New to Real Estate · Lubbock, TX · Member since 2021 · 8 posts · 7 votes
Hello biggerpockets family. My name is Jose Grimaldo and I'm out of Lubbock, TX. I really want to get started in real estate and not sure what to do. I currently have a home that I'm paying on and have about 20-30k in equity in it. Not sure if I should sell my home and use the equity as a down payment for a duplex. My family live in one and rent out the other. My other option that I was considering was to get a home equity loan and use that money as a down payment for a property. Rent it out and let it pay itself off. Not sure what to do, I'm new to all this and would really love some opinions! Thank you!
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
5y
Hello fellow Texan. If all you have is home equity then you need to get your personal finances in order first. You should be on a budget so that you are putting money away every month. You should do that for an extended period of time before purchasing real estate.
Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes
5y
Hey @Jose Grimaldo, this is a tough decision and one that you need to make based on what is best for you. What I would do is dive into each option and do the numbers for each one. Analyze 10-20 properties for each scenario to get an idea of what is realistic. From there you can see which option is best for you and your family.
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
5y
Hello fellow Texan. If all you have is home equity then you need to get your personal finances in order first. You should be on a budget so that you are putting money away every month. You should do that for an extended period of time before purchasing real estate.
Specialist · Midland, TX · Member since 2018 · 198 posts · 148 votes
5y
@Jose Grimaldo glad to see another investor from the area! My advice centers around one word: action. Take a step, any step, and use the result to identify and take the next step.
Step 1: Define your risk tolerance - all relative; high, moderate, or low? This will dictate what strategies you investigate based on the leverage, timeframe, and other risks required of you. This step allows you to call financial institutions with some ideas of what to explain to them of what you want to do. Write the strategy(s) out on paper before going to steps 2 & 3 and try to condense and simplify the explanations of the strategy(s) as much as possible, 3-4 steps, focusing on the questions of "How is this creating value/cashflow?" and "What is the end-goal/steady state that is desired?" and NOT focusing on the mechanics of the financing or minutia of the process.
IE: House Hacking - 1) Identify a 2-4 unit property I can live in and rent the other units such that net rents cover most of or exceed the mortgage payment, goal: live rent cheap-or-free; 2) Secure long-term fixed rate mortgage/debt; 3) Hold and live in the property as I focus on honing my property management systems/skills and accumulate of capital for the next deal.
Step 2: Call financial institutions (local banks, I'd start with Happy State. credit unions, Frost, etc) and figure out financing options for your chosen strategies. Make clear you don't have a deal right now, but want to know the mechanics and structures that would work with your chosen strategies. Start building relationships with these lenders now! Set up a reminder on your phone to call the institutions/each contact on your list every 3-45 days regularly. This should be done concurrent to Step 2, once you have a couple possible strategies outlined.
Step 3: Analyze deals using strategies that fall within your risk tolerance. This is a numbers game and the most important step, the more houses/duplexes/etc you analyze, the more you will learn and start to see trends and what strategies may work in your area. This is also the easiest step to get stuck in (analysis paralysis, so UPFRONT set criteria (% CoC yield, debt coverage ratio, etc) that means you WILL take it to your financial institution and then put in an offer on it. Do this step every day from now on, set a quota for how many you'll do a day and stick to it.
Step 4: Whatever you need to work on in your life to have the means to execute a deal based on your chosen strategy(s), start making changes to your life to make it possible NOW! They may or may not need to be drastic depending on how bad you want to move quickly.
Step 5: Pick a deal that pencils out and try to make it happen. Set a goal for yourself to make a certain number of offers/week or month and hold yourself accountable by telling others what you'll be doing. If you aren't finding enough deals that pencil out to meet your goal, that means you need to either analyze more deals (increase throughput first!), shift your strategy, shift your target asset class/area, or revisit the financing structure.
The key is taking that first step and not EVER ceasing to move forward. By just trying to do something, anything, in any strategy or asset class, you will immediately start learning and making connections which will lead you to where you are "meant to be." Don't forget Lubbock is still a small town at heart and RE thrives off of human relationships. The more people you talk to about RE, help out generally, and befriend, the faster your career will accelerate.
I went from W2-->SFR live-in-then-rent-->SFR purchase and rent-->SFR live-in fix-and-flip-->small MF/townhomes-->Medium MF and failed-->wanting to buy a farm but the deals stunk-->more small MF/townhomes-->finding vineyards and learning to underwrite them-->2 years figuring out and putting first vineyard deal together-->now building a winery services business-->syndicating development of wine grape vineyards in our area to grow an empire.
The point is this: Life is unpredictable and fun, unless you're doing nothing. If you're doing nothing, the outcome is known and that is boring.
If there is ever anything you'd like an opinion on, please feel free to to DM me. We (me and @Matt Moreland) have been involved in the Lubbock market for a good bit and are always excited to help someone else grow and learn.
Rental Property Investor · Lubbock, TX · Member since 2021 · 13 posts · 10 votes
5y
@Jose Grimaldo I am currently closing on a duplex to house hack in Lubbock. This is my first deal but the best advice I can give is advice suggested by bigger pockets. Have any adopted tenants sign a tenant estoppel agreement. This prevents misunderstandings with acquired tenants. Also Texas Tech credit union is great. Ashley Laycock is the representative we are using and so far she has been invaluable. Dont waste time with quicken loans but shop around for rates.
Flipper/Rehabber · Midlothian, VA · Member since 2021 · 4 posts · 0 votes
5y
Hello BiggerPockets Fam,
I'm Vee, from Virginia. I am a real estate newbie , I am currently in the process of getting my LLC & I wanted to know what are some steps I should take on getting my first fix and flip.
Realtor · San Antonio, TX · Member since 2017 · 64 posts · 35 votes
5y
@Jose Grimaldo To start out, I did a cash out refinance on a house I owned, then used owner occupied financing to get the 2nd and 3rd properties. There are 3.5% down FHA loans, 5% owner occupied conventional and down payment assistance programs you can look into. VA might also be possible if you were/are military. I used the 5 % down on my 2nd house because the property didn't qualify for FHA (1954 home with peeling paint and 40 year old furnace!). If you have questions about any of those, let me know and I'll share my experience since I've used each one, except VA. Good luck!