Am I Starting Too Soon?

Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes

@Jordan J. Osborne If you can house hack with 0% down I would highly recommend doing that. You have to live somewhere anyways so there’s no real opportunity cost that you’re missing. The more units/cash flow that you can achieve at 0% down the better.

However, after that I would recommend focusing on paying off the credit card debt. You say those are low rates, and I guess they are compared to other credit card rates, but that’s a lot of interest that doesn’t help you at all. You’re basically throwing that money away every month.

7 Reply

Chris Coleman

Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes

6y

@Jordan J. Osborne

It’s hard to say, not knowing what a “large amount of credit card debt” means compared to your income.

But when you're talking about using your VA loan, or other loans to acquire investment property, one thing you need to consider is your Debt-to-Income ratio.

DTI is one of the factors that lenders will use to qualify you for a loan.

2 Reply

Account Closed

Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes

6y

Originally posted by @Jordan J. Osborne:

Hey everyone!

I’m curious to hear from you guys about whether I should wait to invest in real estate until I get better financials or if it’s not a bad idea to start now.

Background:

I’m a 25 old college student, graduating in 7 months, with political science and economics degrees. I’m using the GI bill so I’m not accruing student debt. I own one Condo that I’m hoping to start renting out within a year. I didn’t start getting my finances in order until a month ago.

My wife makes a decent salary and is the current bread winner in our household.

Dilemma:

I have a large amount of credit card debt, luckily with relatively low APR's (13.499% & 7.99%), but it would probably take me a year or two to payoff when I get a decent job. I also have relatively small savings right now.

Is it irresponsible for me to search for a duplex using my VA home loan (so I can put 0% down) and start house hacking with OPM? Or is it not the worst idea to start early?

Thank you very much for any and all input here!

Thanks for your service. Don't confuse "looking for a property" with "buying a property". It will take you a year of looking and learning to know when you find a good deal and what to do with it. I'd start now.

3 Reply

Mary K.

Rental Property Investor · Rockville, MD · Member since 2015 · 133 posts · 83 votes

6y

Hi!

I personally would hustle and get rid of the credit card debt. After that, get a cash emergency fund for 3-6months. Last is buy the next place and house hack.

Let's say you drive for Uber, dog sit, hustle with other jobs and are able save and pay off the credit card in a year. You will be in a much stronger place to weather any storms the rentals bring.

Just my 2 cents :)

2 Reply

Taylor L.

Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes

6y

Pay down the debt and put together a small emergency fund so you do not have to go deeper into CC debt. As others have said, getting a side hustle to make extra cash and pay down that CC debt might be a good idea.

I also think you should start looking at properties and building a plan. Small down payment owner-occupant loans are readily available. Get a modest house and a couple of roommates. Do it right and their rents will cover all of your housing costs, maybe more. Go talk to lenders and find out what you're qualified for.

It's definitely not too early for you to start putting the pieces together to close on a deal. These things take time, start learning and putting one foot in front of the other!

2 Reply

Josue Vargas

Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes

6y

Could you explain in more detail your situation? "I own one Condo that I’m hoping to start renting out within a year."

Do you have a mortgage and you are living now in the condo and you want to move out and rent the condo within a year? How much debt and repay time, estimated equity, etc., how much estimated cash flow if you rent it our?

0 Reply

Jordan J. Osborne

OP

Investor · Springfield, VA · Member since 2019 · 14 posts · 6 votes

6y

@Josue Vargas Yes! My apologies for the vagueness. We have a mortgage on a condo right now that we live in. Hoping to rent it out this May. Estimated rent would give us about $200/month in cash flow. We don’t have too much equity since we just refinanced a few months ago to get a much lower rate.

My debt is about 15k and it’s hard to say a pay down date. As a student, I make less than 24k/year. If that was constant, it would take a few years with my current expenses. I’ll know more about that when I graduate and get a job.

2 Reply

Josue Vargas

Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes

6y

Originally posted by @Jordan J. Osborne:

@Josue Vargas Yes! My apologies for the vagueness. We have a mortgage on a condo right now that we live in. Hoping to rent it out this May. Estimated rent would give us about $200/month in cash flow. We don’t have too much equity since we just refinanced a few months ago to get a much lower rate.

My debt is about 15k and it’s hard to say a pay down date. As a student, I make less than 24k/year. If that was constant, it would take a few years with my current expenses. I’ll know more about that when I graduate and get a job.

Thanks for the add info.

The $200/month additional income helps a bit. If you move-out and new debt payment is equal to the rent, plus a buffer (savings) to keep you afloat, then you should talk to a mortgage lender (not banks, but mortgage lenders). I think you should learn more, but you are in the right track, I would not precipitate too much. You have a lot of time to figure it out unless your new job is in a different city, etc. and you have to move out. That is another story of how to manage properties at distance or out of state, etc. FYI, most markets in US have cycles, mainly due to school schedule or booming economy, or very high living cost and high taxes in certain areas. Summer is the best, fall-winter after Thanksgiving is the second best. So, find a good broker/realtor, talk you your lender, figure out your situation, then start looking for properties! But always keep learning and becoming familiar with your market.

Good luck!

1 Reply

Scott Anderson

Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes

6y

In my opinion it’s never too early to househack. Run your numbers, If you can get the loan buy the property.

Use all proceeds to pay down debt using Cashflow index.

1 Reply

Mark S.Pro Member

Rental Property Investor · KY · Member since 2013 · 1k+ posts · 540 votes

6y

@Jordan J. Osborne, look to complete a balance transfer on those credit cards to one with 0% and pay them off ASAP.

2 Reply

Craig CurelopBusiness Member

Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes

6y

@Jordan J. Osborne - I would talk to a lender and see what you can afford. Once you figure that out, you can then start running the numbers on the house hacks you'll be able to buy.

In almost all instances, a house hack will generate you a much higher return than 15% on your credit cards. Even mores so if you are using a VA loan.

So if you are comfortable and can afford to house hack, I would highly recommend it. Put your savings from your house hack into paying down your credit cards. You'll pay them down much faster this way.

[email protected]Podcast Guest on Show #350

1 Reply

Shane H.

Member since 2018 · 433 posts · 208 votes

6y

Why not house hack a quad?

0 Reply

Nicole Heasley Beitenman

Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes

6y

You would be crazy to not house hack when you have CC debt. Or student loan debt. Or any kind of debt.

Buy house. Live for free. Use income that would have gone toward rent to pay down CC debt instead. It's a no-brainer.

5 Reply

Jordan J. Osborne

OP

Investor · Springfield, VA · Member since 2019 · 14 posts · 6 votes

6y

@Shane H. I haven’t looked much into it but I imagine I would struggle to get lending for something that expensive. I’ll definitely look though!

0 Reply

Jordan J. Osborne

OP

Investor · Springfield, VA · Member since 2019 · 14 posts · 6 votes

6y

Thank you all for your inputs here! They are greatly appreciated.

0 Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

6y

@Jordan J. Osborne not enough information. What's your current DTI? Now what's your DTI with your expected starting salary post graduation? How much credit card debt (total) are you in? You really should pay that off first before borrowing more money for another house. Good way to extend yourself real quick

0 Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

6y

@Jordan J. Osborne you should pay off the credit card debt before buying another house. Think like rich people. Do you think rich people have credit card debt? You know the answer to that question.

0 Reply

Shane H.

Member since 2018 · 433 posts · 208 votes

6y

Originally posted by @Jordan J. Osborne:

@Shane H. I haven’t looked much into it but I imagine I would struggle to get lending for something that expensive. I’ll definitely look though!

The VA allows you to use rental income from owner occupied multi families so it could turn out to be easier to obtain financing.

1 Reply

Matthew Brown

Duluth, GA · Member since 2017 · 11 posts · 4 votes

6y

@Jordan J. Osborne I would definitely get a place and house hack if your wife is cool with roommates

1 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

6y

Originally posted by @Jordan J. Osborne:

Hey everyone!

I’m curious to hear from you guys about whether I should wait to invest in real estate until I get better financials or if it’s not a bad idea to start now.

Background:

I’m a 25 old college student, graduating in 7 months, with political science and economics degrees. I’m using the GI bill so I’m not accruing student debt. I own one Condo that I’m hoping to start renting out within a year. I didn’t start getting my finances in order until a month ago.

My wife makes a decent salary and is the current bread winner in our household.

Dilemma:

I have a large amount of credit card debt, luckily with relatively low APR's (13.499% & 7.99%), but it would probably take me a year or two to payoff when I get a decent job. I also have relatively small savings right now.

Is it irresponsible for me to search for a duplex using my VA home loan (so I can put 0% down) and start house hacking with OPM? Or is it not the worst idea to start early?

Thank you very much for any and all input here!

My advice is pay off the credit card debt first. You need an emergency fund to own a home. Just because it is 0% down payment doesn't mean there is no expense with moving or home ownership. A house always costs money for even simple things like blinds, decorating, repairs or even just the cost of moving. On the flip side, you need cash reserves to rent out your old property. The cash is needed for things like vacancy or repairs.

Your priority right now should be graduating and securing a good job. Then focus on getting established in your career. Use that time to pay down debt.

One year isn't going to make any difference in your investing career, but it will give you time to strengthen your position before you start investing.

1 Reply

Michael Robbins

Property Manager · Henderson, NV · Member since 2018 · 501 posts · 317 votes

6y

I would payoff all the credit card debt before making any investments in real estate or anything else.

0 Reply

Account Closed

Rental Property Investor · Twin Cities, MN · Member since 2019 · 122 posts · 150 votes

6y

@Jordan J. Osborne

Use your VA loan. It's a no-brainer.

Buy a duplex or triplex.

Learn the business.

Sell your condo if the HOA is detrimental to renting it with positive cash flow.

Use the BP calculators. Never go off the cuff.

If you make some money on the condo, pay off the debt

1 Reply

Jordan J. Osborne

OP

Investor · Springfield, VA · Member since 2019 · 14 posts · 6 votes

6y

@Larkin Adey That is actually very helpful. I've debating on renting vs selling the condo because of the HOA. I need to give the calculators a good look and spend more time searching for a deal.

0 Reply

Dan Chavez

Sunnyside, WA · Member since 2016 · 1 post · 1 vote

6y

@Jordan J. Osborne I would say start now! Start growing yourself and networking with like minded people in the business. Trust me it will help you when things get tough! This is a great business to be in but like anything it has its ups and downs.

Here’s a few places you might consider starting.

1. Wholesaling

You can start with no money and grow as you go by using the money from any closed deals to reinvest in marketing.

2. Leverage Hard/Private Money

I know you mentioned some debt hurdles you might encounter when using conventional lenders. Many hard/private money lenders overlook that and some even lend with no skin in the game, although not common without a prior relationship and or track record.

3. Partnerships

There are a few investors out there willing to do an equity split. You bring a great deal along with a ton of hustle and grind and they bring the capital and expertise.

By the way the house hacking option using your VA loan I think would be a great option for you. I'm not sure how similar it is to an FHA loan but you may be able to get a small multifamily 2 to 4 units on your first deal!

Good luck to you!

1 Reply

Koki Agata

Member since 2019 · 67 posts · 21 votes

6y

Hi!

I am no financial expert, but perhaps it depends on your mindset and your wife's opinion?

I myself would personally feel more comfortable getting rid of the debts first, especially if it is around 13% APR, but if you and your wife feel comfortable with having debts, then why not go for it, especially if you can qualify for VA loan.

Maybe you can take HELOC on your condo, and pay off your debts with it? Again, depends on the amount of the debts, and equity you have on your condo, your mindset, and your wife :)

Good luck!

Cheers

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Am I Starting Too Soon?

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