Saving for my first investment

[Nick Zouras]

Hi all,

Real estate rookie here from the NW Suburbs of Chicago. It is safe to say I’ve been bitten by the real estate “bug” and it has consumed my thoughts. I’m just scratching the surface on my education but it has become such an exciting process that it doesn’t feel like work, I look forward to reading and listening and learning and am excited to join the BP community.

A general overview of myself... I’m 24 years old managing a baseball academy serving over 200 families. While my pay isn’t fantastic, my job offers a lot of amazing opportunities, relationships with families who are influential in the community, flexibility to work on other things, etc. that I know will be extremely valuable long term... not to mention a pay check I can rely on that has kickstarted my investing career.

I would like to start as most other rookies do with “house hacking” preferably in the NW suburbs, but I will not be picky on location. Ideally, I’d like to do so within 6 months which I believe will give me enough time to do the proper research and create a plan I’ll be comfortable taking action on. I’m unsure if this will be possible given my current financial situation... that is why I’m coming to you all for guidance!!

Financially, I’ve been able to sock away 25% of my income into savings, and I’ve also been putting 25% of my income into the stock market, specifically the S&P 500... anything left over from the remaining 50% goes into my savings at the end of the month. I’m estimating that in 6 months I’ll have 4-5k in the stock market and another 5-7k in my savings account. Which leads me to my first question...

1.) Should I stop investing in the stock market and focus solely on putting all of my extra money into my savings account for the purpose of a down payment?

- The idea of having all of my eggs in one basket isn't extremely appealing but I'm starting to think the long term benefit of REI will outweigh my missed opportunities in the stock market. Any insight on this idea would help!!

2.) Should I sell off my investments in the stock market as a part of my down payment on my house hack when the time comes?

I'm researching my possibility with an FHA loan. I've come to understand that if I can save 7k in my savings account alone, that 7k would be enough for a 3.5% down payment on a 200k deal. Should I mix in the money I have in the stock market and go for something bigger? Or start small? For those unaware, the NW Suburbs of Chicago is a rather expensive area compared to the rest of the state. That leads me to my next question...

3.) What if the property is not turnkey and needs repairs?

- I don’t have the extra saving to front the cost of repairs.

- Does anyone have any experience with a 203k loan? My understanding of the 203k is that I can borrow an extra 30k for approved renovations? This sounds very appealing if I’m able to do it correctly.

- I’ve also discovered the possibility of a construction loan but have not done much research on this idea yet.

I realize this may be a lot to answer, so any insight or guidance may help. My main concerns are over-leveraging myself and getting myself into trouble with limited cash.

Oh, one last thing. Maybe most importantly? Not sure. I’ve only been W2 employed for about 7 months. Will I even qualify for any of these loans I’ve mentioned? Or will I be stuck waiting 1-2 more years to even be able to make my first move? I’m all ears in terms of creative financing!!

Thanks in advance everyone :)