Can I jump into REI full time with limited resources?

Question

Hey BiggerPockets fam!

As a new investor, I have just about a million questions to ask about just about anything at this point. So, before I dive into my plan as far as REI is concerned, I think it's best to give a little background on my personal situation. After serving 5 years in the US Marine Corps, I will be transitioning out into the civilian world in a few months. Until this year, I planned on going to college for a 4 year degree. But after opening my eyes to the wide world of REI, I'm convinced college would be a waste of my time, since I'm planning to go into real estate full time anyways.

My preparation this year for the great journey ahead has consisted of binging real estate books and podcasts, keeping an eye on the forums, and saving as much capital as I can. I'm moving across the country to Northeastern Connecticut but I do have a great team at my back who I keep in touch with on a regular basis (also the ones who convinced me to immerse myself in REI). I've saved about $24,000 and plan on making $27,000 by the end of my time in the Marine Corps (not a lot I know, but I effectively 10X'd my net worth this year so that's big for me).

So, onto my plan.

• Step 1:Close on my first property within a month of my returning home to Northeastern CT. This property will be a 3-4 unit multifamily as a house hack.Using the VA loan, I will put 0% down, effectively only putting cash into the closing costs and light rehab work. I'd like to keep the total initial investment under $10,000.The end goal with this first property is to make at least a 40% COC ROI in the first year. I know this is ambitious, especially for someone on their first deal and house hacking, but I believe it can be done.
• Close on my first property within a month of my returning home to Northeastern CT. This property will be a 3-4 unit multifamily as a house hack.
• Using the VA loan, I will put 0% down, effectively only putting cash into the closing costs and light rehab work. I'd like to keep the total initial investment under $10,000.
• The end goal with this first property is to make at least a 40% COC ROI in the first year. I know this is ambitious, especially for someone on their first deal and house hacking, but I believe it can be done.

• Close on my first property within a month of my returning home to Northeastern CT. This property will be a 3-4 unit multifamily as a house hack.
• Using the VA loan, I will put 0% down, effectively only putting cash into the closing costs and light rehab work. I'd like to keep the total initial investment under $10,000.
• The end goal with this first property is to make at least a 40% COC ROI in the first year. I know this is ambitious, especially for someone on their first deal and house hacking, but I believe it can be done.

• Step 2:Once the first deal has been closed I plan to move right into full time REI through house flipping. (side note- I do plan on working during the week, not in real estate investing. Just for something to fall back on if everything goes sideways)Buy distressed properties using hard money or private money to finance the deals, and shoot for at least a $50,000 profit off of each flip.Live frugally, and use any leftover capital to put into buy and hold investments using the BRRRR strategy
• Once the first deal has been closed I plan to move right into full time REI through house flipping. (side note- I do plan on working during the week, not in real estate investing. Just for something to fall back on if everything goes sideways)
• Buy distressed properties using hard money or private money to finance the deals, and shoot for at least a $50,000 profit off of each flip.
• Live frugally, and use any leftover capital to put into buy and hold investments using the BRRRR strategy

• Once the first deal has been closed I plan to move right into full time REI through house flipping. (side note- I do plan on working during the week, not in real estate investing. Just for something to fall back on if everything goes sideways)
• Buy distressed properties using hard money or private money to finance the deals, and shoot for at least a $50,000 profit off of each flip.
• Live frugally, and use any leftover capital to put into buy and hold investments using the BRRRR strategy

• Step 3:Repeat until I can quit the 9-5 and go all in on flips and rentals, and eventually just buy and hold rentals
• Repeat until I can quit the 9-5 and go all in on flips and rentals, and eventually just buy and hold rentals

• Repeat until I can quit the 9-5 and go all in on flips and rentals, and eventually just buy and hold rentals

Now I'm sure that there are a million holes in this plan, and that is precisely why I posted this. It's my plan as someone who is new to REI, I've run it by a few people who seem to think it's a good idea, but the ultimate test is to see whether the BiggerPockets community thinks this is also a good idea. This is a very rough draft but it gets the point across. Does it make sense for me to go straight into full time house flipping with no prior experience? Is this plan just completely ridiculous? Or am I on to something here? Any criticism is welcome.

If you've read this far, thank you for taking an interest in my personal situation. And thank you in advance for the feedback, I look forward to hearing back from everyone!

Jaysen Medhurst · Answer

@Jeremy Bourgeois, I think most of your plan is pretty solid. The big red flag I see is the part where you want to make $50k+ on each flip. I just don't think most of NE CT has the market to support that. Average home price in Windham county is ~$180k. That means on a flip you'd need to be all in for around $110k (purchase and reno). Most flippers aim for a profit margin of ~16%, which works out to be a hair under $30k at this price point. Sure, you might get some home runs, but I think you should recalibrate your expectations.

BTW: there are two great meet ups kind of near where you'll be. @Scott Hollister runs one in Manchester and @Mat O'Grady hosts in New London/Groton.

BTW: there are two great meet ups kind of near where you'll be. @Scott Hollister runs one in Manchester and @Mat O'Grady hosts in New London/Groton.

Jeremy Bourgeois · Answer

@Tom S. I actually completely overlooked the fact that HMLs would require that much down to begin with. And that was also one of my questions that wasn’t on this post. Maybe if I partnered with somebody who had the funds but didn’t have the time to run the flip? I’m sure this would be difficult and maybe impossible since it would be my first flip as well. But it’s the only thing I can think of as of now. It would take me a good deal of time to save up that 45K needed to fund it. But if that’s the case, I’m in it for the long game anyways and I will just save until I can make the next move, or come up with a different plan.

Tom S. · Answer

@Jeremy Bourgeois  I also think it's a pretty solid plan and well written.

In addition to Jaysen's good point above about the potential profit per flip, I didn't see anything in there about where the funds are coming from to start the HML flips.  From your work or income from the first property (or both)?

It sound like your target market is $100k houses, so at 20% down, points & closing costs, that's $25k.  Plus funds to start the rehab (you'll later be reimbursed), call it $10k, and most HML's I've spoken to require at least $10k in cash reserves.  So $45k in liquid cash needed to start.

Dave Grimson · Answer

Sounds like a pretty good plan at a high level, the key is making it happen!  i've been able to build some momentum by setting actionable steps/tasks I can do every day that gets me closer to my goal which for me is usually buying another property.  This for me includes calling potential investors, building lists, working on my website, researching properties, analyzing deals etc. If you dont have a roadmap it will be difficult to reach your goals!

I'll preface this with a question mark on the refi on a VA loan (i'm sure someone here can chime in) but here's a thought.....Rather than trying to spend less than 10K on the first property, you might want to think about buying something that needs a bit more "love" so you are able to build a bit more equity in it and then do a cash-out refinance.  ideally pull all your initial investment out so you can do it again.

Good luck!

Jeremy Bourgeois · Answer

@Brad E. My pleasure. Thank you for your support!

Brad E. · Answer

@Jeremy Bourgeois

Thank you for your service!

Jeremy Bourgeois · Answer

@Jaysen Medhurst excellent points! Clearly I need to do some homework on my flipping expectations. Still, if I could make somewhere around $20,000-$25,000 that would be good for me. I would rather make a smaller profit at first anyways at first learning the skills that I will need for the rest of my investment career than make some extra cash working a job that would really only be a means to an end.

As far as the meet-ups go, I’m actually in California right now but once I get to NE CT, I definitely won’t mind making the drive there.

Count me in

Jeremy Bourgeois · Answer

@Dave Grimson I really like the idea to turn my house hack into a BRRRR right off the get go. Not quite sure how I didn’t think of that in the first place but I’m glad you brought it up! Seems like a great way to build some equity right off the bat!

As far as the daily steps towards achievement that you mentioned above I also believe that my whole path to success hinges on that as a large factor. Right now I’ve been trying to build my network, reading, and I’ve just started analyzing deals so there’s that too. Right now I’m on the other side of the country from where I plan on being but some of my next steps include growing my network in the local area by making contact with other investors, realtors, etc. and learning my markets in the area one town at a time. Anything you would add to this list?

Can I jump into REI full time with limited resources?

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