New member from Las Vegas, but unsure how to start

[Stephanie Hardy]

Hello! I am super excited to become part of this group! My husband and I are self-employed with a pet business and it has gotten to a point where we are doing very little labor for the business, so we are wanting to get to our next step in life, real estate investing! My husband just got his real estate license and our current strategy is to buy rental (buy and hold) properties with the potential of doing flips later.

Our main issue, though, is because we are self-employed, banks don't like us and so getting a mortgage is difficult for us. We currently have 1 home we own & live in that would probably rent for only a few hundred more than what our mortgage is, if even that much. We have 3 small children (under 5) so trying to acquire properties being a primary residence (to get better rates) and moving every year or two would be very difficult for us. Ideally, we would stay in our home and buy rentals so we don't have to keep moving. Our business makes great money, so being able to make payments on 2 houses each month, if our second was vacant, wouldn't be hard for us. Again, with the self-employment, I think a portfolio lender might be our best option? We have about $25,000 saved for a down payment and repairs and are adding to that each month. However, I don't know if that is enough to get started.

I guess my questions are: should we try to seek out portfolio lenders? Where do you even find those? Are they usually smaller banks? How much should we have saved up at least to begin buying rental props?

Also, later on, how do you figure what the after renovation value is? From comps in the area that are finished?

Any help yall could give us would be much appreciated! I hope to learn a ton from all the blogs/podcasts/forums/etc. I love the subject of real estate and hope we can be one of many success stories!

[Christopher Brainard]

@Stephanie Hardy

Hi there and welcome to BP. 

The pod casts are a great place to start to get the basic info on investing. To answer the specific questions in your post, a portfolio lender generally lends to those who have a portfolio of properties. Since you are just getting started and you have a small down payment, I think a conventional NOO loan or OO loan (if you're willing to move) will do. I would check with the local banks first, they seem to be more flexible on their lending criteria. As long as you have 3 years of stable tax returns for your business showing reasonable profit, I think you'll be fine. When you chat with Charlie, I'm sure he can elaborate, as finance is his area of expertise.

You should save up as much as you possibly can. The more liquid capital you have, the exponentially easier life gets. In your current situation, $25k may seem like a lot of money, but that will provide a down payment for a modest rental in Las Vegas. The market here has recovered significantly from the crash and if you need to put down 20%, you may not be able to break into the Class A and B neighborhoods.

Figuring what the After Renovation Value is generally done by someone who is very knowledgeable about the market - usually your real estate agent. Once you learn the area and gain access to sold comparable, you will be able to perform this yourself, if you so wish.

Also, one note about your current primary residence - if you do intend to rent it out, don't forget to add all the incidental charges outside of your mortgage (CapEx, Repairs, Taxes, Insurance, utilities, Vacancy, Etc.). This is probably the most common new landlords make and they are baffled when they fail to make any profit.

Best of luck in your journey,

-Christopher