Should I even TRY to start now?

Question

Hi everybody,  I would like to first say that I have been reading BP forums for a while now and they have helped inspire me to invest in RE.  I'm 28, engaged, have a 2yr old son, and at a somewhat difficult point of life right now and would appreciate any advice.

Here's the breakdown, I have about 40k in debt (car loans) that I pay about $600/mo for, I pay $1200 rent, paying $600/mo for daycare, and I make roughly 75k/yr.  I am a vet, but in my not-so-bright youth I didn't save a lot of money so when I got out of the Navy I had about 20k but I used that up to hold me over until I found my current job.  My fiancee is in school until December (she didn't like riding the bus, hence the 2nd car loan), and I expect her to make roughly 20-40k her first year out and pay about 5k toward her student loans.  With all of my other living expenses I can save maybe 200-300/mo.  So now I have a good job but no money saved, I don't even have enough $$ for a home inspection/appraisal/closing costs, my credit took a hit with the financing of my 2 cars(was high 600's, now right around 600), and I want to begin investing in RE.  My significant other is totally on-board to invest, but how do I begin?

As I see it, here are my options:
1) Buy a 3-4 unit multi now using 0% VA financing and move into one unit.  Use rent received to pay mortgage and cash flow ~$200/mo(using 50% rule).  Put cash into savings along with $1200 I WAS paying for rent +200 I can save and by the time the fiancee graduates I will have ~9600 over 6 mos.  Income from fiancee can be added after that point, assuming bottom line of 20k/yr, in 1 year(-5k for loans) I will save ~24k and then use traditional financing for future investments not using more than 50% of $$ saved to ensure there is a cushion for my first property.

2) Wait it out for 6 mos and build up some capital(200/mo*6=1200 saved, not much), then follow plan 1, bank around 24k after 1.5 years.

3) Wait even longer , say 1 yr, and start out with ~12k saved, hopefully better credit and qualify for better loan terms.

Those are my 3 choices right now, I want to start ASAP while the market is down and money is cheap, long term I would like to buy more multi's, maybe a few SFR's and do a few fix-and-flips in between to build up enough to supplement my W2 job with rental income and retire early.

So the question is:  Should I start now?  CAN I start now without having cash for closing or initial costs?  Anybody with similar stories or experience?  Any and all advice, comments, critiques of my plan are welcome.  Thank you!

Account Closed · Answer

Try not to take this as a discouraging message but you don't have the right mindset to be an investor. You have no business having 40k in car loans. My first advice is sell the cars. You can pay cash for a $5,000 or less car that will get you to work. Investing is about making a choice to accumulate money rather than spend. If your mindset is not right, you will likely not succeed as an investor.

Above all an investor understands how money works. That  debt should only be used when it can increase your assets. They understand the difference between depreciating and appreciating and income producing assets.

So I suggest that investing is more than about just tying to buy a property. If you start thinking like a investor first, you will do better.

Al Williamson · Answer

Robert Granger my first reaction was to spur you on like Patrick L. did with the caveat. But now I think a little more of a caveat should to be shared. There is a saying that goes: You're being what you will become.

You are doing awesome spending time learning on BP, but check out your daily money handling patterns. Are you being careful? Are you being caught off guard by expenses?

Owning a rental will magnify your BAD traits whatever they may be. So, start where you are. You're already a real estate investor - it's just a matter of time. Be savvy with what goes through your hands and you won't have to chase your dream. Your income will climb to meet your financial knowledge.

Best to you and your family.

Michael Quarles · Answer

Hi Robert

I have a situational question for you.

If Roger Bannister is to leadership 
Then Biggerpocket"s poster are to _______?

Please don't sell the cars.   It's a negative action.

Robert Granger · Answer

Thank you for the replies, no discouragement here, only motivation.  What I'm seeing here is that I need to get my debt in check or at least be sure I can handle the added responsibility.

The car loans I could have done better, but for the newer one I get twice the gas mileage(important because I have a 60 mile round-rip commute) for about the same payment as the car it replaced with lower ins. premium, so it actually saves me money.  The other one I should have bought a beater(for the fiancee since she drives way less than I do), but I can refinance that one with my bank next month to cut 150 from the payments.  I actually quit smoking about a month ago to help save money, that's at least $100/mo with how much I used to smoke.  Next cut is going to be cable TV, as soon as the NHL playoffs are over or the Bruins get knocked out (might as well finish watching so close to the end)then that's another 100 at least.

I'm trying to save and get back on track, but after reading Al's reply and thinking about it, there are things that pop up that I don't exactly budget for.  It doesn't seem like it at the time, but that extra $10-20 for whatever it is adds up to put me in a pinch.

I do appreciate the criticism, it's a good reality-check, which is why I decided to ask the more experienced.  I think what I'll do for now is save up enough to at least afford the basic services and closing, then decide where to go from there.

Patrick L. · Answer

I think you absolutely can start now, especially with your ability to use your VA loan.  If you can find a 4 unit property with a decent owner's unit then I'd jump on that and stay there as long as you need to in order to get into the position you want to be for your next investment.

The only reason to wait would be if you really don't have any reserves to cover initial expenses that would come up with the property such as any repairs needed to get it rent ready, any initial vacancy losses,  or capital improvements that are about due (roof, HVAC, etc).

I don't think there's any point in waiting just to wait if you feel you're ready to take on an investment property.

Should I even TRY to start now?

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