New Investor/BP member looking for advice.

[Breyan Miller]

Hi everyone and TIA for reading this, my name is Breyan (Bre-on) and I am new to BP but so far am loving the forums and podcasts. First a little background on my wife and I. We are both 28 years old, both currently work in Healthcare (she as a RN and myself as an Administrator), have a three year old daughter and currently live in Phoenix metro area. After talking about it for some time now, we have finally decided to jump into Real Estate Investing. Like many other first time investors, I have read the books, stalked blogs and forums but actually doing it is different than reading about it. We have decided that the buy and hold strategy is the route we would like to go. 

Our goal isn't to get rich quick but to slowly build our networth while creating an additional income stream. We would like to buy in areas within 30 mins of us, but he issue we are facing is deciding what is the best way to purchase the property as we would need a 20-25% down-payment if done through financing. We currently have about 200k in equity (we owe 382k and home comped at 580k) after only being a year old and have thought about tapping in it through a HEL or HELOC in order to get a down-payment. Would anyone recommend this approach and if you have done it yourself, how did it workout for you or would another approach be better? We also have about 75k between our savings, stocks and retirement accounts.

Our other dilemma is if it wise to buy RE in this current market? Homes here in Phoenix have jumped up significantly in price due to low interest rates and a shortage of homes on the market. What we are seeing are bidding wars, OOS buyers with cash offers and most homes selling above asking price. What advice would you give to finding a deal in this current market? 

Lastly, we have been debating if we should go the LTR or STR route. Anyone have experience with both in the Phoenix area? Our third option would be to turn our new property into a grouphome (we started a grouphome business last year and our currently in the process of opening up a second location). We currently lease the properties for our business, and although we want to keep the two investments separate, we could buy a property and lease it to our business. This wouldn't create cash flow but it would save our grouphome money from the lease side, while building equity in our new property and provide us some tax advantages.

Any and all feedback, suggestions or help is welcomed. Thank you very much!

[Kyle J. Cooper]

@Breyan Miller

Great work so far you've done the heavy lifting and are coming from a position of financial strength! I wouldn't touch the stocks or retirement accounts, keep those invested(most in the F.I. community would suggest low cost index funds). 

Using equity in your personal residence is something many would suggest, especially if you're wanting to put more towards a down payment or even buying properties for cash, though I've never personally done this. This option would be much quicker than simply saving for that down payment on a LTR. You have many options based off your financial position, you could house hack by purchasing a duplex/triplex/fourplex and live in one of the units. This would eliminate your housing expense or minimize it(I believe Phoenix is a relatively HCOL market). You could even get more creative with it by renting out some of the units to long term tenants as well as short term through Airbnb or VRBO!

Using your equity to BRRRR a property might be the most efficient use of your funds. Buy a fixer upper with cash do a full rehab and force appreciation, rent it out, then pull your money back out and do it all over again. This strategy would accomplish your current goal of obtaining LTR properties and also being able to recycle your cash indefinitely(at least, that's the goal of a successful BRRRR). Your last comment sounds interesting and honestly it's going to come down to you and your wife getting on the same page and getting clear on your goals. Hope this helps! Cheers!