Making the jump for my first property

[Peter Vance]

I am a young professional looking to get started in REI. I just recently built a new house and we had our first child. I have a solid full-time job, with a fairly decent amount of investments. I would like to get into single family rentals to start out as I am currently tight on cash. I have been working with local community bank lender on some options for a loan to get started, but I know I know it will be small. I've thought about looking into some foreclosures or other houses around $30k-$50k with a little bit of work. I live in a smaller city in Mississippi with some of the smaller towns having the better deals, but less people.

My question is should I look for houses in a better town, but are of less value, or in a smaller town, better location, but less people and therefore a possible harder time to find renters?

Also, if you are strapped for cash, what is most important? I feel that if you can get the loan and set the rent to provide at least $200 in cash flow a month after all expenses, it is most important. Am I wrong?

Thanks and I love the site and the community.

[Susan Maneck]

Hi Peter, 

Welcome to BP. I live and buy my properties in Jackson. I would very much recommend that you start out by buying a place close to where you live. It makes managing much easier. As for financing, if you are buying houses in the 30-50K range (as I do) you will find that getting a mortgage will be expensive if you can get one at all. My strategy has been this: I will initially pay cash for a house in this price range. After I have owned it for a year and fixed it up, I get a HELOC. Only a few banks like Wells Fargo will give HELOCs for investors, but you can often get a teaser rate the first year and closing costs are either low or non-existent. I then use that money to buy a second home, and so on. This method has enabled me to buy nine houses since 2011. Usually my mortgage payments on these HELOCs are less than $200 a year.