Starting out in Chapel Hill, NC

[Weston Tracey]

Hi All,

Finally ready to take action! A bit about me:

-Moved to NC and bought a primary residence in January. (Wife and kids, no house hacking for me!)

-I've been wanting to get started for years since taking an RE class in college, and have been reading and researching off and on since.

-After budgeting expenses/extras/emergency fund/401k/HSA/etc I will have $45-55K/year from my W-2 job to devote to RE.

-My motivation is financial freedom, and to open up my options in middle age (currently 25) but also for security for my family of 5.

I'm interested in buy and hold, likely via BRRRR. I'm waiting to define my specific criteria until I get to know this area a bit better, but I will definitely be using a PM.

I'll be spending the next couple months getting to know the area and hopefully going to some REI meet ups and making some contacts. I'm still defining my goals, although a lofty somewhat arbitrary longer term goal is $1M in equity 10 years from now.

In the short term since I only have 10k today, and 50k by year end, I'm torn between:

1) doing a traditional mortgage purchase this year because I'm so ready to take action.

2) waiting and BRRRRing when I have sufficient cash

3) BRRRRing with the help of hard money by year end (I'll investigate private money first)

I'd love any advice I can get, including areas to investigate in the Chapel Hill / Raleigh / Durham region, and what kind of numbers others are seeing in the region!

[Jeff Cichocki]

@Weston Tracey,

Congratulations for only being 25 and thinking ahead this way. It's really impressive.

I know I'm tainted in favor of option 3, but it's not just because I'm a lender. My business partner and I are active investors as well. Option 3 has the most flexibility and opportunity in it.

Using a HML or PML to acquire good properties that need renovation is a great way to leverage your resources. Using leverage (properly) will accelerate your goals and create opportunities you won't be able to pull off on your own easily. I help a lot of borrowers with this exact strategy. It works great.

Here's a couple of pointers/thoughts on finding a good lender to work with...

1. Find someone who wants you to succeed. All lenders want you to succeed, but what do they do to help you succeed. This is a hard one to test, but referrals are big indicator. Having a low foreclosure rate is a big indicator.

2. Find someone who thinks of themselves as your financial partner and not just a lender. If they act like a partner, they will be a great resource, guide and mentor to have on your team.

3. Find someone who is active in the market (doesn't have to be your market). A lender who understands the day to day struggles of investing can be an invaluable member of your team. They will have a perspective that few others will.

4. Find someone who will be there to help in the event anything goes sideways. Remember, they are your financial partner. Even though they don't own the property, treat them as if they did. You'll understand why when your first property goes a little off kilter and they help you fix the problem.

5. Find someone that is going to be fair & reasonable with you. Some lenders have very high fixed costs. Most of it's junk fees. Yes they need to make a profit. But, if the fees get too high, it's more likely you'll lose the property if anything goes sideways. You want to work with someone who wants to work with you long term. High fees are a good indicator of short sighted thinking; they are not long term relationship driven.

Good luck. I hope this helps you get started sooner than later.

[Ryan Groff]

I agree with Jeff. It is great to get started young, and awesome that you are about to be in a position to begin, but if your main goal is to have $1,000,000 in equity then you will not capture as much equity going the traditional mortgage route. BRRRR is where you capture that solid amount of initial equity.

There are plenty of Hard Money companies both nationally and locally that can help you, and $50,000 will be plenty to get you a great rental in the area. If you need any recommendations on hard money lenders reach out. Best of luck.

[Dawn Brenengen]

@Weston Tracey  I think any of those options could work.  A lot will depend on when you find the right deal.  If you find a great deal now, get the money and close it quickly!  If you don't find it until you have 50k in the bank, go ahead and do the traditional financing.  

We have a meetup on Wednesday the 12th in the Brier Creek area if you are interested in meeting some other people!

[Whitney Hutten]

@Weston Tracey You have great options! Congrats! While you are weighing options 1-3, I'm very interested to know your WHY of investing in real estate, how our WHY aligns with your goals, and what investment strategy meets your goals and WHY (sounds like you picked BRRRR... curious to know if you have done the heavy "alignment" lift)? Starting out fully aligned at first, will help you stay very focused and reach your goals much faster :)

[Oliver Carey]

Hard Money/Private Money can provide up to 80/85% LTV on Purchases and up to 80/85% LTV Refinances at rates starting at 4% with a great FICO and can close in 2 weeks low doc and no do options

[Weston Tracey]

@Jeff Cichocki, @Ryan Groff and @Oliver Carey

Thanks for the advice, I'll be sure to take the time to find a lender to build a long term mutually beneficial relationship with, I hope to start seeking one out in a month or so, once I've had a bit more time in the area, so I can begin the conversations with a defined plan / specific criteria / area /etc.  As I get closer to that point I may reach out!

@Dawn Brenengen Thanks! I messaged you.

@Whitney Hutten

My why: currently I'm able to provide a comfortable life for my family where we have what we need and much of what we want. However, that only lasts as long as I can and do go to work ~240 days a year. I love my job (I'm a software engineer) and have no plans to leave it, but if something happens to me (or my job) where I'm no longer able to trade my time for money then my life will likely change for the worse.  Additionally, I want to be able to have the choice to stop trading my time for money as I get older, we had our first child when I was 16, and we just had our last a few months ago, by 45 we'll have an empty house and I want to have the freedom/option to just live.

I like BRRRR because it just seems to make technical sense, as a very effective tool to leverage, and because I have quite a bit of W2 cash flow to work with I can stand the risk in the short term for the benefit of a higher return. You'll have to explain the alignment thing a bit more, as I'm not familiar, unless you're referring to goal setting by another name!

Thanks for the input!

[Greg Fitch]

Weston as a fellow Chapel Hill investor welcome to the area; It’s a nice quality of life. But you’ll find that most Triangle real estate does not cash flow positive, and with your work and family obligations you may or may not have the bandwidth to deal with traveling to distant and marginal areas.  The amount of cash you can dedicate to real estate investing represents a big commitment for you but it could take you years to accumulate funds for a sufficient deposit and renovation costs, during which time you could be chasing continued rising housing  prices. So I don’t know how well you’re going to achieve your financial goals this way. It would be a perfect amount to put into passive real estate investing (syndications). And no management headache and they’ll find markets that cash flow. I suspect you will come out ahead by time you reach my age and be a lot happier. We have a few young kids and I know what a difficult balancing act it is. Happy to discuss further offline.