one house down, now what?

Question

Hello Everyone!

My name is Kirill and I am from the beautiful state of Washington. I would like to share some basics about myself and what I would like to accomplish in hopes of getting an idea or direction I should go.

-I am graduating with my B.A. after summer semester.
-23 years old
-Currently gross about 70K
-I would like to build up a portfolio of real estate units and cash flow as well as appreciate

Right now I own a town-home that I purchased FHA last year for 110k, I owe 97k and it was assessed at 167k. My mortgage with P&I, taxes, HOA equal out to $1050. The rental rate on my place is $1350 which I based off of what my agent said and comps in the complex.

I just got a pre approved conventional loan at 97% LTV with a rate of 4% for 250,000. It will be owner occupied as I will be renting my townhome.

I think I would like to buy a SFH and live there with my girlfriend and save up for a third purchase. My goal is to have about 12-15 properties by the time I am 35. Does this all line up and should I do something different with the opportunity I have?

The main question I have for you pro's is what would you do in my position... I think I made a good decision with my first purchase ans would like to continue making good deals. I have read countless hours of posts on here and am excited to join this community.

-Kirill

Tin Lam · Answer

@Kirill, buy with both hands if you can. Your income will qualify you for roughly 4 loans, so I'll be careful in analyzing the loans strategies. After that, start looking into seller financing, and subject to deals. Those will help you improve on your portfolio. Remember, there's a saying if you leverage too much and buy with nothing down, soon you'll have nothing left!!!

Jeff Arndt · Answer

I too am 23 in a very similar situation as you. I just bought a triplex off an FHA loan and will be occupying on of the units. To me it's a no brainer. At this stage in your life you don't need a 250k house to live in. In the tri-plex that I bought, the rent of the other two units covers the PITI. So when I move out and rent my unit. That will cover the repairs, prop management, etc. In this situation, you won't be living for "free". But it's pretty damn close.

Regards

Steve Babiak · Answer

Did you read your loan documents?  You know, that big pile of paper that you signed at the closing table.  I suspect that you will find something that says you agree to actually occupy the premises after closing, and that you will remain the occupant of the premises for some specific minimum amount of time afterward.  Go do some reading of those papers and come back and tell us what you found ...

Kirill Chervets · Answer

Ken,

Seems like I will need to pay off a nice size portion of my two properties while at the same time saving up for down payment so I can loan at 60% LTV. Eventually I will maybe consider trading up to a MFH as that would be ideal for what I am looking to do.

Ken Latchers · Answer

Keep in mind, this is easier said that done.  You can have a goal to do this, but keep in mind there are many things can change your course - health, life events, job situation economic problems (think Greece, Spain, the US national debt), a tenant who causes a lot of damage, evictions, and many other things.

Along the way to a dream is a lot of reality.  For example, no more homes will be 97% LTV, and are more likely to only be 65-70% as LTV, as they will be investments and not OO...

Pavel S. · Answer

Kirill Chervets Good work!  I am in almost identical life situation and looking to do what you are doing!  Keep us posted!

I am about to close on a condo and making preparations to buy my first rental as soon as I can.

Kirill Chervets · Answer

So just to keep everyone posted, I just closed on a 3/2.5 home here in my target investing area and am really excited. I will be renting my townhome that I own and can very conservatively expect a $300 net cash flow. This new property I bought is a 2005 built home and needs very very little to be ready to read. My question is that there are currently tenants living there and want to stay... should I keep them there and create a new lease, move them out and find new tenants or ? I am using a conventional 30yr fixed loan. I would like to use my net cash flow from both properties to be able to buy another one within the year and by 30 years old which is 6 years from now hopefully have 10 rentals! Hopefully my career keeps pace and I continue to learn... I love this site.

Brad F. · Answer

Look for seller financed deals if you want to accelerate your pace and can tolerate the leverage.   Theres a few of us young people on here, welcome.

Raymond B. · Answer

Kirill Chervets,

Welcome to the forum.

I suggest that you click on this link, and use is as a guide with your rental investments.

http://www.biggerpockets.com/forums/52/topics/18371-help-me-understand-this-deal-and-5-2-rule

Raymond

one house down, now what?

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