Contractor · Sacramento, CA · Member since 2018 · 22 posts · 13 votes
Hey guys,
I've got a quick question for anyone who has already gotten started investing and could lend a few suggestions for my journey towards my first deal.
I'm currently paying down the last of my credit card debt and I have 8 months to go. I've talked with a real estate agent and a lender about finding a 4-plex for me and my wife to house hack as our first deal.
My question is, what should I be doing in the mean time while I'm still paying off my debt. I listen to the BP podcast and I've got some of the books on their way. I'm starting the ultimate beginner's guide today as well. I've checked out the calculators on the BP site and was planning on meeting with an owner to gather the details needed to run an evaluation.
Feels like I'm walking through the dark. Am I on the right track? what's my MINS?
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
Congrats on a firm goal and for taking steps to move in that direction.
I'm just curious why you are waiting until your credit cards are paid off. You may be able to start now.
Get with a good mortgage broker (generally banks are not good with this sort of thing.) Remember when buying rental property the income of the property will count towards your debt to income ratio. If you ask a lender what level of mortgage you qualify for you will get a low anser. If you ask an investor-friendly mortgage broker, can I qualify for this plex, they will include the income from the plex in the decision. Your borrowing capacity may surprise you.
Start looking, start analyzing properties, start talking to people. The faster you get in deep, the more you will learn.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
7y
Congrats on a firm goal and for taking steps to move in that direction.
I'm just curious why you are waiting until your credit cards are paid off. You may be able to start now.
Get with a good mortgage broker (generally banks are not good with this sort of thing.) Remember when buying rental property the income of the property will count towards your debt to income ratio. If you ask a lender what level of mortgage you qualify for you will get a low anser. If you ask an investor-friendly mortgage broker, can I qualify for this plex, they will include the income from the plex in the decision. Your borrowing capacity may surprise you.
Start looking, start analyzing properties, start talking to people. The faster you get in deep, the more you will learn.
Contractor · Sacramento, CA · Member since 2018 · 22 posts · 13 votes
7y
@Greg Scott,
Thanks! I really appreciate that advice. That’s a really good point. I’m diving in deep. I’ll look for a mortgage broker to meet with to discuss options.
I see that you’re in Detroit. All my family is back in Michigan In and around Rochester. Once I’ve made a few deals here in Sacramento, I plan on looking at Detroit for investment opportunities. I’d love to be a part of the Detroit revival. How’s the current market out there?
Realtor · Detroit, MI · Member since 2018 · 387 posts · 129 votes
7y
@Scott Vogeli congrats on your decision to get into investing. Continue to do your research and talk to as many people as you can. Also I think it’s a good idea to invest in the a Metro Detroit market
Rental Property Investor · Lake Worth, FL · Member since 2016 · 29 posts · 16 votes
7y
Congrats @Scott Vogeli! As mentioned above you might be able to get started right away. Here are some steps I would recommend to get started if you're going the "house hack" route (note I'm 4 years and ~30 units in but will start my first hack next year haha! So this what I've done thus far):
1) Where to be: Figure out where to buy your 4 plex. Remember this might not be ideally where you want to be but a balance between where profitable rentals are and a neighborhood good enough for you. Schools / Parks may drive this decision. I was able to get into a smaller town's downtown so got a mix of night life, schools and civics.
2) Financing: Talk to as many banks (conventional, commercial) and mortgage brokers as possible. If you stay with a 4 plex (or fewer units) you can do a lower down payment FHA loan (but maybe higher costs due to PMI). Or if you have money, jump into a 5 plex. Being above 4 plexes frees leners from RESPA / Fannie / Freddie so they can do more interesting things. And if you're looking at 4 units, an extra unit or 2 for 5 / 6 - plexes wont be that more complicated. I initially started with almost all 4 plexes and had a tough time getting financing after my 2nd deal because most lenders wouldn't consider my rental income until I had it for 2 years consistently. Or I had to go to investor friendly lenders who charged meaningfully higher rates or points.
3) Network: Meet as many people as possible. Go to the local BP meet up, go to local REIA meetings. Meet as many landlords and investors as possible bounce ideas off them. Take them out to coffee or lunch.
4) Vendors: Start to build and vet a vendor lists: contractors, plumbers, property managers, lawn service, etc. If you want to look at properties needing work, get a design down that you can do for ALL units so you can buy flooring, vanities, paint, countertops, etc. all in bulk and get volume discounts! (Your contractor or property manager can help with such discounts as well). Contractors will also love you if you have the same design for all units. Additionally, any excess materials, say vinyl flooring, you have from the remodeling, you can use for repairs in the future.
5) Dont mention it to tenants: Prior to having our property manager in place, we never told tenants we were the landlords. We just said we worked for them as managers. This reduces the potential for conflict.
That’s excellent! Thanks for the ideas. All great info. I’m so excited to be on my way down the road of real estate investing. I appreciate you taking the time to respond.
Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
7y
@Scott Vogeli I would highly recommend attending some multifamily events too as these will be a game changer for you and will open your eye up to more possibilities. There are several coming up in 2019 that you should check out. I will be attending the @Joe FairlessBest Ever Conference coming up in February...this is a high quality event that you should get to for sure...it's in Denver!
Realtor · Detroit, MI · Member since 2018 · 387 posts · 129 votes
7y
Yes Scott. I do presently and have for the past 20 years in Detroit. For the most part the experience has been good. The key for you is to locate good areas and get good property management in place.
Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
7y
@Scott Vogeli Great advice here. I agree, check with lenders now to see how you qualify and what you qualify for so you know what to look for.
Attend all your local real estate investor meetings which you can find on MeetUp.com and National REIA.org. I also highly recommend attending any landlord group meetings you can find. These are the people who will teach you what you need to know for your local area laws and regulations.
Plus, you may find some great deals on multi-plex units that you will not find on the MLS.
Welcome to BP, and congratulations on making the decision to invest in your future via real estate.
I have written a few blog posts that may help you get started here on BP, and with your investing. Please click on the links, give them a read, and share your thoughts in the comments.
First is a post that I feel will help not get overwhelmed with the amount of info that is here on BP:
Thanks Dan! My wife’s sister, brother-in-law and there two kids live in Colorado! We can plan to visit them while I’m out there. Thanks for the suggestion. Joe Fairless looks like a wealth of knowledge. I’m going to listen to him on the BP podcast right now. Looking forward to meeting with you this Sunday!
Definitely. I can see how out of the team, the property manager would be at the top of the list of importance for successful investing. I appreciate the tip. 20 years of investing in Detroit, you’ve seen a lot!
Thanks Karen! Great idea. I haven’t yet checked out the landlord scene. I’ll definitely check it out!
I’m on the lookout for more lenders to meet with in the Sacramento or surrounding areas to figure out more options. Feels great to be making moves. Thanks again!
Realtor · Rocklin · Member since 2016 · 128 posts · 67 votes
7y
Hi @Scott Vogeli! That's awesome that you will be househacking! I think it the single best way to get started. I wish I knew about it before we bought our first primary residence. I'd recommend using those calculators every single day. Narrow down the neighborhoods you would be interested in buying in. By the time you are ready to buy you will be really fast at analyzing the deals and then you can jump when you find the right one. If you are going to be managing the property yourself start reading books on being a landlord. Brandon and Heather Turner have an excellent book on the subject. Start educating yourself on the landlord/tenant laws of the state. Network with other investors in the area and attend meetups. Read lots of books and listen to lots of podcasts. Hopefully you'll be able to get an FHA loan for the four-plex and then you won't need to put too much down. Good luck! I'm excited for you!
Hi Kim. Thanks so much! All great ideas. I plan on working with a property management company to keep most of my time focused on growing my electrical contracting company but I’m definitely working to understand landlording for my own education. Thanks again!