Current homeowner first time investment seeking sound entry strategy.

[John Anselmo]

Hello all, 

I am graciously seeking input and guidance on an entry strategy that best suits my unique situation. 
I am 35 and the owner of a 1000sqft 2 bed 1 bath starter home that I bought for 150,000k in 2020 at 2.75% interest rate. 
Although I know the home I live in is no asset, I see its cash flow potential if I can be living elsewhere. All in, my mortgage is $1,100/ month and all comparables are renting for $1700/ month in my subdivision. 
Here is where my story gets complicated. Since 2020 I have gotten married, had 2 children, taken in my grandmother in law and have a 3rd child on the way. We have certainly outgrown our little slice of heaven. I have quite a bit of equity in this house that is now valued just south of $180k however the thought of giving up my precious 2.75% rate for a HELOC makes my stomach turn. My cash savings are pitiful, sitting just around $5,000 as all I have to show for years of saving every possible penny.

I make a decent salary of $90,000/ year at my day job as a project manager for a real estate development company in downtown Houston. That is a beautiful thing for a single income household but is nowhere near enough to reach the financial security and lifestyle I would like for my family. I am fortunate to be surrounded by knowledgeable brokers, agents and hard money lenders but feel I need a solid plan in place before I attempt to tap the resources around me. 

My main dilemma is on financing my first investment property, as I do not have the funding to pay 20-25% down on a loan for investment. I’d struggle to come up with the 3.5-5% down on an fha or other low down options. 
My family and I are completely on board for an owner occupied/house hack option, however I see this could be challenging, being the landlord downstairs or next door with 3 screaming children; banging on walls and the likes as most children do. This would not be an ideal situation for any tenant and I feel I need to put the idea of house hack aside unless I can find a unique property that has multiple standalone units, one large enough for my Brady Bunch and potentially several other units to offset the note. This would be additionally offset by the $600 in cash flow from renting my original home. 

Although I know my situation has its downsides, I know there has to be someone here who has overcome similar hurdles. If you have the chance to read my long winded post and have insight on alternative ways start my REI journey please respond or feel free to DM me. Any and all input would be so very appreciated.

Thanks so many!

-John Anselmo

[Jeremy Fleming]

Hey John,

Congrats on all your accomplishments! Here’s a streamlined game plan for your situation:

Leverage Your Current Home: Rent it out for $1,700/month to generate $600/month in positive cash flow ($1,700 rent - $1,100 mortgage). Consider a small HELOC for initial costs if you can secure a good rate.

Owner-Occupied Strategy: Look for a duplex, triplex, or fourplex with one unit big enough for your family. Properties with additional units on the property offer separation from tenants and rental income. (think guest house or apartment above the garage)

Financing the Next Property: FHA loans require as little as 3.5% down. Check for down payment assistance programs. Explore short-term solutions with hard money lenders and plan to refinance later. I've bought most of my rentals utilizing vendor carry back financing (for a zero down option)

Utilize Your Network: Use your connections for off-market deals and creative financing. Partner with someone who has capital while you bring project management skills. 

Actionable Steps: Understand your finances and potential rental income. Explore loan options and down payment assistance. Attend real estate events for opportunities. Focus on finding a property that fits your family and rental needs.

You’ve got a solid base. With some strategic planning and leveraging your network, you can take the next step in real estate investing.

Good luck!

Cheers, Jeremy