The Game Plan: Good idea? Or Misguided?

Question

Hello BP!

I want some experienced advice my short term (2 year) game plan:

Currently, I am a college student working toward a double major in Accounting and Finance with a minor in Real Estate (cool, right?).  I have another 2 years til I graduate. I also work part time as an intern for one of the major oil companies in the area.  I make good money and have decent savings.  I also have roughly $10,000 saved.

At the end of the summer, I will be headed to 4 months of military training (National Guard).  Rather than sign another year long lease for an apartment that I'd only live in for half a year, I moved back in with my parents to save some more cash.  I am very fortunate and my parents don't charge me rent.  This means that between now and my return from training, I should be able to save an additional 10-15 thousand dollars ( 20-25k total).

As soon as I return from training I plan on becoming an agent so I can submit my own offers.

I plan on using part of this cash early next year to buy a house (preferably 3br/2bath) for myself that I can fix up while I live there.  I plan on renting out the other two rooms and essentially live for free.  The money I make during that time would be put into improving the house.  By the time I graduate, I'd like to have taken a below average house and improved it enough that I can refinance, pay off the original mortgage, and use the excess to buy my first rental property.  Or I could use the first property I bought as a rental and move into the next property and repeat the process of improving the house.

Am I missing anything in this plan?  Am I misguided?  Your opinions are appreciated as well as any tips and advice you can offer.

-ZZ

Brant Richardson · Answer

That sounds like an excellent game plan.  Getting into real estate at an age when you don't mind, or even prefer, having roommates really opens up possibilities.

You could use a HFA loan (as little as 3.5% down) or Homepath loan.   That would be one of the great things about your idea to move out of the original property and occupy the new residence too.  With a loan like that you probably wouldn't even need to refinance the first property.  Some people move once per year so they can keep taking advantage of this as they build their portfolio.

You may not want to submit your own offers for your very first deal.  The seller will be the one who pays your realtor anyway.  Yeah it would be nice to be paid to buy the property but that's a lot to bite off for your first one.

You should do some research on how to build your credit score and do everything you can as far as that is concerned over these next two years.

I foresee success in your future.

Paul Timmins · Answer

@Zach Zepp

Welcome. Sounds like a good plan consider student housing see below. I have a buddy just closed on 242 units while deployed.

Check out the Start Here page http://www.biggerpockets.com/starthere

Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having 50 past ones to catch up on.

Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and all the cash buyers (rehabbers) you will need.

Consider checking out HUD homes for small multi's owner occupied gets first crack.

You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.

Good luck

Paul

Brant Richardson · Answer

High-Functioning Autism - Classic.  Yes, FHA, that will teach me to post at 12:13 AM when I should be in bed.

Travis mentioned the 203k loan which is really nice because you can finance the rehab costs too.  I'm not sure, but I think you have to have a contractor do the work though.

Travis Sperr · Answer

Sounds like a viable plan - I would encourage you to look at 2-4 unit properties if you do not plan to live there for more than a couple years. Having actual tenants rather than friends or room mates will help you learn a lot (about investing and yourself). Furthermore the gross rents in comparison to the mortgage are typically much stronger and when you exit that property it will make it much easier to obtain financing on another property. I started with a 203k loan on a HUD triplex - got in with 3.5% down, lived there and fixed it up, moved on a couple years later and the property cashflows $1,200 per month.

Zach Zepp · Answer

No, I think he is implying I have High-Functioning Autism and I can get a really good loan because of it.

Sadly, I don't have HFA.  I just make things awkward.

Dawn Anastasi · Answer

I think you mean FHA loan.

Zach Zepp · Answer

Through my Real Estate minor I will have all the information I need to test for the license.  I would still use other agents, but when I have the ability to gain that credential and access to the MLS with very little added cost (relative to the gain), I don't think I should pass it up.  Of course, that is over a year from now and I might start working with the perfect agent and decide I don't need to waste my time.  We'll see what happens next year!  Thanks for the advice Elizabeth!

Guardsmen are offered VA loans after 6 years of service.  I still have a few to go, but I am looking forward to the benefits.

Elizabeth Colegrove · Answer

@Zach Zepp

Personally I would not become a realtor. My biggest "secret weapon" has been my agent. Her knowledge and connections are unbeatable. Plus as an agent you know the rules and have to  "play fair". My agent is still willing to put low ball offers in. Since she "know the lay of the land" we haven't needed to put as many in to get the same result. You do want to be strategic because reputation is everything. You do not want to get a bad reputation.

Check and see if you are eligible for the va loan for your service in the guard. These loans have many great benefits.

Zach Zepp · Answer

@Brant Richardson I have a few friends that are Realtors that can help me out and make offers on this first one.  I just think it is difficult using a Realtor when you are putting in tons of lower offers.  Since I am looking at this first property as a rental, I don't plan on spending nearly as much as most people would for their first home. Of course, one of my realtor friends is also an investor that I can lean on.

@John Moore I will definitely be keeping the job for as long as possible.  That steady stream of good income is hard to pass up, especially early on in an investment career.

@Paul Timmins The city/ town in which I plan on investing is surrounded by quite a few colleges.  If the opportunity arises and I see a good deal, I am definitely going to look into the student housing.

John Moore · Answer

Welcome to the BP family.  It all sounds good; I would suggest you pursue real estate as a part time activity and keep you job with the oil company an it pays you well.  I believe you will get input to purchase a duplex or two family house if you are doing it for investment purposes.  Which ever you choose you will have started your career.  Welcome aboard.

The Game Plan: Good idea? Or Misguided?

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