One investment property, looking to expand

[Keaton Vols]

I am 25 y/o, I have a job where depending on overtime, I make around $140,000. I bought a 4 plex a year ago and I live in one unit while saving for another. I put 20% of pay into 401k and have a couple payments totaling around $1000. I will have $30,000 saved up by the end of the year. I’m wondering what the next steps should be going forward to gain another property and expand my portfolio. Any suggestions real-estate or not are greatly appreciated 

[Joseph Chiofalo]

Hi Keaton, 

Would you be purchasing a new primary residence or investment property?  

Depending on the occupancy will determine the amount of down payment needed on the purchase. 

Most investor loans will require a minimum down payment of 15-20% of the sales price with having healthy credit and a few months of reserves. 

Do you have a property in mind?

[Keaton Vols]

It would be an investment property, depending on the property I would like in it or stay in the investment property I’m currently in. 

[Cam Schwartz]

Hi @Keaton Vols, congrats on the house hack and getting started early.

As you're aware, there are many investing strategies you might consider, though if your aim is to expand your portfolio then BRRRR investing is a great option. With the right project, you can pull out 100% of your equity when refinancing and "repeat" the process.

The key is to buy low enough in an area that justifies an ARV that will allow you to pull out all of your cash at a ~70-75% LTV. We have a detailed BRRRR cash flow calculator tool we share with our clients to help assess these types of projects. Happy to share a copy!

[Jonathan Greene]

This is a great post because it's an example of a young investor doing all of the right things and not trying to go too quickly. If you want to stay, that's smart also, but you will need that 20%. I would actually think smaller, not larger. Since you were smart to house hack a 4, I would see what you can get for a 2 in good shape, not a BRRRR or rehab (too much work when you are new).

[Keaton Vols]

Quote from @Jonathan Greene:

This is a great post because it's an example of a young investor doing all of the right things and not trying to go too quickly. If you want to stay, that's smart also, but you will need that 20%. I would actually think smaller, not larger. Since you were smart to house hack a 4, I would see what you can get for a 2 in good shape, not a BRRRR or rehab (too much work when you are new).

 Thanks for the reply! I am wanting to start out on the right foot. I’m totally going into this blind and having to learn on my own. 

As far as financing, with the brrrr strategy I would need to wait until I have some equity in the property correct? I’ve redone one unit and now starting another as that tenant moved out. I don’t know if I should keep pumping up the numbers in my 401k and getting the tax benefits, or lower my contributions and out money into a high interest savings account for my next down payment

[Wale Lawal]

@Keaton Vols

To expand your real estate portfolio and achieve financial growth, consider refinancing your property, saving for a down payment, implementing house hacking, partnering, exploring markets, building a network, educating yourself, diversifying into alternative investments, maximizing tax benefits, and maintaining an emergency fund. With careful planning and strategic investments, you can successfully expand your portfolio.

Good luck!

[Nathan Gesner]

Quote from @Keaton Vols:

Rinse and repeat!

Buy another fourplex with an FHA loan. Live in one of the units. Rent out your current unit. You'll have a place to live and seven rentals. Do it again and again until you meet your goal or decide you want to upgrade to a single-family for yourself. If you can handle it, you should be able to get five or more fourplexes by the time you are 30 and earning enough cash flow that you will have the financial resources to enjoy life.

[Travis Timmons]

The part that goes unsaid for those that toss around BRRRR like it is some easy, push the button transaction is that most properties that would work for a BRRRR do not qualify for conventional financing. The amount of cash or high interest debt that it takes to pull off a BRRRR is substantial. It's scary and it sucks. You run the risk of running out of cash and being forced to sell.

I'd encourage another house hack or a live in flip. Slow and steady still wins the race. 

[Wesley I.]

@Keaton Vols

Congrats!

Curious if your employer matches your 401k?

Get the match at the very minimum.

Nothing wrong with putting money in your 401k, and check with your admin if you can take out a loan to buy a primary from your 401. Ive used this tool once or twice. Some lenders also count your retirement account as reserves.

Seems like you’re on the right track, keep looking in your buy box so you know what a great deal is when you’re ready to buy.

Wish you the best.

[Jonathan Greene]

Quote from @Keaton Vols:

Quote from @Jonathan Greene:

This is a great post because it's an example of a young investor doing all of the right things and not trying to go too quickly. If you want to stay, that's smart also, but you will need that 20%. I would actually think smaller, not larger. Since you were smart to house hack a 4, I would see what you can get for a 2 in good shape, not a BRRRR or rehab (too much work when you are new).

 Thanks for the reply! I am wanting to start out on the right foot. I’m totally going into this blind and having to learn on my own. 

As far as financing, with the brrrr strategy I would need to wait until I have some equity in the property correct? I’ve redone one unit and now starting another as that tenant moved out. I don’t know if I should keep pumping up the numbers in my 401k and getting the tax benefits, or lower my contributions and out money into a high interest savings account for my next down payment

If you take the time to finish all the units, you will be able to cash out refi and hopefully take more money with you and leave nothing in.

[Keaton Vols]

Quote from @Jonathan Greene:

This is a great post because it's an example of a young investor doing all of the right things and not trying to go too quickly. If you want to stay, that's smart also, but you will need that 20%. I would actually think smaller, not larger. Since you were smart to house hack a 4, I would see what you can get for a 2 in good shape, not a BRRRR or rehab (too much work when you are new).

My lender said the underwriter would allow me to get a duplex at 10% if I live in it. I’m going to look for a place with garage and more yard space. I’m trying to learn as much as I can from Bigger Pockets as I can

[Keaton Vols]

Quote from @Wale Lawal:

@Keaton Vols

To expand your real estate portfolio and achieve financial growth, consider refinancing your property, saving for a down payment, implementing house hacking, partnering, exploring markets, building a network, educating yourself, diversifying into alternative investments, maximizing tax benefits, and maintaining an emergency fund. With careful planning and strategic investments, you can successfully expand your portfolio.

Good luck!

With a rate higher than what it was when I got the mortgage and only owning it for a year it wouldn’t be worth it to refinance would it?

[Wale Lawal]

Quote from @Keaton Vols:

Quote from @Wale Lawal:

@Keaton Vols

To expand your real estate portfolio and achieve financial growth, consider refinancing your property, saving for a down payment, implementing house hacking, partnering, exploring markets, building a network, educating yourself, diversifying into alternative investments, maximizing tax benefits, and maintaining an emergency fund. With careful planning and strategic investments, you can successfully expand your portfolio.

Good luck!

With a rate higher than what it was when I got the mortgage and only owning it for a year it wouldn’t be worth it to refinance would it?

 That is a decision you have to make. Weigh the pros and cons and act accordingly. You know yourself and your unique situation more than anyone else.

[Keaton Vols]

Quote from @Nathan Gesner:

Quote from @Keaton Vols:

Rinse and repeat!

Buy another fourplex with an FHA loan. Live in one of the units. Rent out your current unit. You'll have a place to live and seven rentals. Do it again and again until you meet your goal or decide you want to upgrade to a single-family for yourself. If you can handle it, you should be able to get five or more fourplexes by the time you are 30 and earning enough cash flow that you will have the financial resources to enjoy life.

This is kind of my goal, I think I want to go want to go duplex next and live in that. I don’t think I could get another fha loan for a duplex I thought my financial lender told me

[Keaton Vols]

Quote from @Wesley I.:

@Keaton Vols

Congrats!

Curious if your employer matches your 401k?

Get the match at the very minimum.

Nothing wrong with putting money in your 401k, and check with your admin if you can take out a loan to buy a primary from your 401. Ive used this tool once or twice. Some lenders also count your retirement account as reserves.

Seems like you’re on the right track, keep looking in your buy box so you know what a great deal is when you’re ready to buy.

Wish you the best.

I upped my contribution to 25%, we have a cash balance account too but their match isn’t very good, it’s only 4. I actually wondered if it was worth it to put money into 401k or save as much as I can for rei’s. I figured to up my 401k and borrow against it in the future