buying my own first before investing

[Phillip Gonzales]

Hello just a beautiful day here in Arizona! I was wondering if you some of you might have started investing before buying your own home first? I am on the fence on buying a home first or just going for straight real estate investing. I live in a highrise condo and my wife is pretty happy being here right now, but have you done investing before buying your primary home?

[Patricia Newman]

Glad I can help! 

This would be the perfect time to start your Personal Plan (Business Plan):

1)  Where do you and your wife want to be in 1-2 years, 3-4 years, 5 years etc. to grow your personal wealth? It's important to write it out.  To visualize it.  Have it come from the heart. 

2)  Once you and your wife know where you are going, then you can do a step-by-step approach on how to get there.  But first you need to know what "where" is.

3)  A legacy for your children.

For me - In the 1980's living in the beach areas of Los Angeles was extremely expensive. Back then, SFH were selling for $225,000 - I was making $30,000 and single.

It took me 5 years of reading everything related to real estate - no money down, rent out SFR room-by-room, going to numerous seminars. I started studying real estate and didn't even know what equity was. Deep down I knew that I could buy a home to live in (I had been renting for 10 years). What was the magic formula for me?

One book was the magic bullet for me. I could qualify for a FHA loan buying a multi-family property. A duplex was not enough income, but a triplex or 4-plex was. I hunted, I searched, I cried - the property was just not out there...until one morning I opened up the newspaper and there it was. I called the agent for the address - it was in an "A" neighborhood - a triplex - asking $135,000? What? It must be a misprint! I called the agent back and said I wanted to make an offer and I would be at her office at 2:00 p.m. This gave me enough time to drive by the property and the neighborhood.

It definitely was in an "A" neighborhood.  This was an older neighborhood with beautiful tree lined streets.  Homes had been remodeled and I knew they were worth $225,000 easy.

I made an offer for $133,500 and it was accepted.  Wow!  All those years of reading had really paid off.  I knew what I was talking about.  I knew what I wanted and how to get it.

Now with multi-family properties, the offer is always made "subject to interior inspection". So if you don't like what you see you can simply state property not accepted.  I knew by the condition that it would be gutted down to the studs, new plumbing, new wiring, new everything.  It was BBBAAAADDD!  My kinda property.

This was a gold mine! In an "A" neighborhood. The realtor simply made a HUGE mistake on the listing and I found it! This made a perfect FHA 203(k) rehab loan - based on the appraised value after remodeling, the bank gives you so much money to remodel. This was perfect. An owner-occupied loan was perfect for me and the bank.

The deal closed.  With the help of a contractor, I started remodeling the unit I was going to live in.  Then after I moved in, one of the other tenants moved, so I renovated that.  And, a couple years after that, the last original tenant moved out and I remodel that one.  I also put in beautiful landscaping.

My real estate philosophy has been to get it for the right price - sweat equity - so I can rewire, replumb, new roof, etc. depending on the age of the home and what has been done.  It's all about the price and cash flow.  Forget about future appreciation.  It might not be there when you are ready to sell!  Note:  2008-2009

I decided to move to Redmond to be closer to my brother.  So 3-1/2 years after buying my first property, I sold it for $365,000.  Taking the equity from that property, I did a 1031 tax free exchange into my current 4-plex which I currently live in with my husband.  It has allowed us to live comfortably with the tenants paying all the bills and then some.

Selling the triplex for $365,000 after buying it for $133,500 - over the 3-1/2 years, I put approximately $70,000 into remodeling all 3 units.  Interest rates were coming down - property values going up; properties appreciated 25% just by doing nothing.  My appreciation was 79.4% (365,000 / $203,500) in 3-1/2 years.

Soooo - Be careful of the traps that prevent you from building your wealth - big houses, cars, vacations, toys....credit cards!

Also, you stated you want to buy several investment properties.  Don't get hung up on the fact that a lot of people on BP are going crazy buying investment properties at warp speed...with the housing market so hot right now, I hope they don't crash & burn.  It's easy to get caught up in this.  It's okay to play it safe and steady. Time is on your side.  I bet 5 years from now you will look back and be amazed (and so very thankful) how far you have come.

Good Luck!