light repairs/renovations.

That way you can increase your ARV to help get the cash out quicker to get to the next REI purchase. Put together a good team seasoned Realtor, seasoned Banker/Loan officer, and ask around about contractors if you decide to renovate. A good realtor with work with you Banker to design a long term plan to keep the ball rolling. Have these conversations up front so that your maximizing your financials, and properties.

  • Jason Wray
  • [email protected]
  • 727-637-4289
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