Strategy for a 23 yr old starting out with $100k+ year salary.

[Ricardo Lunk]

Hi There!

Thanks for stopping by. I caught the real estate bug just a few months ago and am now very eager to get started with my first investment deal and looking to hear your opinions on how I should lay out my strategy moving forward

I could write several paragraphs laying out my situation but I decided that it'll probably be easier to read it in a bullet/list form. With that, listed below are, what I think, significant details of my current situation and end goals. Please let me know if you guys need additional information or have any questions.

Current State:

• I'm 23 and live with my fiance in Bothell, WA (Snohomish County).
• I work in IT full time and make a little bit over $100,000. Currently looking to save over AT LEAST 25% of my annual salary. Have about $20,000 saved up so far.
• Also a full time undergrad student (Using the GI Bill, this allows me to pocket an extra $2600 per/mo for Monthly Housing Allowance while I'm in school)
• I financed my first primary residence in Oct 2016, using the VA Loan with $0 down for $470,000. 
• Current estimated value is over $500,000 (Possible $30,000 of Home Equity Line of credit for capital?)

Current Strategy/Goal:

• Cash flow through rental properties *Likely out of state due to the expensive area that I live in. OR cash flow where I'm currently at if I partner up with other investors
• Turn-key rentals (I'm anticipating to have my bandwidth to be stretched thin due to full time work and school, although this doesn't negate the fact that I will make the necessary adjustments if needed)
• Buy and Hold
• Open to the idea of flipping as well but I have zero experience in anything construction related.

I hope that this is enough information to get the discussion rolling. As you may have noticed I don't have an immediate specific plan to get started just yet, which is why I'm looking to hear what you all have to recommend or suggest. Thanks again for your time.

[Julian Sibley]

@Ricardo Lunk Welcome to BP and thank you for your service!

It looks like you want long term buy and hold in the Midwest so I am going to assume that your long term strategy/goal is cashflow, but we need to know if you plan to focus on SFR's, multi-units, commercial, etc. Once you have your end-goal in mind it is much easier to place the plan/steps needed to get there. I am no help to you on the Midwest part, but if you find a good partner over there who can be your boots on the ground you should be in a great position.

Start attending local networking events to build out a team in the area, or if you solely want to invest in the Midwest start meeting people locally who invest in the midwest and try to have them connect you with people they trust. The forums are a great place to search through for answers and the BP podcasts are as well.

For your first couple deals you could use conventional financing, seems like you have a good W2 job at $100k a year which is a plus and could always have your fiance co-sign to use her income as well. You also have access to VA which is a great program, just make sure you always compare it to conventional financing, assuming you have good credit. Using VA for subsequent use can sometimes be more costly than what you would pay going conventional.

You should start looking up "house hacking" as well as "BRRRR" (Buy, rehab, rent, refinance, repeat.) My wife refuses to share walls with tenants so house hacking is not an option for me, your fiance might not care, either way you should know what they are/how it could benefit you.

My $0.02 on your strategy moving forward:

• Limit your debts, and your fiance's for that matter. We are a community property state, which means her debt is your debt ;) or atleast, it will be in the near future.
• AT LEAST 25% savings annually; Pay yourself first through a forced savings plan. Once your paycheck is deposited put 25% directly into your savings or an account that DOES NOT have a debit card. This way you force yourself to save at least 25% and in order to touch your savings you have to transfer it back to an account that has a debit card linked to it. Then at the end of the month transfer whatever remaining balance you are comfortable with to your savings. Seems like you're already great at budgeting/saving if you have $20k in there, so if you already treat your 25% savings as a "bill" ignore this piece.
• Current residence, keep it until you are done with school. If you are comfortable with the mortgage after your housing allowance is over I would stay there, since I assume it is close to your work. Otherwise you could look into moving into a place with a lower mortgage payment (assuming you can cash flow on your current residence). If you truly want to sell it you can after 2 years (Oct. 2018) to avoid capital gains and free up capital to invest out of state.
• Start networking/building out your team. You will meet plenty of people who flip, own turn-key rentals, and manage their own rentals. Keep in mind people are much more open to working with "partners" rather than a "mentee". Find something of value you can provide them, if you can't find anything ask them what they hate doing and offer to do it for free, in exchange for working with them on a deal/seeing their process start to finish.
• Last option is to just jump in, lots of research is great but sometimes the best lessons are learned from simply going through the process. Everyone on the forums is extremely helpful should you have any questions, ask!