Advice needed for buying second family home

Advice needed for buying second family home

Member since 2020 · 1 post · 1 vote

Hello. I am new to the community. I have recently developed a strong interest in buying properties and flipping them and then renting them out for a profit. I have not done so yet because I have not had the money to invest and I am not handy. Here is my current situation:

  • Married, father of four who has owned two cars (used) and one house (recently sold). I live in the Cleveland, Ohio area. 
    I work in tech sales and have had three jobs in the last two years. I was laid off from two, resigned from the other. I have a good job now that pays well and is flexible but may not be secure long term. 
    Due to being unemployed for several months after my last lay off and due to the bad situation that was our old house, I have sold that house just a month ago and we are living with my parents so that we can save $ and look for our next house. We did not make any money from the sale of our house, instead we lost $2K due to us foolishly trusting the inept realtor we were using. 
    The two used cars that I currently own are old and lacking in value so I will need to get another car soon, especially because I will be driving more for my new job. One is a 2010 Chrysler Town and Country with 115,000 that is in good-fair condition. We owe $6K on its loan. The other is a 2008 Toyota Highlander that has 175,000 miles on it and we we $2K on its loan. 

Based off my current situation, could I please have some advice with answers to these questions?

  1. First, should I trade in a car now before we buy a new house? The one car is a minivan that has little trade in value. Due to its current state, it will not last longer than six months. Since I am in a position where I can save money, should I put money towards another car now before buying a new house?
  2. Second, due to there being an overall shortage of houses in the housing market in our area, we are going to need to wait to find something good. Our price range is $130,000-200,000. Is it better to buy a house that is on the high end of that range and not have to do any work or is it better to buy one on the low range and fix it up? ( new kitchen, adding square footage, facelift etc)
  3. Third, due to being in a situation where I can save money and be flexible with my time due to my job, what are the best steps that I can take now towards making money in real estate in the future? (Buying properties and renting/selling)? 

My apologies for the long list, but any good advice that could be shared with me would help. I would be glad to answer any questions to help clarify my situation or reasoning. Thank you 

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  • Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
    6y

    I think regarding the car situation, you should open up that conversation with your lender. Having another credit inquiry and higher car payment could largely affect what kind of house you're able to buy and when. Meaning, keep your debt to income low for the sake of getting better terms on a mortgage. If you do have to buy another car, consider buying something cheap in cash that can hold you over for a year or two if you want to prioritize real estate. A good lender will advise you on how to organize those other pieces of the puzzle so you can be in the best position to buy real estate.

    Keep in mind that unless you get a rehab loan, any repairs you make will be out of pocket and that's money that you could use to invest in other properties. A lot of people in your position would buy a move-in ready house with an FHA loan to minimize their out-of-pocket expenses. Then, use what is left to buy an investment property that you can add some value to. If you were single with no kids then I'd say be more aggressive and buy a live-in rehab project, but that's probably not a great option.

  • Realtor · Boston, MA · Member since 2014 · 159 posts · 75 votes
    6y

    James, obviously if you purchase a new vehicle that will increase your debt to income and limit what you qualify for with regards to your home purchase.  I would say that unless it is an absolute necessity, forget about purchasing a new car at the moment if your focus is on real estate.

    For question #2, if you are not handy and do not have the additional funds to pay contractors and such, I would say try to buy something that is turn-key so that there are no issues.  Please keep in mind that nothing is every really turn-key though and you should maintain a repair budget just in case.


    For question #3, just being on BP and learning from other savvy investors is a start.  You can also join your neighborhood Real Estate Investor groups or any other real estate meetups in your area that you can find and learn from the people right in your own back yard.  Perhaps start with learning to wholesale properties.  

    Wish you all the best in your future endeavors!!!

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