33yr old investor and my plan. Feedback welcomed!

[Tim Polk]

Goal

To achieve passive income of $120k annual within the next 7-10 years and commit to full-time rental property investing.

The Why

Have always been drawn to real estate rentals. Before purchasing my first property I moved into larger rental properties and would sublet the extra bedrooms to reduce my rental costs and sometimes even turned a profit. I did this from age 20 – 30 and loved it. Met some of the closest friends I currently have today and some of the biggest wierdos I have no contact with… It is an experience I would never change if I had to do it over, except I probably would have bought vs rented… I am also friends with the landlords I used to rent from and they are a great resource. I love the challenge, the unknown variables and how everything can come together if you work hard enough and genuinely have good intentions.

Portfolio

Chicagoland suburbs

First and only property I own is a two-unit side by side duplex I house hacked in 2015 and still live in.

Bought with 3.5% down using an FHA loan

Purchase price $345k

Rented out one side immediately for $2k and still have the same tenants, current rental income $2150/month

2017 I refinanced into a 30yr fixed conventional loan @ 4% with an appraised value of $370k which I believe was low as there was not a good selection of comps.

Since then there has been a handful of much better comps and with the renovations to the property I'm expecting it to appraise around $425k which I will have done in January 2019. If my numbers are accurate that appraisal will put me at about 24% equity removing my $89/monthly PMI.

Finances

I did run a rental property report through bigger pockets and showed cash flow of roughly $500, or $250 per door. It sounds a bit light to me but I did include 11% property management which I’m not currently using as I’m living there.

Current income from Sales job $140k annual

Fiancé, is an accountant @ $75k annual

All personal debt paid off in 2018 outside of the mortgage.

No current savings outside of 401k @ 75k combined

Able to save $3k cash monthly to put towards my future rental investments

I'm approved for another FHA loan, good credit/decent income

Target markets

Geographically I’m in Chicago but open to relocation

I am targeting multi-families until I can get into larger apartment buildings/commercial spaces. All depending on where the highest yield will be. I will not shy away from qualifying any opportunity.

I have no problem doing another house hack, it seems to be a desirable option at this moment.

On top of that I am engaged, not married. We are in this together and if I found two different multi families that were desirable I could put one in my name and another in my fiancé’s name.

Rental property knowledge

Up until recently I have relied on my gut as a compass to navigate the rental world. Did not read any books, blogs, articles etc. I conducted my own market research through Craigslist, Zillow, personal network etc. This along with previous renting experience is how I determined the juice was worth the squeeze on my first investment property. One in which I’m proud of and despite it not passing the 2% rule, I’m confident in my decision.

I recently discovered bigger pockets by looking for an audio book to educate myself further on the rental property market, so I can begin expanding in an educated manner. I am continuing my education and have dedicated an hour a day toward continued growth/education. Although I’m finding myself getting more and more excited which means going over that hourly allotment of time pretty much daily 😊

Team

Fiancé – Very supportive, also an accountant. Aspiring CPA

Lender - Does not specialize in multi units/does have okay knowledge on them, however; is motivated and has done several loans for people in my personal network, not investors.

Real estate agent – I made this mistake of allowing a dual agency on the first purchase and it was a nightmare. Need an agent

Lawyer – I have a good property tax lawyer, I do not have an attorney for evictions or any of the setbacks I have not been exposed to yet.

Insurance broker – Is not going to be on the team for long. Looking to replace for a more motivated and educated member.

Mentor – Small business owner/uncle, very success and great values. Keeps me honest and provides fantastic life advise. Huge advocate of me running my own business.

Feedback that would be useful

Any and all

Another house hack?

Start with an FHA and roll into conventional despite current rates?

Hang tight and save money?

Go big, stay small?

7-10 years a SMART goal?

Leverage 401k funds?

Leverage equity?

Move to a hotter yielding rental market?

Am I in a hot rental market and just haven’t found the right 2nd investment?

Multi-family properties appear to be highly overinflated

I am closed off to looking at multi-families only in good school districts so I can get more reliable renters. Should I expand my horizons? Is this possible head trash or do you think it’s wise to stay away from lower income areas?

Any geographic location in Chicagoland I should be putting as spotlight on due to any outlier projects such as transportation, new construction, updating etc?

FHA Clarity – I was told while buying my first house in the Chicagoland area it could only be 2 units and it had a capped lending amount?

Any thoughts on putting my name on one property and another in my fiancés name if the right deals came along? 

[Jason Belovich]

@Tim Polk - Very interesting topic. I'm a new member and will be posting a very similar situation/goals. I'm ~6 months out as I'm dead set on paying off all debt besides my house before investing. Best of luck!