First Time Investor - With Personal Mortgage

[Vanessa Raquel Magana]

Hello All, 

My husband and I are tracking to purchase our first multifamily in Milwaukee in the next few months. We currently live in Chicago (my husband grew up in MKE so is very familiar with the city) and we have a mortgage on our apartment in. Our all in monthly mortgage payment is 19% of our total income. Should we wait and pay off our personal mortgage first before investing ? I am just afraid if for whatever reason a tenant doesn't pay or we can't find a renter if we can do two mortgages. Mortgage is the only debt we have. 

[Marcus Auerbach]

@Vanessa Raquel Magana when I bought my first 2flat (duplex) in 2008 I had the same concerns. I had been reading books and listening to CD's (LOL I know, but hey at least it was not tapes!) for a year and was still looking for the catch. When I signed the mortgage in the back of my mind I was worried that I just made the biggest mistake ever.. turns out, it actually worked!

Here is how you make sure you won't be stuck with the mortgage. I estimate there are roughly 10,000 leases signed in Milwaukee on an average month. When you look at the rental inventory, you see that most places are in rough shape - "it's just a rental" is often the mindset of the owner. We rent properties a little over the median price point and they are typically fully remodeled. We charge $200 to $300 more than what you would see suggested by some online plattforms. It usually takes me about 2 weeks to fill a vacancy, somethimes just one. And we pick the best of usually 5-10 applications.

Most new investors think that by limiting their investment they can reduce the risk. Real estate is somewhat counterintuitive here - buy a desireable property and update it nicely, you will never have to worry. It is harder to buy it, but once you own it, you are on the other side of that equation. You don't have to fully remodel, just make sure you are nicer than 50% of the 10,000 other apartments for rent, you will never have an issue. 

Its a little like the old joke about running from a bear. You don't have to run faster than the bear, you just have to run faster than your friend..