Future Investor - Birmingham, AL

[Brett P.]

Hello everyone on BP!

I've been lurking on the site for awhile and looking at property to buy as an investment .

A little backstory: I'm 27 years old. I bought my first home in September 2012 in the Birmingham/Fultondale, AL area. I have a good job with job security. My credit score is considered excellent. I currently have minimal debt other than my mortgage payment.

I'm very interested in my first real estate investment property. I've been reading a lot about wholesaling, buy and sell and buy and hold strategies. With each having their pros and cons, I'm not opposed to either. What do you suggest to a young guy that doesn't have a lot of cash out-of-pocket to invest?

I love my job and am not looking to quit working, but am looking for opportunities to make money in real estate outside of the normal 8am-5pm workday. I am a very hard worker and have no lack of drive and willingness to put forth the effort. Making the Birmingham AIA luncheons are near impossible because of my work schedule.

What area of town would you suggest to get started in investing? I've read a lot about the Eastlake/Roebuck areas of town for good deals. Any truth to that?

Any advice would be greatly appreciated.

Thanks in advance!

[David Beard]

@Brett P. - I think it's always terrific to grab a good cash-flowing rental as early as possible so that you start your experience clock as a landlord. (Most banks and conventional mortgages require 2 years of landlording experience in order to use the rental income in your debt ratio).

Birmingham is a perfect market to pick up a $50k house in decent condition that could rent for $850. You would need just 20% down for a conventional loan, and after 6 mths you could do a cash out refinance using a new appraisal, and based on the improvements you've made, could very well get all your cash back out and repeat the process.

You can also use a Fannie Mae Homestyle Renovation mortgage to finance both purchase and rehab on the front end.

You stated that you might be uncomfortable with two mortgages. Just be prudent. Make sure that the gross rents on your investment houses are 3.5x your P&I payment and you should be in great shape with at least $200/mth of cash floor per house.

By all means, go to the RE club meeting and network, maybe you will find a solid mentor there.