Hello from Northern Virginia - looking for advice

[Matthew S.]

Hi Guys,

I found this site a few days ago and am very impressed.

I’d like to describe the small amount I’ve done so far with RE investing and get any feedback and advice you might have on my next steps.

About me, I’m a native of the northern part of Northern Virginia (Fairfax/Vienna/McLean/Arlington), just outside Washington DC. I’m 28 years old and first wanted to invest in real estate when I was about 25.

So far, I own one house myself and co-own a second rental house with a business partner. Here is how those investments look:

House 1 – Townhouse in Fairfax area I bought for approximately $430,000 one year ago. I live in it, and rent out other rooms to friends my age while managing the house. It brings in $2,100 a month in rental income, against $2,015 in monthly PITI costs (30 year fixed rate mortgage). So it's a good situation, in that I am living there while only paying utility and repair costs, which allows me to save up money for the next investment.

House 2 – Detached single family house in Falls Church area that an older friend and I bought this summer of 2013. We bought it for about $530,000, and each have a 50% interest in the property. I am the property manager for this house, since my friend lives in California. Right now we are bringing in $3,050 in rental income from renting to four young professionals. Rental demand is ridiculously strong in this area, and we could probably be renting it for significantly more, but I had to get it rented out on a very short timeframe in order to secure the loan (that's a long story). The PITI costs are $2900 a month (30 year fixed mortage).

This second house is not nearly as good an investment as we would like, but it is not terrible either. If there are any big repair costs, we may have to subsidize it, which is not good.

Questions –

1 - We had a incredibly difficult time securing financing for the second investment property (even though we put 25% down). We probably made the mistake of only looking to the big banks. Given the seemingly very stringent regulations on lending following the financial crisis (which look set to get even tighter in 2014), I am wondering how I will be able to secure additional loans to get financing for future properties. I am concerned about the restrictions concerning debt ratios, the discounting of rental income (only 75% counts), and wonder how these issues can be navigated – it seems like government and banks are making it hard for small investors to grow their portfolio via traditional financing. Surely some other threads on this site are discussing this – if you can point me to any useful discussions I would appreciate that.

2 - Also, if you are from the greater DC area, what’s your viewpoint or preference on investing locally (where it’s very expensive) versus investing in other cities or areas of the country? I am considering an investment in San Diego in the future, as well as in smaller college towns in Virginia and Maryland.

3 - Also, does anyone know about any multifamily properties in the NOVA area? I cannot find any and assume they only exist in DC. I would eventually like to have a multifamily property.

4 – How important do you think having an emergency fund / significant savings is? I have enough right now to cope for about 6 months if I lost my job. I think I should have more. Maybe I should patiently save for a significant period and build up a big reserve before doing my next property, rather than take undue risk. My time horizon is long given that I’m 28 years old.

As you might guess, I have a pretty good job in a technical field which has allowed me to save money to start buying houses at a young age. I have no debt apart from mortgages and try to save as much as possible every year for downpayments. My goal is to own at least 8-10 income-producing rental houses and to be able to retire if I want to in 12 years, at age 40 (even though I don't think I will want to, since I enjoy my regular job). I also want to accelerate the paydown of mortgages where I can and own several homes free and clear by age 40. However, the house prices in the NOVA area are ridiculous and I am not sure if I should continue investing here. Overall, my preference is strongly toward buy-and-hold to produce income (rentals), rather than flipping or wholesaling, which I regard as speculation rather than investing.

I look forward to any advice you have. If there are others on here that would be interested in discussing investing in houses in the Northern Virginia / greater DC area, please contact me. I am happy to talk over email, and perhaps eventually to meet in a public place in NOVA to discuss.