1 deal down. Real estate investing with kids?

Question

My wife and I bought our first property in 2021 for 65k. We spent 30k of our own money rehabbing, lived in the property for 3 years, did most of the work ourselves, and sold last summer for 195k. Obviously, we want to do that again.

My kicker is that we now have a toddler and another kid on the way. We bought a foreclosure and are living in it currently and are making it our forever home due to the location. We are on my income only now due to the kids, and have little to invest at the end of the month.

We have 40k in the bank and 100k equity in our current house (but we can't afford a larger payment on our current residence). We could make a decent down payment with the 40k, but due to us having little money left over at the end of the month, I'm worried about buying another deal with minimal cash left over after the down payment and not having two mortgages. I'd love to move into another fixer upper for two years so we could flip tax free or live in for long enough to use our FHA loan. However, my wife loves our current house and just isn't down with living in another fixer upper with two small kids (I still have hope of convincing her though!).

How do we get back in the game while minimizing our risks on one income and with two kids?

Nate Williams · Answer

Thanks for your response, Wale. Those are great options that I will consider. I especially like the BRRRR rental. Thanks again!

Caleb Brown · Answer

The ideal situation is you guys updating and moving. Then set aside the equity to invest outside of a primary home. Then use the equity to continue investing without having to move into each property. This is not ideal but financially the best path. With 40K you can tackle a property using hard money(flip or BRRR) BUT 40K can be eaten up quickly. With you having experience that helps. Having 1 toddler and another on the way you'd want to have money set aside and financially safe. Other then that you can sit tight and let your primary appreciate, save more and explore pulling a HELOC to tap into it.

Eric Blair · Answer

Before I comment, understand I only have one property and am totally NOT a professional

But that being said, I'm kindve like you. I've got kids and a wife and we don't really want to move over and over to fix build our properties. It's too much. Plus I need savings for emergencies. So we are staying put until I can just save enough to buy a flip/ rental. Just my 2 cents

Nate Williams · Answer

My older brother says now is the time to sacrifice and build a business. He’s 43 with 4 kids. We have our second coming in June.

I’m off work all summer since I’m a teacher. We have a contract with a fixer upper, and I plan to do most of that myself our summer. However, live in fixer uppers seem like a great option for y’all. We are in a home we love, so we aren’t willing to move. If we weren’t though, I would be trying to do exactly as you-rent out my current residence and find another fixer upper to do while I live in it.

Courtney Willess · Answer

What did you and the wife end up doing? My husband and I are currently looking for a third property (we have one we rent out already, are planning on renting out our current home, and after 1-3 years turning around renting out this next home). It is definitely not easy. We have three kids four and under, plus two dogs... Ultimately I am wanting to sacrifice now to set us up for a better future. The kids are young and can share bedrooms/live in a small space... but once they are older it will be much more challenging.

Lindsay Davis · Answer

@Nate Williams,

I’m probably preaching to the choir here, but BRRRR isn’t just an investing strategy—it’s an all-encompassing lifestyle.

Given your young family (and your wife’s pleas), I imagine an approach that leans heavily on rehabs to create value would be difficult to maintain, especially as your portfolio begins to expand.

You do mention that you have $40,000 in cash, but also say that you want a bit of a cash buffer. Have you considered a slightly more hands-off strategy—-for example, something like turnkey rentals?

If you’re worried about high down payment costs, there are plenty of deals right here in Birmingham (or elsewhere in Alabama) where you can acquire a rent-ready, turnkey single-family property for between $120,000 and $200,000 or so. That means about $30,000 to $50,000 plus closing costs for 20% down, which is roughly where your budget’s at.

Any thoughts?

Nate Williams · Answer

Thanks for the response, Caleb. When you say update and moving, do you mean sell our current residence or rent?

1 deal down. Real estate investing with kids?

1 deal down. Real estate investing with kids?

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