Please, help me with my investment.

[Bryan Rodas]

Hello,

My dad has saved 220k dollars. We want to start investing in real estate. We were thinking on buying a distressed property (all cash) and then fix it and cash flow for a while until it appreciates enough to sell it. We were also thinking about doing the brrr strategy so we don't pay gain tax. However, there is another method that I read which is instead of spending all the money on one property, to get 2 mortgages in 2 different properties, and divide the 220k in two and buy different properties. Since, they are going to be strictly for cash flow we are confident that it can be possible if we find the right bank or mortgage lender. My dad's credit score is 750 and our house is paid off the only debt we have is our car. Can somebody please help me think of a good strategy. Thank you so much!

[Alecia Loveless]

@Bryan Rodas Hi Bryan. For a non-resident occupied rental you will need a 25% down payment plus your closing costs which are usually 3-5% of the purchase price but might be a big higher in NJ.

The mortgages will be based on your DTI, Debt to Income ratio which takes into consideration outstanding debts compared to your income and assets. If you are buying a rented multi family many banks will consider at least some of the rental income into this ratio as well.

I would recommend talking to a local bank or credit union to see what you can get pre approved for, this pre approval usually lasts 3-4 months. If you don’t think your timeframe is that fast you can get prequalified which will at least give you a ball park figure of what you amount you can buy. But you should start getting your documentation together so you will be ready when the time comes to submit it.

If neither you nor your father is handy I would probably steer clear of a BRRRR right now because most of the good contractors are all booked for the summer already which would give you holding costs until you could get someone to work on your property, materials are through the roof, and real estate prices are through the roof which means unless you buy a real dump you'll not be real likely to get something under market value. Some people still are getting stuff under value, I just think until you have a little experience it might be best to wait.

I think buy and hold is great, I’ve got several. I’m in a small market and if I had 40 more I could rent them all.

If you divide it in half and buy 2 that’s great, or a small multi if you can find one that works and get several rents might be better.