Advice on my plan to get my foot in the door

[Andrew Martin]

Hey everybody this is my first time posting and I will try not to take up too much space. So to make a long story short I have recently become obsessed with real estate investing and learning everything I can to get my foot in the door. So I think I have decided on house hacking to not only live rent free but learn the ins and outs of being a landlord. Problem one is I only have about 2500 saved up so I'm thinking about an FHA loan for the 3.5%. first does anyone have any bad experiences with FHA loans; and how would I go about getting funds for rehab costs if needed? Also what is involved with cash out refinancing? I want to expand my rental portfolio as quickly as possible, how long do I have to wait to do the cash out? Any help would be greatly appreciated!

[Natalie Schanne]

@Andrew Martin - Welcome to the Bigger Pockets community! Keep reading and asking questions.

I really like house hacking, especially with a highly levered FHA loan. House hacking is defined as renting out part of your home to tenants or buying a 2-4 unit multifamily (duplex/triplex/quad) and renting out every unit you don't occupy.

The most successful real estate investors are GREAT at budgeting and saving. Make sure you're continuously building your gratification-deferral skills. (Are you willing to put off that vacation or going out to eat every Friday in order to save up a bigger down payment?)

Talk to a mortgage lender to see where you're at in terms of loans they can pre-qualify you for.

How's your W2 income?

Credit score?

After that, think about where you want to buy and for how much. 

Then spend 30 days minimum just looking at potential deals. What's a fair price for the neighborhood? If I rented out a spare bedroom or an apartment, how much rent would someone reasonably pay? 

Then, you'll know a good deal when you see one. Get on a real estate agent's database email list and get first notification of foreclosures / REOs and multi-family units hitting the market in your price range and in the areas where you want to buy.

Then, tour properties and make an offer via your agent. Negotiate the best price you can. Settle. Then rehab and rent out the other bedrooms for cash flow. 

When you have less than 4 units in most states, you don't fall under codified landlord-tenant law, so if you're really cash strapped you can put the $1000-3000 in security deposits in your bank account and fix up your house with this money in the beginning. Make sure to pay it back / set aside the $$ for the security deposits asap, since you will owe the full security deposit - any home damages to the tenant within 14-30 days of move-out, whatever your lease says.

Good luck and let us know how it goes.