Investing in Real Estate in Vancouver, WA -Beginner

[Blake Ingram]

Hello! I’m currently living in Vancouver, WA. These passed few weeks I’ve been watching the “BiggerPockets Podcasts,” and reading several books. I understand the basics and really want to implement the “BURRR” strategy. Goal is to buy a Townhouse, renovate the house and rent out the other side. I know a General Contractor myself that could help with the project in the renovation. Using this as a way of paying off the mortgage. Problem being, understanding how to acquire the funds to make this happen. Would it be best to contact a local hard money lender? Possibly looking at 0% down because of being a first time home buyer? Any thoughts or suggestions? Just want to add, thank you BiggerPockets for all the insight and help you’ve given me to figure this out and build wealth at a young age. I hope to contribute a lot more in the future to all of The BiggerPockets community!

[Chace Fraser]

Hi @Blake Ingram and welcome to BP! I think you are on the right track and the BRRRR strategy is a great one... especially if you combine it with either house hacking and/or doing a live in flip. Can you clarify a couple things? When you say "I know a General Contractor myself that could help with the project in the renovation. Using this as a way of paying off the mortgage." how would that help pay off the mortgage?

To clarify the BRRRR strategy; when someone buys ("B" of BRRRR) a property that needs work, and they put the work into it (or Rehab, first "R" of BRRRR), it increases the value of the property which would result in the owner having more equity. If the owner has enough equity in the property the could then Refinance (the third "R" in BRRRR... the second "R" is rent) which would give them cash to go out and buy more property... ie to Repeat the process (the final "R" in BRRRR).

From what I can tell it sounds like you're looking to house hack ("...buy a Townhouse, renovate the house and rent out the other side."). The beauty of house hacking is you can purchase an income producing property with the advantageous terms of a residential mortgage (you wouldn't need a hard money loan). There are loan products out there for residential buyers that allow you to get into a property with a very low down payment (0-10 percent). If you were to purchase a property without a residential mortgage (ie you weren't going to live in it or it was 5 units or more) you would be looking at at least a 20 percent down payment. The best way to figure out if you qualify for one of these types of loans is to go talk to a lender (it's free and they'll answer all your questions). PM me if you'd like a recommendation or two.

Another thing to keep in mind; If you are using a low down payment, it's not really realistic to expect to be cash flow positive. When an investor is looking at being cash flow positive, they are typically putting down 20-25%. If you are in a high demand metro area, it's simply not realistic to expect to be cash flow positive if you are putting down 0-10%.

Now if that is all the capital you have, that is what it is....is it better to keep renting than to buy? Typically it is better to buy. Better to build your own equity through the debt pay down, enjoy the tax benefits of ownership, and garner the equity of an appreciating asset. You just can't expect to cash flow on an initial purchase with a low down payment. Now with time and rent growth, what could be a negative cash flow property might very well become a cash flow king, but that takes patience.

Another way to increase cash flow would be renting out rooms in the unit you live in, either Airbnb or longer term.

If you'd like to meet up and chat more about it I'd be happy to do so.

Best of luck and keep us posted!