What amount of money do you need to begin?

Question

I often see these forums flooded with people asking questions that they really don't need to ask, as their questions are very much personalized to their specific situation.

I will try my best to keep this as short and concise as possible for simplicity and not waste you all's time.

I would like to invest in real estate by doing something similar to a live in flip just to get the ball rolling with my real estate investing. I have access to the VA loan from serving.

I spend hours listening to audiobooks, reading, browsing the forums, and getting my RL license so I can be as educated as possible, but my question is, how much money would I need to begin investing in real estate? My wife is about to go back to school so she will not be contributing income as well as she will be tacking on a lot more debt to her initial student loans. Obviously this is an investment as once she is finished with school she will make more money, but realistically we are looking at the next 4-5 years being pretty tight on cash from only me working and paying off the debt.

Is investing even feasible with low amounts of cash on hand? is it smart? Investing in real estate is truly my dream, but I have chosen to sacrifice/postpone my dream, so she can get hers. I just want to know if there's any way for both of us to be working towards what we want.

Additionally, If any of you RE investors are in the Atlanta area, PM me! Id love to pick your brain and go into more detail about my situation.

Thank you all so much in advance for taking time out of YOUR day to help me :)

-Andrew

Michael Dumler · Answer

@Andrew Stouse, I'm somewhat shocked that people are recommending subject-to-deals. Sourcing and acquiring a sub-to-deal is a full-time gig and challenging to implement in this market. I don't necessarily recommend pursuing this strategy if you're already working full-time and your wife will be a full-time student. My general rule of thumb is $5k in reserves for each property. If you don't have close to this amount, don't invest in real estate. As you're aware, utilizing your VA means your downpayment is 0%; however, you'll still need to account for closing costs ranging from 1%-3% of your loan.

This is all a straightforward math equation. Income - student debt - mortgage payment - monthly expenses = monthly savings

If you're going to go down this route, I highly recommend that you house-hack your first deal. Most wives aren't on board with this strategy, but there are other creative ways to house hack besides the typical rent-by-room example. For example, past clients of mine have acquired properties containing an in-law suite, which they rent out as an LTR or STR. This method provides more privacy, but you're still capturing all the advantages of having someone else pay your mortgage. Two books I recommend for you moving forward are "The House Hacking Strategy" by Craig Curelop and "Real Estate by the Numbers" by J Scott and Dave Meyer.

Also - this is posted constantly in the forums and can be debated, but acquiring your real estate license just for one deal might be a massive waste of time. I would give this some more thought. You'll be required to pay annual dues for MLS access and to keep your license active. This can be anywhere from $1,000-$3,000 per year, depending on where you hang your license.

I hope this provides some guidance and clarity!

Alana Reynolds · Answer

Start with a primary home, maybe a 4 bedroom house and house hack. 0 DOWN VA loan ... all you need is closing costs with is usually around 3% of three closing costs. Even then your realtor can negotiate that the seller helps with your closing.

Zack Karp · Answer

@Andrew Stouse you can ABSOLUTELY buy a property using your VA loan with not only ZERO down, but with the right realtor and offer, you can actually walk away with cash back in your pocket at closing. By building a seller credit into your offer, the seller can pay for ALL of your closing costs and prepaids, and you will get your earnest money back, plus any property tax proration credit as applicable. I have helped hundreds of Veterans with this strategy.

You should have a small reserve set aside for repairs or unexpected expenses, say like $2K-$5K, depending on the property condition. You can also get a home warranty if the mechanicals are nearing life expectancy, or for peace of mind.

Getting started is way easier than you think, and don't let analysis paralysis get in your way. The longer you wait, the longer it takes to start making money and get to property #2, 3, 4, etc.

TYFYS and best of luck!

Andrew Stouse · Answer

Mike,

This is awesome! thank you so much for sharing this!

In the case of using the VA loan, how much cash on hand would you think Id need?

Tim Stone · Answer

Hey Andrew, I'm in Atlanta too. I liked Nathan's reply because it is totally possible to buy rentals with little to no money down, but you should definitely have some sort of cash on hand for general operations and unforeseen events.

I've done a few seller financing deals in Atlanta. If you have the time to commit to looking for off market deals, you can certainly find some opportunity to build up capital. Even if you have to pass the deals off to another investor for a fee/partnership it's worth it to learn.

If you ever want to chat I can find some time to brainstorm

Nathan Harden · Answer

I truly don't think you need all that much capital at all. Like you said, use your VA loan to get a live in flip. Just remember, you're going VA so the appraisal process is more strict so it's going to be hard to get something that needs real sweat equity. Think more of cosmetic fixers in your case.

I don't think owning rentals with little to no money is smart. You need to have "rainy day funds"

What amount of money do you need to begin?

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