Homeless homeowner seeks knowledge, advice, connections

Homeless homeowner seeks knowledge, advice, connections

Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes

HELLO, BIGGER POCKETS! Please allow me a moment to talk about. . . Me.

I've recently purchased my first property, a residential 4-plex, in Springfield, IL, and I hope to expand my budding portfolio as aggressively as my circumstances allow for the next several years.

My job is all travel and I'm still single and unencumbered, so I do not maintain a home of my own. As you can imagine, that means I have very little overhead and am therefore free to invest a significant majority of my earned income. I've quickly grown tired of my rootless existence and long for the day when cashflow from my my portfolio will at least sustain the portfolio's growth, or at best replace enough of my income so I can trade this job for something less lucrative but more stationary.

I've chosen to invest in Springfield for two reasons:
1) it's cheap. This is important because I'm currently utilizing traditional financing, and am therefore hindered by the time it takes to save for each 25% down payment.
2) I have a realtor there whom I know and trust on a personal level. She is inexperienced with investment properties, but I nonetheless chose to trust her over trusting someone of whom I no prior knowledge.

For these reasons, I will continue to buy in Springfield until:
1) the market of viable multi-families is tapped out (which shouldn't take long), or
2) I learn enough to feel confident investing in other markets with the help of other professionals.

I am very interested in hearing what advice you have to offer to a noob in my situation, getting recommendations of quality turn-key services providers in other markets, and in connecting with other people who can help me in Illinois (a finance person comes to mind first).

Thanks, BP! I'm looking forward to your responses.

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  • Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    Industry Education - the entire industry. Be sure to include laws. All laws that apply to the real estate industry, laws that apply to advertising, laws that apply to tenants, and so much more.

    Business Education

    Every investment should have a business plan. This is your roadmap to enduring success.

  • Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes
    13y

    @tom goans - Laws are a hang up for me because I do not expect to make many more purchases in Illinois and don't know where I'll be investing next. Is there much GENERAL education one can acquire on laws without being state-specific.
    Also, since my vagabond status necessitates that I am an absentee owner, I would think the laws pertaining to tenants and advertising would be the domain of my PM. Am I wrong about that?

  • Real Estate Consultant · Brighton, MI · Member since 2013 · 607 posts · 251 votes
    13y

    David Morrow

    Hi David,
    I wanted to commend you on your focus and determination. It won't be long before you can work because you want to, not because you have to. You're on the right track. Wish I knew what I know now at you're age.
    I totally understand the "trust" issue. That's why we are as transparent as possible when working with another investor.

    Anyway, I want to let you know that there is another avenue of investment that has the potential to grow your portfolio. Have you tried Seller Financing? Sometimes, it's much easier to purchase properties because you may not have to jump as many hoops or pluck down quite as much as a bank would require you to.

    Although I am a big proponent of using OPM, you may want to keep in mind that each time you apply for an investment loan you increase your debt to income ratio which could make obtaining new loans a bit more difficult.

    You're on the right track!

  • Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes
    13y

    Thanks for your input, Annette!
    I have taken a few stabs in the dark at seller financing and so far come up empty every time. Whenever I've singled out a property for further research I always ask my agent to ask the seller agent to ask the seller if seller financing is an option. Obviously, this arrangement doesn't allow me sell the high points and benefits of seller financing, so my inquiries have consistently returned a flat "no".
    In your experience, is there a better way to ask? Is there a type of seller or property who tends to be more interested in this arrangement?

  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    13y

    Hey David Morrow welcome to BiggerPockets and congrats on the 4-plex. I'm a huge fan of those property types! I definitely think you are thinking on the right track with your plan. Let me know if I can help!

    If you get bored, here's an article you may like! How to Make a Million Dollars in Real Estate: A Step by Step Path

  • Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes
    13y
    Originally posted by Brandon Turner:
    Hey David Morrow welcome to BiggerPockets and congrats on the 4-plex. I'm a huge fan of those property types! I definitely think you are thinking on the right track with your plan. Let me know if I can help!

    If you get bored, here's an article you may like! How to Make a Million Dollars in Real Estate: A Step by Step Path

    Brandon - your blog post linked above was one of the first pieces I read after subscribing here! I hope that you can help me in my quest for a mentor or mentor/partner. Sending a colleague request now. . .

  • Investor · -, IL · Member since 2010 · 409 posts · 616 votes
    13y

    Welcome to BP. If you have any questions about Springfield investing let me know, I grew up here and have my rentals here and in surrounding towns.

    Also shoot me a PM and I can give you some contacts at local banks that are investor friendly.

  • Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    13y

    Hi David, welcome to BP. I think you are on the right track with the 1-4 unit properties. Having been a former lender for 18 years, I can give you a little help in that area.

    You stated that you dont own a primary residence. You could buy a 1-4 unit as owner occupied and live in one of the units. You can do this with an FHA loan at 3.5% down payment and just plan to buy a new primary (1-4) once a year (Owner Occupied loans require 1 year occupancy). Or if you have made improvements to the property and can justify a higher appraised value, you may be able to refinance the 1-4 you just bought with the FHA loan into a Fannie / Freddie non-owner occupioed loan, and then go buy another 1-4 unit as owner occupied without having to wait the full 1 year.

    You must plan to actually live in the new property however, but so long as you do, you should be able to qualify for another FHA loan at 3.5% down with owner occpied rates of 3-5% depending. I know of many people that have done this in connection with rehabbing properties and so long as you play by the rules of the lenders, you will be able to excellerate the growth of your portfolio.

    You come out better in the long run if you dont refinance and just keep the original FHA loan in place at the low rates and just live there the prescribed 1 year then go get a new 1-4 with a new FHA loan as a primary.

    I would find a good mortgage broker / banker or any large volume mortgage lender and explain the details as I have laid them out, and they can give you the details of the loan guidelines and how best to approach all this.

    Good luck and happy hunting.

  • Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
    13y

    Welcome to BP David Morrow!

    Vagabond status means you probably have a great DTI ratio and can really take advantage of conventional financing right out of the gate. Grats on the 4plex! If you make a lot of the right purchases, you'll be doing what you want for a living in no time.

    Having worked with many different realtors, here's my take. As long as your agent is aware of your criteria, she can do her job in finding deals for you. The important quality to me in an agent is responsiveness. I need an agent that is accessible, will respond to my emails quickly, run comps for me when I need them, and be on POINT when it comes to paperwork & communicating with title/selling agent. What good is an investor savvy real estate agent if they aren't responsive? I'm doing the due diligence, I'm doing the deal analysis. Local market expertise (good/bad areas etc) is another thing to look for in a good agent. Anyway, I think your decision to work with her is a good one, providing that she can deliver :)

    You seem like a real sharp guy and it's great to have you join our ranks! See you around.

  • Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes
    13y

    Kevin R. - good advice. you can bet that I will be utilizing that
    OO financing as soon as I can transition to a job that allows me to justify having a residence. Right now, no family of my own and 300 days a year on the road doesn't make it plausible.

    Like Mehran Kamari said, though, it reduces my overhead to near zero and keeps my DTI looking nice!

    Thanks, all, for your input and words of encouragement!

  • Sheboygan, WI · Member since 2013 · 107 posts · 18 votes
    13y

    If you work "out of town" couldn't another 4plex be your primary home for the other 65 days of the year and satisfy the FHA terms?

    Sounds like you have an ideal situation to me!

  • Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    13y

    Steve you are correct, you can have 2 FHA owner occupied loans out at anytime so long as you show that you had to move because of maybe a job type situation and the property has about 75 miles or more away from the original home. At least a couple of years ago, that was the guideline.

    Its been 2 years since I was in the business, so you know how those guidelines can change on a dime at times.

    A good loan office can officially answer this question.

  • Real Estate Investor · Springfield, IL · Member since 2013 · 35 posts · 7 votes
    13y

    Steve makes a point that I hadn't yet given due consideration. On the surface, it seemed unwise to "pay" to officially live in a unit that I hardly have time to actually live in. Now that I dig into the math, it starts to makes sense:

    Hypothetical quadplex for $100k
    Rents at 600/unit
    I "pay" $7200 to make one unit my primary residence.
    3.5% down FHA vs best case 15% down NOO
    15,000-3,500 = 11,500 cash saved
    11,500-7,200 = 4,300 benefit

    Suddenly, this is starting to sound like a good idea!

  • Owner / Investor · Oakwood, GA · Member since 2013 · 74 posts · 9 votes
    13y

    Great thread, I am in the same position since I work OCONUS and my company pays for my housing. I will be expanding into quads shortly, and will be reading this for information. Good luck!

  • Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    13y

    @David Morrow

    Sounds like you've got it all together and are on the right track - keep it going :)

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