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Updated over 6 years ago,
Analysis Paralysis or Calculating Risks on First (To Be) Deal?
excuse the lengthy email:
My husband and I are at odds as to how to approach our first deal. We have been listening to Bigger Pockets podcasts amongst other formats and meet ups and recently decided to start analyzing deals. I was doing it more for practice and wanted to analyze different types of strategies to determine our best first move. After analyzing 5 deals over this past weekend, he wants to move forward on one where the numbers seem to make sense.
our goal is to have me stay w2 and for him to eventually quit his w2 to focus on REI.
I have 2 questions:
-How many deals did you analyze/how long did it take you to jump into your first deal?
-If you financed your properties with your own funds, do you go bang for your buck even if it will take longer to find deals that fit that model or tie up all the funds in the one deal? (eg, do i find lower purchase price homes off market or out of state so i can buy 4 properties vs invest it all in one property)?
Considering our goal, The question i am asking myself when i analyze our first deal is how soon will i be able to get back in the game for my next deal? is that a good question to ask?
-the cash flow on this duplex is 300-400/mo combined. and its fully occupied right now. but there would be no leverage (equity) to take out and apply to more properties.
-We spoke to a mortgage broker who said we would need 25 percent down on a multifamily. 25 percent down (24k) would be 50 percent of our liquid cash. The other 50 percent i would want to keep for emergency funds and is still 10-15k shy of what i like to have on hand.
-the property is in an area where i wouldnt expect much growth or immediate appreciation.
my husband feels considering cash flow is positive we should just go after it and start learning. i feel tying up all of our avbl funds in this deal could mean he might have to work for another 3-5 years til we build up funds for the next deal if we are just accruing cash flow)
we have other means to get funds: HELOC, 401k loans, credit cards to pay for repairs - but i am not a fan of debt or loans so i’m really hesitant to go these routes.
because i am trying to replace his w2 income as fast as we can, i feel the strategy is: if 1 property i need leverage (equity) OR i need to focus on multiple properties at a much lower purchase price (out of state or distressed) that get me more cash flow combined.
thoughts on tying up funds in the one or the other strategy of more units for more cash flow?
thanks!