How can I make this work?

Question

Hi! I'm new to real estate investing and BP (though I've lurked around before).

My question is if now is a bad time to get started with the current market, and what might be the best route for me to take with my situation?

Here are the bullet points:

* Currently living in a 2018 mobile home that's paid for.

* Self-employed, internet business. Periods of $0 monthly income but cash out six figures from time to time.

* Recently cashed out an internet deal for $250,000 (after taxes) that I'm looking to use to get started in real estate.

I'm a complete beginner with real estate. Zero deals under my belt.

Would you recommend I get an FHA loan on a new home while renting out the mobile home, or maybe stay and start looking for deals in my area (Clanton, AL)? Any advice is welcome and appreciated.

Thank you.

Ned Carey · Answer

@Wesley Oaks if you live in a mobile home park you may be able to do mobile home deals within the park. Look up "Lonnie deals"  Lonnie (Scruggs,  I believe) was famous for buying cheap mobile hoes and selling them with owner financing.

Steve Vaughan · Answer

I stayed in a paid for mobile for 5 yrs on purpose while I built a rental portfolio with no job.

Off-market seller-financed plexes were my go to.

Welcome to BP!

Napoleon DeCiutiis · Answer

Wesley,

Welcome to the best game ever.  The best time to invest was yesterday.  Everyone has a "I wish I never would have sold that house" story!  I would recommend reaching out to @Raymond J. Rodrigues to see lending options, and look at the established rental markets that will give you the best return.

Logan M. · Answer

Focus on Seller Financing deals

Lending from the bank is fine but if you get low to no downpayment properties the banks won't matter.

I have had a lot of luck with off-market and commercial real estate.

Specifically, small MHPs. Get a few good ones and you will have the cash to roll.

Rachel H. · Answer

@Wesley Oaks Many investors rent out their first homes and get into new ones. It's a natural progression and good way to see how transactions work when closing. With that being said, if you plan to rent out the mobile home you'd have to make sure rentals are allowed if the home sits in a mobile home park. If not and the home is out on a piece of land, then you won't have to deal with that issue.

Regarding rentals, usually the area will determine the type of clientele. So just make sure you're familiar with the types of people who live in the area and know what you're getting yourself into before you decide to rent out the mobile home and purchase a new home. If you live in the area already, you're probably familiar with the community and the people who live there. Most times, it will be their friends and family members who may be interested in renting or buying when putting homes on the market. Hope that helps!

Tyler Fontaine · Answer

It's always a good time to buy real estate. It just depends what it is. The best time to plant a tree is 20 years ago and today.

Buying a multifamily to house hack is a brilliant way to get into the game for a small amount of money upfront. Talk to a lender and see what your options are for financing given you situation.

Figuring out how to buy property is worth it. Get in touch with an accountant or financial advisor. A team member I have gets income inconsistently as well. However, she has her income poured into her business, then she has her business pay her a weekly salary so she can show proof of income and have banks lend to her. If she needs extra cash, she just bonuses herself out.

You can also see what it would take to become a private lender. Our team works with a bunch of regular people who have stacks of capital in a bank. They lend it to us for flips and other projects. They make a great return and it's pretty low risk for them.

Garrett Crosby · Answer

Welcome to the party of real estate investing! From what I'm reading, it looks like you probably would be well-suited for cash offers in the right market. Among my investors, cash has been KING lately. We have secured deals out here that have been 100K less than list price using cash alone. Lot's of motivated sellers and market fear that fuels the deals.

At the end of the day, my suggestion would be partnering with a good real estate agent who is specialized in working with investors. Read and study the craft. Pick a strategy and then get started. You can't predict the bottom of the market - just like you can't predict the top. There are strategies that work better for markets of the past that maybe don't work as well today... but likewise, there are strategies that work better today that may not have worked better in the past.

Starting is the most important step - and being on these forums asking questions is a great way to get the ball rolling.

Best of luck! Here to help in any way if you need it!

Wesley Oaks · Answer

A lot of great advice here. I appreciate everyone that's responded.

I think I will move into a new house and rent the mobile home to start.

@Adam Bartling Do you only work within TX?

William Graham · Answer

As a private money lender, I don't determine the loan based on credit scores or income for approval. The property is considered collateral for the loan.  There are a few things we will look at

1. Is it a good deal? We want you to make money on the deal, not to break even or lose money, so we will want to know your numbers. Initially purchase price, ARV, Rehab Cost. What is your exit strategy? F/F or BRRRR. We will require an appraisal to determine if this is a good deal.

2. We lend to entities, not individuals, but I am not sure about every private money lender.  Minimum an LLC, and it can be approved yesterday before applying for a private money loan today.

3. Can't be owner-occupied or anyone in the family.

Understand we are risk-based for-profit lending. The higher the risk, the more the cost in interest and points.

Loan amount: $40k to FHA cap

Term: 6 mos to 24 months

Interest: 8% - 15% generally

90% Purchase, 90% rehab not to exceed 65% LTV

General Appraisal is required. We will order that

Minimum Credit Score: N/A

Excluded states:  MN, NV, SD, UT, VT

Connect with me if I can help you or provide advice.  My wife, who I will try to get on here, does kitchen and bath CAD for GCs and Home Design Agencies.

Adam Bartling · Answer

@Wesley Oaks for someone that makes what you make in AL, I would not look at an FHA loan because getting to remove PMI almost does not happen.

So I would look at conventional financing with 5% DP.

70% of your mobile home rental will be counted as your new income for your DTI Ratio.

As long as you have 2 years of self employment or were previously employed in the same field as 2 years of relevant experience, being self employed is ok.  We are not looking at your monthly income, we will be looking at the Taxes and bank accounts.

How can I make this work?

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