Newbie from Whittier, CA area looking to flip/rent/airbnb???

Question

Hello everyone,

My name is Mario. I'm new to Bigger Pockets and have taken an interest in Real Estate Investment. My focus so far has been on buying single family residences to either rent, flip or airbnb. To educate myself, i bought 5 books on Amazon so far.

1.The Book on Flipping Houses: How to Buy, Rehab, and Resell Residential Properties

2.Real Estate Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Securing Financing, Closing Your First Deal, and Building ... Real Estate (QuickStart Guides™ - Finance)

3.The Book on Rental Property Investing: How to Create Wealth With Intelligent Buy and Hold Real Estate Investing (BiggerPockets Rental Kit, 2)

4.Airbnb For Dummies

5. The Book on Investing In Real Estate with No (and Low) Money Down: Creative Strategies for Investing in Real Estate Using Other People's Money (BiggerPockets Rental Kit, 1)

I have read #5, started #3 and part way through, jumped into #1.

As you can see, i just want to educate myself first before taking the next step. Throughout my reading, Bigger Pockets was advised and so here I am.

I have an idea (my wife is on board) of what my investment journey would look like, but i would love to hear expert advice from the forum.

My current situation is as follows:

Married, one child (3). We live in our 3bed/2ba townhouse with about 200K in equity (under my name). Our goal is to move out of our townhouse (within 2-3 years) and into a single family house with a big yard front and back.

I make about 100k annually, while my wife makes close to that. We both have excellent credit and no credit card debt. We only have 1 car payment with 2 years left to pay off.

My investment idea/plan is to buy a single family residence (BRRRR method) to either flipp, rent or airbnb, but i would love to hear from ppl who have lived in a townhouse and have done this.

I would really like to know what the best financing option is for a newbie with excellent credit and 200K equity.

From reading the books so far, I'm leaning towards Portfolio Lenders, but I read a post here recently that said Hard Money lenders was his favorite. Is it really necessary to use Hard Money lenders if you have great credit and equity?

I just want to go through the least amount of hoops to get started. Am i at an advantage by having good credit and equity?
I've entertained the thought of renting my townhouse, but I would rather live in the townhouse until I've found a rehab property i can fix and move into. Maybe I could flip one house, sell it and then use the proceeds to buy ourselves another rehab property we can fix and then move into and then rent or sell our townhouse.

I know i have many questions, but i wonder how many ppl are in my situation. Living in So Cal, i definitely am interested in "farming" in the La Habra, La Mirada, Whitter area.

I just would like to see how someone else has done it in the So Cal area, maybe even in the whittier area.

Thank you,

Mario

David Featherstone · Answer

Hey @Mario Casarez Welcome! It’s great to hear from someone who also lives in Whittier! The great thing about real estate is that there are so many different ways to go about it. Here are some steps you can take to get some more info: 1) Financing - talk to a morgage broker to about your situation and goals and they could give you an idea on what kind of rate you can get on a HELOC (a way for your to borrow against your equity). Search BiggerPockets for a recommendation or let me know and I can send you the one I use. They could give you an idea of what it would cost per month to borrow money to use it as a down payment. 2) Rental Potential of Current townhome - Have your looked into what your current townhome could rent for? This might affect what your next move is. Check you homes rental potential by using sites like rentometer.com (for a standard rental), airdna.com (for an Air BnB rental) and other marketplaces like Craigslist and Facebook marketplace. Use a rental calculator (like the ones on BP or others online) to see if it can be profitable for you. Knowing this will help you narrow down future possibilities. 3) Look into “Live in flips” - this strategy is something you should consider because it can help you get into your single family home with the big yard quicker. It works the same way as a flip except you live in the home as you fix it up. All the same rules and steps of a regular flip apply. You still need to find a home that is under market value and that you can add value to somehow. Pros: if you plan to live in it for at least 1 yr before selling, you can get cheaper loans / better financing options. If you live in it for 2 years then you don’t have to pay capital gains tax when you sell it if the profit from the sell is less than $500k(the capital gains tax can be around 20%!). It also gives you time to do the renovation and maybe save by doing some of the work yourself. Con: you don’t get paid until you sell, but real estate is a long term play. Also, you can only have one “live in flip” at a time as you can’t have multiple primary residences. My thought is that if your townhome makes sense as a rental (+the cost of the HELOC) you look into using your HELOC as a down payment for a live-in-flip property. 3) Find a property - I would work on trying to find a property off market here in LA county as it is still very competitive and expensive on the market. There are many strategies to do this (BiggerPockets has tons of info about this) One possibility that not too many people talk about is working with an agent who actively seeks off market deals. I know an agent who does this (more in Orange County though) and she will send out letters to homeowners in areas that I’m interested in buying to find off market deals. Hope this helps! And remember this is only one of many possible strategies and there are sure to be flaws/cons with this that I missed but I thought like it sounded like it might help you reach you goal a little quicker then other methods.

Justin Phillips · Answer

@Mario Casarez Welcome! First off, I highly recommend any books that Bigger Pockets has put out. Hard to go wrong. As far as financing, I'm a big proponent of putting equity to use. My wife and I have a specialized 1st position line of credit on our property. We have access to up to 80% of equity anytime. Along with that, we're able to pay down the balance and save interest cost, because it's tied to a zero balance sweep checking account. So every dollar we deposit is swept directly towards our remaining balance, lowering interest cost and increasing our line available to pull from. When the market turns, we'll simply stroke a check from our line to get the next property. Each property purchased/paid off with the line actually pays off faster than the last with the added cashflow. It's a great way to snowball yourself into multiple properties. It's been a great tool for us, and I always recommend everyone educate themselves on the loan as an option!

Mario Casarez · Answer

Thank you to all who have responded here and have messaged me privately. I appreciate the warm welcome. I'm still working my way through The Book on Flipping Houses (J Scott) and would like to complete to become familiar with the entire "flipping" industry. But on a side note, how likely is it to complete my first flip before the end of this year?How much time does it take? I'm scared and excited at the same time, kinda like what I imagine going sky diving would feel like.

Andreis Bergeron · Answer

Hi Mario,Congrats on the decision to invest in a piece of real estate. I agree with the others: talk to mortgage broker and evaluate the options he gives you. Also, welcome to the BP community. I do some work in California, would love to connect with you!Best,Dre

David Featherstone · Answer

@Mario Casarez I sent you the contact info in a message. Good luck!

Mario Casarez · Answer

Hello @David Featherstone. Please feel free to send me the mortgage broker you use. Would love to get the conversation started. Thank you.Mario