New, Part-Time Investor in Spokane, WA

New Member Introductions
9yFollow

New, Part-Time Investor in Spokane, WA

Kevin Graham
Spokane, WA · Member since 2017 · 7 posts · 5 votes

Hello, BiggerPockets Community!


After weeks of combing through this site and becoming absolutely amazed with the insights and knowledge that you all have to offer, I figured now would be a great time to write one of these. 

I am a 24-year-old aspiring investor in a relatively small market (the entirety of Spokane County has less than 500,000 residents). After reading a book written by another investor in my area, titles "Living At Zero", I decided that I would be doing everything I possibly could to generate enough passive income per month via rental properties to exceed my expenses. I currently work as a production manager at an advertising agency, and I will soon be a 25% partner of the firm. I also write music for TV/film/video and generate a modest supplementary income from that, but I want to have a cash flow to fall back on/fund bigger and bigger deals. 

My rough plan in a nutshell:

- Save as much of my active income as possible for a down payment on a multi-family unit. I am currently able to save roughly $12k - $15k per year, and my plan is to have around $30k-$35k in capital to get my first deal off the ground. I am planning on hitting this mark within the next two years. I own my home and have equity in it, and I have a few emergency credit cards, but I don't want to tap into any of this just yet. 

- As I'm saving my capital, I will use every resource I can find to further educate myself on all aspects of buy-an estate investing. I will do everything I can to get a sense of what my local market is like, and try to network to form relationships with lenders, property managers, lawyers, real estate agents, other investors, etc. I figure there's no sense in me even saving up for this if I won't be educated enough to find and execute the right deal.

- Based on calculations of about 50 multi family units in my area, and assuming the market continues its current rate of growth and Cap Rate, I believe that I can purchase a property (most likely a duplex) with the aforementioned capital that will cash flow around $400 - $500 per month after PITI, expenses, property management, vacancy, and maintenance/CAPEX.

- Use this new rental income, along with the same active income I've been saving all along, to purchase property #2 within a year of the first. 

- Repeat until I have 5-7 properties and my cash flow reaches approximately $3000 per month (which is about what I take home from my active income).

- I'm still working on my plan after this point. Right now, the thought of having $3000 per month in passive income seems like a dream come true to me, but I also know that in the grand scheme of investing and to many members on here, that's pocket change. Maybe I'll use this cushion to focus more time on real estate investing, maybe I'll try to 1031 a few properties for larger properties, or maybe I'll be content with what I've got. 

- I also think that the combination of cash flow, tax shelter, loan amortization, and general appreciation is a far better long-term hedge against inflation than the stock market, and is a viable retirement plan. 


So there it is. I hope that you will look at this, shoot holes in it, and tell me why it won't work and what I should really be doing. Is it ridiculous to wait two years just to raise the capital for one deal? Should i be looking to partner, or use the equity in my home to get started quicker? I have done enough homework to get to this point, but I'd be naive to think that I couldn't use some pointers and guidance from those much more experienced. 

Also, if there's anyone else on here in the eastern Washington area, I'd love to connect with you as well. 

Thanks in advance for your time, everyone! Your insight on this site is truly amazing. 

- Kevin Graham

2Reply
13 views

7 Replies

Jump to latestLatest
  • David Clinton III
    Real Estate Coach · Coeur D Alene, ID · Member since 2013 · 458 posts · 295 votes
    9y

    @Kevin Graham, weclome to BP!

    I like your plan. Remember to be flexible. I've changed and honed my plan a dozen times over the last 4 years as a full-time investor.  It's a fun game, and not particularly easy. But if you're cut out for it, very enjoyable.  If you ever wanna grab coffee and talk shop, let me know. I'm happy to help you get started with contacts, connections, strategy, and a bit of experience!

    0Reply
  • Kevin Graham
    OP
    Spokane, WA · Member since 2017 · 7 posts · 5 votes
    9y
    Originally posted by @David Clinton III:

    @Kevin Graham, weclome to BP!

    I like your plan. Remember to be flexible. I've changed and honed my plan a dozen times over the last 4 years as a full-time investor.  It's a fun game, and not particularly easy. But if you're cut out for it, very enjoyable.  If you ever wanna grab coffee and talk shop, let me know. I'm happy to help you get started with contacts, connections, strategy, and a bit of experience!

     David,

    Thanks for the reply! And you're right; I totally understand that this plan will probably change as I become more sophisticated and educated in my investing career. I appreciate your offer and I'll absolutely take you up on that offer and buy you a coffee. I'll send a PM. 

    0Reply
  • Randy Hallowell
    Investor · Walla Walla, WA · Member since 2016 · 50 posts · 19 votes
    9y
    Kevin Graham Welcome to BP! I think it's a great plan. Unfortunately it's the same plan that most people have, so you will have to hustle to get those deals. Like David Clinton III said be flexible. Most great opportunities come in unorthodox ways, be willing to think out of the box. If you aren't already listening to the podcast, do it! So many people doing it so many different ways. I'm working up in Spokane and am occasionally free on Wednesday evenings if you are interested. Cheers!
    0Reply
  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    I'm not sure if this would interest you, but there is another way to get where you want to go, just a little quicker? You could buy as an owner occupied 1-4 unit with as little as 3.5% down using an FHA mortgage. You occupy one of the 2-4 units for a min. of one year, then rinse and repeat and go buy another 1-4 unit as owner occupied. You would rent out your current residence or sell it? When you move out of the 1st 1-4 unit, you then can rent out the unit you were living in. This is house hacking as @Brandon Turner has mentioned many times. You can use this technique until you get to 10 financed properties. Keep in mind that a 1-4 unit only counts as 1 financed property. 

    When you get to 10 financed properties, you have different options. There is no limit on the numbers of financed properties if your buying a new owner occupied property and will turn your existing owner occupied property into a rental. 

    If your buying a rental and have maxed out at 10 properties, you can open a Sub S and move a property or two into the Sub S and get portfolio or commercial financing on those and then they wont count in the 10 financed property rule, so you could buy your next rentals via financing available through Fannie Mae. Rinse and repeat and buy as many properties as you want to buy!!!

    0Reply
  • Kevin Graham
    OP
    Spokane, WA · Member since 2017 · 7 posts · 5 votes
    9y
    Originally posted by @Randy Hallowell:

    Kevin Graham Welcome to BP! I think it's a great plan. Unfortunately it's the same plan that most people have, so you will have to hustle to get those deals. Like David Clinton III said be flexible. Most great opportunities come in unorthodox ways, be willing to think out of the box. If you aren't already listening to the podcast, do it! So many people doing it so many different ways. I'm working up in Spokane and am occasionally free on Wednesday evenings if you are interested. Cheers!

     Randy,

    Thanks for the response! The podcast is absolutely amazing. It's taking me a bit to get through it because I keep re-listening to episodes and still I'm pulling new things out of it!

    I appreciate the insight about finding deals. I've always assumed that it would NOT be as easy as just scrolling through Zillow, so I'm eager to explore the market and build a network to familiarize myself with those other methods of finding the right deal. I'm mostly free on Wednesday evenings as well; I'd love to chat and talk shop at some point. 

    0Reply
  • Kevin Graham
    OP
    Spokane, WA · Member since 2017 · 7 posts · 5 votes
    9y
    Originally posted by @Kevin Romines:

    I'm not sure if this would interest you, but there is another way to get where you want to go, just a little quicker? You could buy as an owner occupied 1-4 unit with as little as 3.5% down using an FHA mortgage. You occupy one of the 2-4 units for a min. of one year, then rinse and repeat and go buy another 1-4 unit as owner occupied. You would rent out your current residence or sell it? When you move out of the 1st 1-4 unit, you then can rent out the unit you were living in. This is house hacking as @Brandon Turner has mentioned many times. You can use this technique until you get to 10 financed properties. Keep in mind that a 1-4 unit only counts as 1 financed property. 

    When you get to 10 financed properties, you have different options. There is no limit on the numbers of financed properties if your buying a new owner occupied property and will turn your existing owner occupied property into a rental. 

    If your buying a rental and have maxed out at 10 properties, you can open a Sub S and move a property or two into the Sub S and get portfolio or commercial financing on those and then they wont count in the 10 financed property rule, so you could buy your next rentals via financing available through Fannie Mae. Rinse and repeat and buy as many properties as you want to buy!!!

     
    Kevin,

    I really appreciate the response! The suggestion of doing a house-hack strategy has been made before, and I've done a bit of looking into it myself. The idea of getting into that first property faster via an FHA mortgage is definitely a huge plus. I'd have to discuss the strategy with my better half a bit more before we seriously considered it, but it's a viable option for me at this point to speed things up.

    The concept of the Sub S, hough, is very new to me, so I'm glad you brought it up. I had been wondering what an investor does when they've maxed out their conventional loans options at 10, and it's good to know that there are other ways to circumvent that issue than looking at high-interest hard money loans or having to buy properties outright. I'll be researching Sub S in detail. 

    Thanks again for the insight! 

    0Reply
  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Kevin Graham here are the actual Fannie Mae guidelines. You cant do the same things with an LLC as you can with A Sub S or C corp.

    See below from the reference guide for FNMA multiple financed properties. If they own 25% or more of the LLC or partnership then it would count.

    Type of Property Ownership to include in Financed Property Count:

     Joint ownership of residential real estate. (This is considered to be the same as total ownership of an individual property).

    Note: Other properties owned or financed jointly by the borrower and co-borrower are only counted once.

     Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner

    of the corporation; however, the financing is in the name of the borrower.

     Obligation on a mortgage debt for a residential property (regardless of whether or not the borrower is an owner of the property).

     Ownership of property that is held in the name of a limited liability company (LLC) or partnership where the borrower(s) have

    an individual or combined ownership in the LLC or partnership of 25% or more, regardless of the entity (or borrower) that is the

    obligor on the mortgage.

     Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined

    ownership in the LLC or partnership of less than 25% and the financing is in the name of the borrower.

     Ownership of a manufactured home and the land on which it is situated that is titled as real property

    Type of Property Ownership NOT to include in Financed Property Count:

     Ownership of commercial real estate.

     Ownership of a multifamily property consisting of more than four dwelling units.

     Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner

    of the corporation and the financing is in the name of the corporation or S-corporation.

     Ownership in a timeshare.

     Ownership of a vacant (residential) lot.

     Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined

    ownership in the LLC or partnership of less than 25% and the financing is in the name of the LLC or partnership.

     Ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free