Ok! I am ready to quit my job, I can't take it! I need...
Real Estate Investor · Oceanside, CA · Member since 2008 · 38 posts · 0 votes
To be my own boss!!! But seriously, I need advice to make this happen, at first I was all about wholesaling, but I realized as I learn more on here the more I want to be a landlord and buy and hold homes to build my net worth.
Now, I can't figure for the life of me how to approach this with my situation. I am currently taking the steps to pay down all the debt on my credit report, it was at 12k and it is down to only 4900 now :mrgreen: that's left.
But, I am living in a home where I will be the "landlord" on 3/31, I have two tenants already, I just had someone move in, with whom I work with. And once the room I live in becomes available (after the old landlord moves out) I will be taking the master bedroom downstairs.
As it stand this house is up for a short sale, and I have very little cash on me (like close to none) because I've been aggressively applying it all to paying down my debts to increase my score.
So what should I do??? I am eligible for a VA loan and was thinking that could secure this house as my first investment property, but it's not all piecing together in my mind!
HELP!
I'm not clear...you are the "landlord" but do you own the property?
One thing about landlording - it pays little to nothing in cash to you when you start so you'll need a job for a while. Most of your positive cashflow goes right back into the properties and you will need to save cash all the time for unexpected expenses. About 2 weeks ago, I had to drop off a $1,500 check to the utilities company for one of my properties. Next week, I'm looking at writing a couple thousand more in checks for consideration fees on properties I want to buy next and advertising. I know you hate it but you will really need your day job while you are building your rental portfolio.
I agree with Tim, you will probably need to have some sort of job to keep you afloat at first.
You said you were considering wholesaling, why not try to wholesale to take your current job's place while you figure out your buy and hold strategy?
AS far as your deal, whether it's a go or not, we really need more information about the house, the cost, the rent youll be collecting, yadda, before anyone can begin to analyze it.
Good luck!
In addition to the excellent advice above when you quit your job you will not be able to prove to banks that you have steady income and you will have to go stated or no-doc which is going to make it more difficult to get a loan, and next to impossible if you have less than stellar credit.
-Michael
One thing about landlording - it pays little to nothing in cash to you when you start so you'll need a job for a while. Most of your positive cashflow goes right back into the properties and you will need to save cash all the time for unexpected expenses. About 2 weeks ago, I had to drop off a $1,500 check to the utilities company for one of my properties. Next week, I'm looking at writing a couple thousand more in checks for consideration fees on properties I want to buy next and advertising. I know you hate it but you will really need your day job while you are building your rental portfolio.
Sigh, I had a few glasses of wine before posting the OP, so I apologize if it weren't clear. I am currently renting from the lady who has to move out, she isn't the owner like I had assumed. She kept the Feb rent she collected from us and didn't pay the owner.
So he is evicting her, long story short, I will now be acting in her place, dealing with the tenants and reporting to the owner of the house. He stated I am allow to move people in after I screen them and charge them whatever for rent. The total he needs each month from me is 1800, I have 2 rooms rented out for 600 each, so once I get the 3rd person, I'll be able to live rent free and he's fine with that.
That is what got me into thinking about becoming a landlord rather than wholesaling, I do understand I'll need to keep my job, but I've obviously never bought a house before and thought it would be a great idea to keep my currrent situation going. Only I purchase his house from him, keep the tenants I have and live in the bottom portion of the house while it gets paid off, and I build equity, and work toward quitting my job I guess?
He is doing a short sale so that is why I am confused as how to approach the matter. But it's a great situation, one tenant is a friend and coworker so I know she has the income to rent from me, and the other always pays his rent on him and is NEVER home, he's the perfect roommate. He works so much he only comes in to sleep and heads back out the next day.
I don't want to give this up lol!
-Michael
Noted, thanks! I am currently tackling my credit, I understand that is a must to have in this business. Less than 5k to go!
where are you at that you are able to collect $600 a month for a "room"
Oh, I see - so it's an on-site management arrangement. If you can make it profitable, I'd say go for it. Nothing like learning prop. mgmt on someone else's dime and credit. Take the time to learn it properly then you can apply it to property that you buy eventually.
Essentially what you've done is a master lease. You've leased the property from the owner for $1800 a month. Now, you're leasing out the pieces, and pocketing the difference, or, in your case living there without paying rent. I've seen this done for apartment buildings, too.
I'd try to formalize the agreement as a master lease with subletting allowed so that you don't get accused of bring a property manager without the proper licenses. In many areas, you have to be a licensed RE agent in order to be a property manager. Nevertheless, its not the first time I've heard of one tenant managing a building on behalf of the owner.
Whether or not it would be a good deal to buy the property is a different question. It could well be that if you bought it you would be much worse off than with your current master lease arrangement. If you own it, you take on maintenance, taxes and other expenses the owner is currently paying. It could well be more expensive and less profitable to own it.
You should check your credit scores. You seem focused on paying down your balances, but that's only a part of the story. If your scores are good, and you have documented income, the outstanding balances won't keep you from buying property. It may be better to accumulate some cash.
Jon
-Michael
Noted, thanks! I am currently tackling my credit, I understand that is a must to have in this business. Less than 5k to go!
What Wheatie states is very true. Paying down debt is certainly a good thing (especially if its high interest credit card debt), but what the banks now a days seem to be looking for is a good credit rating combined with a good debt to income ratio and a down payment. The first part is easy, pay your monthly minimums, don't close to many accounts at one, and don't open to many at once. In general and over time this will increase your credit score (please note that there are many factors involved with your credit score, these are some very general tips). The second part is a bit more tricky. Having debt will not prevent you from getting a loan, nor will it lower your credit score (unless you don't pay at least the minimums due each month). Take a look at your debt/income ratio and if it is decent then I would set aside some of the cash to help with the purchase of the investment, and use the rest to make regular payments on the debt. Once you have enough cash stored away you will have the down payment.
Hope that helps!