May I run some thoughts by you?

Question

Hello wonderful BP Community! I’ll do my best to keep this quick.

As a newbie, I’ve been pursuing clarity as to which niche and strategy will best fit my goals, skill set, and current financial position. I'm eager to hear your constructive criticism and opinions so please don’t hold back any thoughts you may have!

First, my main goal is to eliminate my housing expenses and realize the wealth building benefits of owning investment property in a stable market with a growing population and job industry. I feel strongly that a form of house hacking will be an excellent option. While I love the idea of house hacking a buy-and-hold rental property(rent-by-room, small multi-family, etc.), I’m not opposed to taking a live-in-flip approach and holding for at least two of the last five years for tax advantages. My partner and I are in our mid 20’s and not discouraged by the possible “discomforts” that are inherent with these two strategies.

I’m handy, disciplined, have good credit, and between $30-50K to conservatively work with. However, I have no formal real estate experience and have worked only low paying jobs the last few years so I'm not sure how difficult(or easy) finding financing will be.

Lastly, I’m focused on Washington state markets since I plan to relocate there in the near future. I’m flexible in choosing a market and would like to move somewhere where I will invest “in my own backyard.” Ideally a blue collar city or town that has more affordable prices within a moderate commute to a higher population city. Any thoughts?

I’m truly grateful for your time today and eager to learn and network!

Regards,

Mitch

James Miller · Answer

@Robert Freeborn

I second snohomish county but a word if caution. I strongly believe rent control is coming state wide very soon. And if its similar to California it will affect mutis harder than single family. Just something to keep in mind.

Dylan Vargas · Answer

@Mitchell Jacobs Welcome! Great plan. My bigger point would be to pay attention to how you rehab the home. DO NOT over rehab. Rehab the home in a way that is appropriate for the neighborhood. Tour other similar homes on the market and see what type of finishes the home has. Make sense? This plan isa great way to lear and make money while building equity. Owner occupy will help you get the lowest out of pocket money as well unless a non lendable fix and flip. No biggie at that point but would need to get a fix and flip loan which will be a higher interest rate etc. Good luck and keep us posted.

Darius Ogloza · Answer

Sounds like you have a good basic plan.  The opportunity should drive the strategy and not the reverse.  Find a deal first and then figure out how best to exploit it.

Robert Freeborn · Answer

@Mitchell Jacobs welcome to Washington! We have a great environment and market here.

Areas I think you should strongly consider based on your notes: oak harbor, Anacortes, Mount Vernon, Burlington, sedro wooley, Everett, Arlington, ferndale

These areas are growing, are still affordable, and are more working class neighborhoods.

Send me a message and I’d be happy to talk details.

Jared Boundy · Answer

@Mitchell Jacobs, it sounds like you're starting to form a good plan.  It's important to know what you're planning, and why, but it doesn't have to be a plan that works for everyone (you'll get lots of different advice). I'd recommend talking to lenders sooner, rather than later, so you know what it's going to take to get a loan. If a conventional loan won't work at this point, then you can consider partnerships, hard money, etc. Given what you've shared so far, I'd probably look about 45-60 minutes outside of Seattle or other larger cities (Tacoma, Olympia, Bellevue, etc.).  If you're comfortable with further, then go for it, but I think you'll still see much more competition if you're looking 30-45 minutes from Seattle or the airport. I think there's still quite a bit of opportunity within an hour of Paine Field, the fairly new airport in Everett. You're welcome to message me privately if helpful to discuss more.

Bonnie Low · Answer

@Mitchell Jacobs welcome! Good for you for getting started early in life. That's the one piece of advice I think all investors agree on: you can't get started too soon. Here are some thoughts based on your scenario. Start talking to a lender right now. I highly recommend @Jason Wray from the Federal Savings Bank, you'll find him here on BP or @Joe DeVera, also here on BP. I have worked with both of them and Joe knows the tri-cities area several people have mentioned. Since you're willing to put in some sweat equity, you might consider a 203k loan. Not a lot of people use it, but it will pay for your purchase of a distressed property (which most conventional loans will not) and will also fund your rehab costs. Changing jobs might affect your credit worthiness, but that's a question for a lender so just another reason to start talking to a lender so you know your options. I think most of us make the mistake that we have to know exactly what we're looking for when it comes to financing. But asking banks and lenders what they offer or what they can do is a great strategy because we can't possibly know all the products that are out there and, unfortunately with a lot of lenders, if we don't ask exactly the right question we won't get exactly the right answer. This is challenging for newbies because we want to sound informed, but getting too specific might inadvertently narrow our choices. A good lender will hear you out and try to find something to fit you. But just like Realtors, they're not all great. So work with someone who will really work for you!

Steve Morris · Answer

"Lastly, I’m focused on Washington state markets since I plan to relocate there in the near future. I’m flexible in choosing a market and would like to move somewhere where I will invest “in my own backyard.” Ideally a blue collar city or town that has more affordable prices within a moderate commute to a higher population city. Any thoughts?"

Well, you're too late for Seattle-METRO, however, Olympia and Tacoma still offer some value.

If it was me, Spokane or Tri-Cities are both growing like crazy.

Parker Chrisman · Answer

Hard to argue with either strategy. I will, however, point out that there's probably more risk in doing the live-in flip as you have to come up with a scope of work, rehab budget and project post-rehab comps to make the best returns. Whereas renting out extra rooms or the other side of a duplex you don't HAVE to accurately estimate ARV in order to have a good deal. It's all about what's important to you though. Do you want to potentially have a lump sum payday after the flip or do you want to lower/eliminate your living expenses for the next X years by renting out rooms or other unit?

Robert Freeborn · Answer

@James Miller well said.  I wouldn’t be surprised to see it either. Let’s hope not though.

Elise Marquette · Answer

You should definitely talk to a lender, especially if you are considering relocating. Will you have you change jobs to relocate?

May I run some thoughts by you?

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