Starting Out Today with Low Income

[Steven Sullivan]

Hi everyone, nice to meet you!

I’m an eager new investor working on getting my first single family househack. I plan to get a 3 bed with a garage which I will live in, and rent out the bedrooms. That being said, I was wondering if anyone knows someone who was able to invest with only a $40,000 salary? (I’m a teacher). Getting a co-signer is very possible. But I am single so there is no second household income.

I would like to be able to afford my whole mortgage at 100% vacancy in a disaster scenario, which puts me at buying houses less than 200k at the current interest rates including expenses and insurance. I also live very frugally. 

With these interest rates, good positive cash flow with less than a 200k property only seems doable outside the city (an hour outside of Austin) or in good cashflow markets like the Midwest or parts of the Southeast USA. Can anyone offer advice on whether it’s worth making the move to a large city in the Midwest or a smaller town in the state you live in? Specifically, do mid-sized to small towns outside of big cities have sufficient rental demand for rent by the room? And would you recommend it? What would you do if you were in my position? A lower income, but willingness to sacrifice comfort in order to set yourself up for an abundant future.

Any advice or insight is appreciated! I really am open to anything. I fully live behind the, “How can I?” not “I can’t.” mindset. Thank you for your time!

[Caleb Brown]

I would maybe do side hustles to increase your income. The alternative is moving to somewhere cheaper or find a higher paying job. If you are house hacking you just need to focus on saving up the DP which is not bad. TX is competitive so I'd imagine it can be tough there. I am in the Midwest and there is always demand for housing, room by room is very market specific so that depends

[Min Zhang]

Hey Steven! Welcome to BiggerPockets! You’re in the right place to learn about remote investing.

I like starting in the Midwest because it's affordable and offers good cash flow. Following David Green's Core 4 strategy (realtor, contractor, property manager, and lender) gives confidence to invest anywhere. I would say, the Ohio market in general is a very beginner friendly state to get started with your real estate journey. I have seen so much growth in Columbus when it comes to appreciation and job opportunities which I have experienced. On average, 80 people move into Columbus weekly.  It has seen significant growth, especially with tech giants like Intel, Meta, Amazon, and Google setting up operations, driving up property prices and job opportunities. On the other hand, if you have a lower budget, let’s say $100-$150k. Cleveland would be a great market for you. I have experienced cash flow anywhere from 10-18% with so much more to offer. As a real estate agent and an investor, I am on the market daily and explore opportunities for myself and my clients. Let me know if you need assistance!

[Steven Sullivan]

Quote from @Caleb Brown:

I would maybe do side hustles to increase your income. The alternative is moving to somewhere cheaper or find a higher paying job. If you are house hacking you just need to focus on saving up the DP which is not bad. TX is competitive so I'd imagine it can be tough there. I am in the Midwest and there is always demand for housing, room by room is very market specific so that depends

 That’s good advice! DP is saved, and I have extra I can pull from in stocks if need be. I’m working on an Amazon-based side hustle at the moment, and have been trying to break into tech for the last year with 10 personal apps set to release on the App Store sometime this year. A full-time position just hasn’t come my way yet.

I recognize that in theory, monthly mortgage payments shouldn't be an issue since I'll be househacking, I would just rather comfortably afford the mortgage if everyone somehow decides to move out at one time. Do people regularly invest in properties they can't afford the mortgage of with full vacancy? I suppose that's what caused so much panic for STR investors during quarantine, which is probably less likely to happen with LTR? I'm very curious, what is normally considered acceptable risk in the real estate community in terms of monthly combined mortgages vs monthly total income?

That’s good to know! I suppose I should talk to investors in the smaller towns I’m considering moving to for their input on rent by the room demand. 

[Preston Dean]

@Steven Sullivan

I was in your shoes some years ago. I had to house hack for 2 years & was able to make it a rental after 2 years now it cash flows about $350.  If you don't want to wait then maybe find a hard money lender

[Alfath Ahmed]

Quote from @Steven Sullivan:

Hi everyone, nice to meet you!

I’m an eager new investor working on getting my first single family househack. I plan to get a 3 bed with a garage which I will live in, and rent out the bedrooms. That being said, I was wondering if anyone knows someone who was able to invest with only a $40,000 salary? (I’m a teacher). Getting a co-signer is very possible. But I am single so there is no second household income.

I would like to be able to afford my whole mortgage at 100% vacancy in a disaster scenario, which puts me at buying houses less than 200k at the current interest rates including expenses and insurance. I also live very frugally. 

With these interest rates, good positive cash flow with less than a 200k property only seems doable outside the city (an hour outside of Austin) or in good cashflow markets like the Midwest or parts of the Southeast USA. Can anyone offer advice on whether it’s worth making the move to a large city in the Midwest or a smaller town in the state you live in? Specifically, do mid-sized to small towns outside of big cities have sufficient rental demand for rent by the room? And would you recommend it? What would you do if you were in my position? A lower income, but willingness to sacrifice comfort in order to set yourself up for an abundant future.

Any advice or insight is appreciated! I really am open to anything. I fully live behind the, “How can I?” not “I can’t.” mindset. Thank you for your time!

I would look into house-hacking with a 5% down CHAMP loan or a 3.5% down FHA loan. This is how I got started in real estate while in engineering school. I now own 9-units here in Columbus and have BRRRR'ed and Flipped multiple properties after.

[Jena Vail]

Steven, your goal is worth it! Your willingness to move to the right market that works for your income seems on track. Your questions about findding the right city or town is perfect to guide you. You want to consider regions that you are personally attracted to first. Also think about strong economies with diverse industries. College towns can be solid for rentals. Also look for properties in established & attractive neighborhoods that match your price point & research rental rates. Would you also consider 2 - 4 unit properties? Also, make sure you consult with a trusted lender to give you all the best options based on your goals & current scenario. Hope this is helpful & all the best to you! 

[Theresa Harris]

Talk to others, but there may be specialized mortgages for teachers.  Do you have someone who can co-sign a loan (ie a parent)?  

[Steven Sullivan]

Quote from @Min Zhang:

Hey Steven! Welcome to BiggerPockets! You’re in the right place to learn about remote investing.

I like starting in the Midwest because it's affordable and offers good cash flow. Following David Green's Core 4 strategy (realtor, contractor, property manager, and lender) gives confidence to invest anywhere. I would say, the Ohio market in general is a very beginner friendly state to get started with your real estate journey. I have seen so much growth in Columbus when it comes to appreciation and job opportunities which I have experienced. On average, 80 people move into Columbus weekly.  It has seen significant growth, especially with tech giants like Intel, Meta, Amazon, and Google setting up operations, driving up property prices and job opportunities. On the other hand, if you have a lower budget, let’s say $100-$150k. Cleveland would be a great market for you. I have experienced cash flow anywhere from 10-18% with so much more to offer. As a real estate agent and an investor, I am on the market daily and explore opportunities for myself and my clients. Let me know if you need assistance!

That’s great info, Min

Thank you! Ohio seems very promising. I ran numbers on those 2 cities after you mentioned them and they both offer great cashflow! I’ve read some not great things about crime in Cleveland, but I imagine knowing an agent in the area would provide knowledge as to safer neighborhoods to invest in. Columbus on the other hand seems disproportionately interesting based on those tech companies! I’ll continue doing research, but Columbus and Cleveland are now on my list in the spreadsheet I have. 

 
Thanks again for the great intel!

[Steven Sullivan]

Quote from @Preston Dean:

@Steven Sullivan

I was in your shoes some years ago. I had to house hack for 2 years & was able to make it a rental after 2 years now it cash flows about $350.  If you don't want to wait then maybe find a hard money lender

 That’s a great success story, Preston!

Thanks for weighing in! Are you an investor in the Fort Worth area? I was looking into Killeen and Houston today as affordable, but growing markets. I will need to check out DFW if prices are good there as well. 

[Steven Sullivan]

Quote from @Alfath Ahmed:

Quote from @Steven Sullivan:

Hi everyone, nice to meet you!

I’m an eager new investor working on getting my first single family househack. I plan to get a 3 bed with a garage which I will live in, and rent out the bedrooms. That being said, I was wondering if anyone knows someone who was able to invest with only a $40,000 salary? (I’m a teacher). Getting a co-signer is very possible. But I am single so there is no second household income.

I would like to be able to afford my whole mortgage at 100% vacancy in a disaster scenario, which puts me at buying houses less than 200k at the current interest rates including expenses and insurance. I also live very frugally. 

With these interest rates, good positive cash flow with less than a 200k property only seems doable outside the city (an hour outside of Austin) or in good cashflow markets like the Midwest or parts of the Southeast USA. Can anyone offer advice on whether it’s worth making the move to a large city in the Midwest or a smaller town in the state you live in? Specifically, do mid-sized to small towns outside of big cities have sufficient rental demand for rent by the room? And would you recommend it? What would you do if you were in my position? A lower income, but willingness to sacrifice comfort in order to set yourself up for an abundant future.

Any advice or insight is appreciated! I really am open to anything. I fully live behind the, “How can I?” not “I can’t.” mindset. Thank you for your time!

I would look into house-hacking with a 5% down CHAMP loan or a 3.5% down FHA loan. This is how I got started in real estate while in engineering school. I now own 9-units here in Columbus and have BRRRR'ed and Flipped multiple properties after.

Thanks Alfath!

By CHAMP, does this refer to the Community Housing Affordable Mortgage Program loan? At first glance, it seems like an attractive option especially to forgo PMI. I've heard there's also assistance programs for 1st generation homebuyers (people who's parents don't own a house) that can be 0 down payment in some states. Regardless, your success story is incredible and I hope to have that many units someday! The Midwest seems like a popular topic in this thread.

[Steven Sullivan]

Quote from @Jena Vail:

Steven, your goal is worth it! Your willingness to move to the right market that works for your income seems on track. Your questions about findding the right city or town is perfect to guide you. You want to consider regions that you are personally attracted to first. Also think about strong economies with diverse industries. College towns can be solid for rentals. Also look for properties in established & attractive neighborhoods that match your price point & research rental rates. Would you also consider 2 - 4 unit properties? Also, make sure you consult with a trusted lender to give you all the best options based on your goals & current scenario. Hope this is helpful & all the best to you! 

Jena, that is really great advice! I have added how much I’d like to live in the area to the spreadsheet as well. So that will certainly be a major determining factor. A lot of the places that excite me most are also the most expensive, such as SF or Denver. Not realistic on my budget, although I’m considering a very brief move to SF to network more with tech folks with the help of my friend who lives down there working for Adobe. If I’m lucky, I can score a remote role and move to an affordable market elsewhere to jumpstart my FI progress, but if not, I can still buy a house with a lower salary in any of these affordable markets around the country! I relate pretty well to college-age students being in my mid-20’s so college towns certainly are attractive. I would love to consider a 2-4 unit property provided the numbers work. I haven’t seen a lot of them. But if the cashflow is there, that could be a major consideration!
Thank you for all the helpful info really! I’m talking to a lender now just to see the type of options I may have in my area and the loan I can qualify for likely with someone in my family as a co-signer. My credit score and history is great so it’s only my income that’s holding me back, but I should be able mitigate that with a qualified co-signer if I can’t find better work. 

Thank you again! That is all VERY helpful!

[Steven Sullivan]

Quote from @Theresa Harris:

Talk to others, but there may be specialized mortgages for teachers.  Do you have someone who can co-sign a loan (ie a parent)?  

Thank you Theresa! I will look into that and ask the current lender I’m talking to right now as well. Yes, I have my parents or my brother. My brother has a greater than 100k income for the last few years but he recently got laid off, so I would likely have to go with my parents if he doesn’t find a job by the time I get pre-qualified. But definitely looking into creative loan programs that are unique to my situation!

[Zeke Liston]

Quote from @Steven Sullivan:

Hi everyone, nice to meet you!

I’m an eager new investor working on getting my first single family househack. I plan to get a 3 bed with a garage which I will live in, and rent out the bedrooms. That being said, I was wondering if anyone knows someone who was able to invest with only a $40,000 salary? (I’m a teacher). Getting a co-signer is very possible. But I am single so there is no second household income.

I would like to be able to afford my whole mortgage at 100% vacancy in a disaster scenario, which puts me at buying houses less than 200k at the current interest rates including expenses and insurance. I also live very frugally. 

With these interest rates, good positive cash flow with less than a 200k property only seems doable outside the city (an hour outside of Austin) or in good cashflow markets like the Midwest or parts of the Southeast USA. Can anyone offer advice on whether it’s worth making the move to a large city in the Midwest or a smaller town in the state you live in? Specifically, do mid-sized to small towns outside of big cities have sufficient rental demand for rent by the room? And would you recommend it? What would you do if you were in my position? A lower income, but willingness to sacrifice comfort in order to set yourself up for an abundant future.

Any advice or insight is appreciated! I really am open to anything. I fully live behind the, “How can I?” not “I can’t.” mindset. Thank you for your time!

You shouldn't have any issues getting approved for $200,000 with that salary, but I could be wrong. I would apply through a bank and see what your max budget will be and go from there before putting too much thought into location. Who knows, you may be approved for more. 

[Bonnie Low]

Have you considered getting a DSCR loan? That stands for Debt Service Coverage Ratio. While it's not something people usually do for their first purchase, I don't see why you couldn't. It's typically used for investment properties but I'm not aware of there being a prohibition against house hacking with a DSCR...? The downside is that you're going to pay a higher interest rate, but the upside is that the lender is only concerned with the property's financials rather than yours. So if you can show that the rents will cover the mortgage and then some (most want around 1.2 debt coverage ratio at least) you may be able to get financing even on your current salary. There are plenty of DSCR lenders here on these forums so I'm sure someone with more experience with this type of loan will chime in. If you're looking at markets in the midwest, don't overlook Dayton OH. It's about midway between Cincinatti and Columbus and less expensive than both. There are some very affordable homes there and many nice areas in and around Dayton.

[Steve K.]

I know a teacher who has a house painting business he runs on the side/ in the summer. He makes really good money doing that and was able to buy an expensive house recently because of that additional income. Another teacher I know trades stocks on the side and does well with that. I’d look into some sort of way to make additional income. Teaching is a demanding job but you’ve got that glorious time off in the summer that you can put to good use, and evenings/ weekends if you really want to hustle. A summer job in one of the trades would be beneficial to a real estate investing career also as you’d make connections and gain knowledge. If you have a co-signer and can lower your monthly expenses by house hacking instead of renting, that would be an awesome way to get started immediately IMO. Just don’t forget the three golden rules: location, location, and location. Houses way out in the burbs or in the sticks won’t rent as well or appreciate as fast as those closer to more high-paying jobs. 

[Brian Bohrer]

Why not search for a house hack opportunity that also has a FHA, VA or USDA loan behind it? You can get a 2%-5% rate on a mortgage that you assume and since values have come down in most states over the past 2 years, you may be able to find a seller who would be willing to have you take over the payments and cover the closing costs!

I wrote a blog post about the most powerful purchasing strategy available to every buyer in todays market combined with house hacking!  

https://www.biggerpockets.com/forums/922/topics/1175338-maxi...

I personally bought my last primary residence in November 2023 with a 3.08% assumable loan (in a 7.5% rate market) and hope to buy my next few homes the same way every year!  I wish you the best in your journey!  If you have any questions, please feel free to reach out!  Take Care :)

[Jimmy Lieu]

Quote from @Steven Sullivan:

Hi everyone, nice to meet you!

I’m an eager new investor working on getting my first single family househack. I plan to get a 3 bed with a garage which I will live in, and rent out the bedrooms. That being said, I was wondering if anyone knows someone who was able to invest with only a $40,000 salary? (I’m a teacher). Getting a co-signer is very possible. But I am single so there is no second household income.

I would like to be able to afford my whole mortgage at 100% vacancy in a disaster scenario, which puts me at buying houses less than 200k at the current interest rates including expenses and insurance. I also live very frugally. 

With these interest rates, good positive cash flow with less than a 200k property only seems doable outside the city (an hour outside of Austin) or in good cashflow markets like the Midwest or parts of the Southeast USA. Can anyone offer advice on whether it’s worth making the move to a large city in the Midwest or a smaller town in the state you live in? Specifically, do mid-sized to small towns outside of big cities have sufficient rental demand for rent by the room? And would you recommend it? What would you do if you were in my position? A lower income, but willingness to sacrifice comfort in order to set yourself up for an abundant future.

Any advice or insight is appreciated! I really am open to anything. I fully live behind the, “How can I?” not “I can’t.” mindset. Thank you for your time!

Hi Steven, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

[Marcus R.]

+1 for @Steve K.'s suggestion.  Wife is a teacher so this one hits close to home.  I know a RE investor/teacher that did flips during the summer and on breaks.  Does a lot of his work to cut down on costs and eventually went full time.

You could also go the other way and pick up something full time during the summer and use those funds towards RE. 

Here's some other thoughts to scale income and not just limit it to the summer...

- Educational videos on your subject on Youtube or other social media platforms.

- Tutoring on your subject or other areas.  Another teacher I know gets 75+/hour doing this. 

- Test prep 

[Preston Dean]

Quote from @Steven Sullivan:

Quote from @Preston Dean:

@Steven Sullivan

I was in your shoes some years ago. I had to house hack for 2 years & was able to make it a rental after 2 years now it cash flows about $350.  If you don't want to wait then maybe find a hard money lender

 That’s a great success story, Preston!

Thanks for weighing in! Are you an investor in the Fort Worth area? I was looking into Killeen and Houston today as affordable, but growing markets. I will need to check out DFW if prices are good there as well. 

 @Steven Sullivan

Yes I am & have a rental in Fort Worth. 

Deals you can find here

Duplex close to TCU that rents for $2500 list price $300K

4plex in a nice neighborhood can rent for $4400 list price $540K

House with a back house rents for $2,755 list price $299K (my listing)

[Mike Dymski]

There are a lot of vocal members on the forums that claim that affordability is not an issue.  They feel that there is plenty of affordable housing and that people just need to be realistic on where they can live.  It's true but it's not that simple.  We need good teachers (and other professions) in every market.

[Nathan Brock]

Quote from @Caleb Brown:

I would maybe do side hustles to increase your income. The alternative is moving to somewhere cheaper or find a higher paying job. If you are house hacking you just need to focus on saving up the DP which is not bad. TX is competitive so I'd imagine it can be tough there. I am in the Midwest and there is always demand for housing, room by room is very market specific so that depends

 Agree on side hustles 100%. I am currently boosting cash savings with DoorDash. Nice thing is the tax deduction for driving jobs nearly covers the revenue, so you won't pay much in taxes on it. I can pull it off even with super high gas prices in PNW.

Also, in my experience, "career growth" in the W2 world is slow and agonizing... wouldn't count on it if you're an investor.

[Joseph Bodek]

Hi Steven:

Steven if cash is a problem for you then you might want to utilize owner finance as your means to secure a property for yourself or to flip. Lease Option would be my first choice and then Subject To or any owner finance deal you can put together. These deals require very little cash and do not require great credit.

Joe

[Brittany Coleman McCauley]

Quote from @Steven Sullivan :

Quote from @Caleb Brown :

I would maybe do side hustles to increase your income. The alternative is moving to somewhere cheaper or find a higher paying job. If you are house hacking you just need to focus on saving up the DP which is not bad. TX is competitive so I'd imagine it can be tough there. I am in the Midwest and there is always demand for housing, room by room is very market specific so that depends

 That’s good advice! DP is saved, and I have extra I can pull from in stocks if need be. I’m working on an Amazon-based side hustle at the moment, and have been trying to break into tech for the last year with 10 personal apps set to release on the App Store sometime this year. A full-time position just hasn’t come my way yet.

I recognize that in theory, monthly mortgage payments shouldn't be an issue since I'll be househacking, I would just rather comfortably afford the mortgage if everyone somehow decides to move out at one time. Do people regularly invest in properties they can't afford the mortgage of with full vacancy? I suppose that's what caused so much panic for STR investors during quarantine, which is probably less likely to happen with LTR? I'm very curious, what is normally considered acceptable risk in the real estate community in terms of monthly combined mortgages vs monthly total income?

That’s good to know! I suppose I should talk to investors in the smaller towns I’m considering moving to for their input on rent by the room demand. 

@Steven Sullivan , first and most importantly thank you for all the work you do as a teacher! My mom was a teacher and I now have a school-aged daughter; teachers are some of the most important members of our communities! 

Second, my day job is in IT recruiting leadership and I’ve been in this industry for 14+ years. If I can help in any way with resume, market insights, and guidance as you look to break into this space, please let me know! I’m happy to help :)  

[Wale Lawal]

@Steven Sullivan

When choosing your initial investment, it's important to take into account factors such as your income, affordability, location, market analysis, and house hacking strategy. If you have a salary of $40,000 and a co-signer, you may be able to fund your investment by carefully considering all expenses, including mortgage payments, property taxes, insurance, maintenance, and possible vacancies. It's essential to research various markets, particularly those in non-urban areas, to strike a balance between affordability and rental demand. House hacking can be a lucrative method for cutting living costs and growing wealth in the real estate sector.

When deciding where to invest, it's important to weigh the potential risks and rewards. While smaller towns may be more affordable, they could have fewer tenants or slower property value increases. Connecting with local real estate investors and getting advice from experts can help you understand market patterns and investment techniques. Also, think about your long-term goals before starting with a smaller property that fits your budget and risk level.

Good luck!

[Caleb Kim]

I love your ambition and drive to invest. In such a situation, it is important to consider various options and possibilities. Investing in real estate with a small income is possible, but requires careful planning and market research. It may be worth considering as an alternative a slightly smaller city or suburb where property prices may be more affordable and rental demand remains stable.