Updated almost 6 years ago on . Most recent reply
Review My Gameplan :)
Okay, so I'll be graduating with a business degree next year around mid-May 2021 (I'll graduate just before I turn 22). I estimate I'll be making ~$50k/year and my credit score is currently 750. And I've been doing a bunch of research on real estate and believe I've formulated a good strategy. Feel free to tell me if you see any holes in my strategy, and I have a couple of questions at the end that I'd greatly appreciate your input.
From my understanding, I can utilize an FHA loan on a multi-family property. The advantage of this, of course, is that it will allow me to put down a 3.5% loan, instead of the conventional 20%. This does come with the downside of a PMI, but I personally still believe this is a viable option.
My goal is to purchase a 4-plex using an FHA loan and live in one of the units rent-free (for at least a year, but I don't have a problem staying longer of living near people). I'd manage the property myself, and gain experience as a landlord whilst living in a rental property. I'd purchase an umbrella insurance policy for personal protection.
Then, my plan was to save up 25% and purchase another 4-plex property, then tuck that inside an LLC. I know I can convert the first 4-plex into a conventional loan, but I feel like this strategy will slow down my property accumulation. There's also less risk in the property I'd live in because I'm confident I would always pay rent, lol.
Once I have the second property inside an LLC, I'll convert the first property to a conventional loan, then put it in a separate LLC. So now I'd have two 4-plex properties inside two separate LLCs. I would then move into a small house for myself, and then hire a property manager and manage things on a less time-intensive manner from then on.
Questions:
1. I know I could qualify for the first FHA loan, but what about the second 4-plex loan? Or the single-family home after I move out of the 4-plex? Would the bank lend me money for these? I feel like my income wouldn't be enough (let's assume each 4-plex costs 370k and the single-family costs 180k which is standard around where I'll be living)?
2. Is putting them inside separate LLCs a smart decision?
3. Do you have any advice on how to force up rents and appreciation on the properties?
4. Would it be smart to pay off the properties? I know this wouldn't make mathematical sense (given the extremely low-interest rates, but what about from a risk perspective? I don't really want to build a real estate empire, just two 4-plex's will do and a single-family :)
5. If a 4-plex is inside an LLC, and I can't pay, would I be liable if the house is inside an LLC?
6. Any advice on finding good property managers?