23 Year Old College Grad Getting out into the RE World

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23 Year Old College Grad Getting out into the RE World

Jordan CoughenourPro Member
Denver, CO · Member since 2016 · 8 posts · 0 votes

Hello,

As per Josh and Brandon's encouragement on a podcast, I am making a post to get more involvement on the BP community!

A little about me:

I just received a degree in Construction Management from Colorado State University, and I am moving down to Denver this Fall to work for a consulting company doing construction consulting for large commercial and industrial construction projects. I have never owned any property before. I am a newbie.

I want to get going with my own real estate side endeavors that would ideally become my long term passive income.

Here's my finance snapshot:

-single

-$60k/year salary

-$25k student debt

-$16k car loan

-$3k in savings

-$2k credit debt (argh spring break 2016! - paying that off with my $5k signing bonus immediately)

-credit about 680

I met with a real estate agent yesterday and while I was planning on renting for a year, she was making it seem that there are a lot of options for me to get into a house by the end of this year. I also don't want to throw away $900/mo at rent for a year while I could own.

-FHA @ 3.5% down

-A new type of 1% down conventional loan she told me about on single family only

-FHA on single family up to a 4-plex so that I may rent out the other units.

-USDA loan at 0% down on single family home only

What sounds most attractive to me is getting an FHA loan for a du/tri/quadplex in order to create that passive income. However, I don't want to be overleveraged my first year.

The market in Denver and Colorado in general seems to be at a crest, and I don't want to necessarily buy at the top of the market. On the other hand I don't want to pay rent.

If anyone could shed some wisdom on my situation I would love to hear it! I am a sponge and want learn as much as I can to make the best choice. Is it best to just get grounded for a year and save while paying rent? Should I make the leap for a multifamily unit on an FHA loan?

Thanks so much!

Jordan Coughenour

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Jean BolgerPro Member
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
9y

You want to be careful about taking on a small multi without reserves, and what you have now is basically zero reserves. Real life story: I helped my sister buy a four unit property this January. Remember that hail storm last week? She had actual holes in the flat roof from that, with massive water damage and two units currently uninhabitable. Yes the insurance will pay for the bulk of it but a typical hail deductible is $2500 and there are a lot of other costs that will be incurred. 

What would I suggest? Sell your car, buy something used, cheap and practical that will last you a few years. 

Buy a 2bd 2ba condo somewhere convenient to your new job and get a room mate. Look for something that will have some modest cash flow when you move out. Renting is going to be pretty much as expensive as buying right now, and this way you can be getting in the game and not tossing your money away on rent. I suggest a condo because rather than an SFR for a couple reasons. One is the reserve fund scenario. With a condo your costs are much more predictable- any major issue like a roof or a sewer line will be covered by your HOA payments. Another is that it's actually a lot easier to find a cashflow condo than a cashflow SFR in the area right now. And finally, a condo you can afford will be a lot nicer than any house you could afford on your current budget.

In a year or two you can move on to another property and keep the condo as a rental or sell it depending on the market and your long term plan.

You are totally on the right track. I wish I had been thinking like you when I was just out of college!

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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    9y
    What's the interest rate on your debt, besides the credit card debt? I would be careful about being over leveraged. I wouldn't go with anything lower than the FHA. 1 percent or zero down loans could have you in hot water fast if you lose your job or something similar.
    0Reply
  • Jordan CoughenourPro Member
    OP
    Denver, CO · Member since 2016 · 8 posts · 0 votes
    9y

    27% on the credit card... I know.

    5.5% on Student 

    What would be wrong with the 1% or 0%. I could just as easily lose my job on a 3.5% loan too? I suppose I don't understand.

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y

    @Jordan Coughenour welcome. So I can speak to one of your concerns, the buying at the top of the market. If you buy now and it is the top of the market you will likely have forgotten about it in 10 years. If you still remember it's because you bought more than you can afford and either ended up having to sell or lost the property because you couldn't afford it. 

    Your first step is to get with someone that knows the ins and outs of the mortgage industry. Find out what you qualify for. On a $60k income with car and student loans I serious doubt you can buy a 4 plex in the Denver metro. Perhaps you can aim lower than $900 per month in rent by sharing a place with someone. There are a lot of 2 bd apartments below $1800 if you are not living in one of the big box plexs near downtown. 

    You should get the "Set for Life" book as it has a road map that points the way for the things that you are trying to do.

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Unlike most eager investors I see the true value in renting, Rent is not money wasted. Renting something cheep is the best way to save money and pay down debts.

    You should rent, sell your car and buy something cheaper with cash, pay off all your bad debt and save like a maniac. That is how you get the finances to invest smart.

    In a few years you will be well established to get your first multi unit and will be far better off in the long term. Investing done right is not a race.

    1Reply
  • Kevin Grinstead
    Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    9y

    Hi Jordan, welcome to Bigger Pockets. When you speak to a lender you can see about what you qualify for and go from there. I know with my clients most had to be above a 700 credit score to use those programs and I would see u ow long they would want you to be at the new job before you can count your income.  

    As for housing, you may want to see if you can get a SFR and then rent out rooms to other professionals. If you can do that then they can help pay off your mortgage and tou know that you could cover the whole mortgage.

    When looking for a long term strategy, talk to the lender. It will probably best to use FHA for your first purchase and then use one of the other programs for your second home purchase.

    0Reply
  • Jordan CoughenourPro Member
    OP
    Denver, CO · Member since 2016 · 8 posts · 0 votes
    9y

    @Bill S. I am ordering that book here shortly! Thanks for your input.

    0Reply
  • Jordan CoughenourPro Member
    OP
    Denver, CO · Member since 2016 · 8 posts · 0 votes
    9y

    @Thomas S. I do want to make a sound decision. I have considered downsizing to a cheaper car for sure. I suppose my thinking is that I don't want to miss out on the time value of my money if it is just parked in cash and not an investment.

    0Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    9y

    You want to be careful about taking on a small multi without reserves, and what you have now is basically zero reserves. Real life story: I helped my sister buy a four unit property this January. Remember that hail storm last week? She had actual holes in the flat roof from that, with massive water damage and two units currently uninhabitable. Yes the insurance will pay for the bulk of it but a typical hail deductible is $2500 and there are a lot of other costs that will be incurred. 

    What would I suggest? Sell your car, buy something used, cheap and practical that will last you a few years. 

    Buy a 2bd 2ba condo somewhere convenient to your new job and get a room mate. Look for something that will have some modest cash flow when you move out. Renting is going to be pretty much as expensive as buying right now, and this way you can be getting in the game and not tossing your money away on rent. I suggest a condo because rather than an SFR for a couple reasons. One is the reserve fund scenario. With a condo your costs are much more predictable- any major issue like a roof or a sewer line will be covered by your HOA payments. Another is that it's actually a lot easier to find a cashflow condo than a cashflow SFR in the area right now. And finally, a condo you can afford will be a lot nicer than any house you could afford on your current budget.

    In a year or two you can move on to another property and keep the condo as a rental or sell it depending on the market and your long term plan.

    You are totally on the right track. I wish I had been thinking like you when I was just out of college!

    2Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    Fellow CSU grad here. I wish I would have added that CM degree to my finance/RE degree. It's a great program. My roommate went through it. 

    I'd rent for a bit and save. Get 6 months worth of reserves too while you're at it. The cheapest option would be to find a place with at least 3+ beds and 2+ baths. Ideally a basement you could finish. Then rent out your rooms. I've got several clients that have gone/are going this route. A few are already on their 2nd home. "Plexes" are just too hard to come by right now, and the competition is fierce. 

    -Go Rams!

    0Reply
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