How would you start?

Question

I live in Oklahoma City. I've been a member of BP for a couple years, and interested in getting into real estate the same time. I've been doing a lot of overtime at my job and working on my savings and have about 20,000 saved up. My credit score is in the 750-800 range. I've got a 230 a month car loan for the next few years and owe 9500 on it. The lease for my apartment is up in November and I hope to have 25-28K saved up by then. If you were in my position how would you start? I'm mostly interested in house hacking by getting a duplex. But I've also thought about getting a live in flip, fixing it up, and selling for a profit a couple years down the road. Would it also be possible to take out an equity loan on said house to get an investment property? Or maybe BRRRR the house. My goal is to do buy and hold investing, with maybe a couple flips per year down the road.

Shawn Ackerman · Answer

@Cody Evans the sooner you can build rapport with a local lender the better off you will be.  You need to get a solid understanding of how you will be leveraging the lender relationship.  WIll you be using them to delay finance or for acquisition.  Learn what they need from you to get qualified I.e. credit score, debt to income ratio, reserves, income etc....We use MB financial as they are a national lender.  In addition to meeting with local lenders in your area consider a national lender as well.  It sounds like your interested in house hacking a multi-family? I get that right?  Lastly,  Lender has no interest in learning about your sacrifice.  They are more interested in learning whether or not you are viable enough to make long term money off of the interest they will charge you over a 30 year note.  With a house hack I believe you can put as little as 3.5% down and you may ask for a concession from the seller to assist with closing costs.  Be sure to exercise the use of both the down payment and closing cost assistance.  All the best young man.  Now go out there and get yourself a DEAL!!!!!

Cody Evans · Answer

@Shawn Ackerman

I am a young guy just beginning my savings. Would you recommend me to talk to these loan officers before I even get substantial savings so that the officer can see the journey and sacrifices I made and be more willing to lend me money?

Chris, have you considered a 4-plex? That is the route I want to go because I figure there is more money in that but I am interested in why you want 2 less rooms.

Laura Alamery · Answer

@Chris Hayes You definitely have a lot of possibilities in your situation and location, since the Midwest offers great values in real estate - I own and have invested in properties in St Louis for over 20 years :

1. I agree about using an FHA loan for the property that you plan on living in and fix up - that would not use much of your reserved capital and you will still have plenty of savings left over;

2. With your credit, low debt ratio and job stability, you can establish lines of credit (business) and also approach private lenders (not hard money) in leveraging your resources for much more funding available, so you can get into fix and flips and buy and hold;

3. You can definitely get an equity loan on your house or refinance your FHA and pull out equity to buy more properties, although under #2 scenario you can leverage your funds with OPM (other people's money.)

Chris Hayes · Answer

My car loan is through a local credit union so I might just start with them and go from there.

Joe Norman · Answer

I would take advantage of the benefits of being an owner occupant (better financing, first dibs on some REOs, tax advantages, etc.) and house hack as many properties as you can.  Once the reno is done you can flip them and build your cash reserves, or hold on to them if you don't have too much cash tied up in them and rent them out.

Chris Hayes · Answer

@Cody Evans I mentioned a duplex because of initial cost to buy, and there are more of them than 4-plexes around OKC and the metro in general. But, like I said, if I could find a triplex or 4-plex, and the numbers were good, I would be all over it. It could certainly accelerate my career in investing; especially considering I want to do multifamily in the future.

Chris Hayes · Answer

@Cody Evans I'd consider a 4-plex if I found one that would be a good deal. There'd be a bigger learning curve in regards to property management, but the potential reward would be much larger than a duplex.

@Laura

@Laura Alamery thank you for the tips!

Shawn Ackerman · Answer

@Chris Hayes If I were in your position i would begin the process of building a relationship with a local conventional lender.  I'd start with local credit unions first.  Go in and find a loan processor/loan officer who understands your real estate investing intentions and see how they can assist you in the future.  Secondly, I would begin speaking with a local realtor who will be willing to work with you down the line.  I'd also suggest setting up FHA financing for the house hack approach.  All the best.

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