What would you do in my shoes? 🤔

Question

Okay yall! What would you do in my shoes? I want lots of opinions and reasons why! Let’s get a discussion going.

I’m 23 years old and married, and we have worked extremely hard saving over the last couple of years. I’ve been reading books and listening to bigger pockets like a mad man. I’m so hooked on real estate. We’ve been blessed to have put aside about 80k for rental property investing. I’ve walked through a few homes with my realtor and have put in one offer. I look ever morning on Zillow, realtor.com and at listings I’m sent and run the numbers.

We are in the Utah county market and my wife and I are hoping to house hack at least the next 3 years as we finish up school. We expect to continue saving at the rate we are and have 80k each year to re invest into real estate. Typical rent for single room is $500 and for families anywhere between $1100 and $1800 depending on rooms and bathrooms and whatnot.

Where do you put your money? How frequently are you buying a home? How are you buying properties at 80% market value?

I’d love to hear your thoughts and plans in this scenario! Comment below please. I am all ears there’s still so much to learn and this is a great place to learn from all of you. Thank you!!

JD Martin · Answer

If I was 30 years younger and doing this from scratch again, when I was in college I would have bought a duplex/triplex that needed work with an FHA (or my VA loan as a vet), lived in the crappiest unit, fixed and rented the other 1/2 units out, then fixed my unit, moved into my van and rented my unit, then refinanced and did it again. I would have aimed for 1 duplex/triplex per year of college, such that I had 8-12 units by the time I graduated (well, in my case 15-21 units since I have a PhD). Then I would have worked my career, let compounding take over, and probably cruised from there.

Christopher Nehren · Answer

I live in Utah County myself. For Utah in general right now it can be really hard to find a deal because of the insane appreciation the state has seen over the past year. 20%+ for single family and 30%+ for multi-family! I would say that the best scenario would be to buy something that is already built out and permitted with some type of ADU or mother-in-law. This is save you time and money because a handful of the cities in Utah County are increasing the cost of filling for those permits aside from the fact that it can take up a lot of time. I personally work with a lot of wholesalers and buy a lot of what they have for my clients. If you have an agent, I would see what connections they have in that regard but there are definitely deals on the MLS and waiting to buy is going to be the biggest thing that slows down your game plan.

Also, I believe the Fed is going to start tapering interest rates in November so waiting could really end up costing you a lot more than waiting for the perfect 80% deal.

Kim Gibson · Answer

If you can find a fixer upper- not a complete gut, you could get a 203k FHA loan, its like a construction loan so the bank will give you the financing to fix up the place.  I would aim for a house with a basement apartment or mother in law.  Live in the apartment and rent out the rest of the house by the room.  I believe BYU changed the housing requirements, so single students can live anywhere, not just campus approved housing.  This could be a great opportunity for you.  I know Utah is a really competitive market,  set your budget and dont get into something that depends on the renters to make the mortgage payment.  Decide if you want to have students as your renters or families/single professionals and search accordingly.  Utah county has lots of tech jobs and so you may be able to get more per room if you avoid the student rentals.

Also,  dont spend every last dollar you have for the downpayment,  have a reserve.  Homeownership can get expensive.  Lots of surprises.  When I bought I had a list of must haves.  Cheapest house in the best neighborhood you can afford.  All the right things wrong with it ( needs flooring and paint vs bad foundation and roof damage).  Buy a house someone else would want to buy ( think long term resell ability).  Buy a house no older than you, I know this one is hard...you may be able to push to 1980 and newer.  Then you avoid major updates/problems.

Good luck.

Ned Carey · Answer

@Calvin Schofield welcome to BP.

With that kind of money to throw at real estate you should do quite well. Keep in mind especially now the best deals are off market deals. I have only bought perhaps half a dozen listed properties but I have done well upwards of 500 deals.

Right now getting properties at below market prices is tough. The best way to build some equity is buy fixer uppers and add value by renovating. If you do this right, when done you should be all into a property a solidly below market value.

If you haven't heard the term BRRRR look it up here there is a ton of info about it.

Theresa Harris · Answer

If you are both in school, will you be able to get a mortgage?  If so, find a place with a suite and move into the suite and rent out the main part of the house while you live in the suite.

Keep living like you are students even when you get jobs.

Calvin Schofield · Answer

Thank you everyone who has replied! So much to learn and consider here. The goal is to close by the end of December on a property especially since December and April tends to be the time where there is more shuffling around. And @Christopher Nehren you’re right rates are rising fast which means more money spent.

Where is the balance? Most decent deals I’m seeing are barely breaking even for monthly cash flow after i move out and are still being sold over asking price.

thanks

Kevin Romines · Answer

Obviously you have a solid income while in school, so you it is likely you can get an FHA or even an FHA 203K loan. However, the 203K loan is a specialized loan that will beat you up and spit you out if not done by a loan officer that only does those loans. Its not for just any loan officer that thinks they can get it done but hasn't really done many of them. It can be a 3-4 month process to close that loan and I don't believe the average seller will wait that long.

So what is the solution to those issues, Hard Money. However hard money is not for an owner occupied loan. You will even sign a disclosure assuring you will not owner occupy the property. But once you have it refinanced into an owner occupied loan, then you can and must live there. So from that aspect, hard money works. You can close on a hard money deal in 5-10 days. The hard money lender will require a down payment of 5-20% down, but from there they will fund the rest of the purchase and all of the rehab. You will get 6-12 months on the term, interest only, so these are not designed to be long term loans.

The hard money lender will not allow you to get into a property that doesn't fit their criteria, because they don't want you to lose money and or worse yet, for them to be in a position to foreclose on you.  The key to success on these deals it o accurately estimate your rehab budget and the time it will take to get the rehab done. You need to build in a 10-15% contingency into the rehab budget, you never know what you will find once you start opening things up.

When you get to the refinance, if a cash out, you can up to 80% Owner occupied and 75% Non-Owner Occupied. You want to cash out to get your money back out of the deal so you can rinse and repeat as many times as you want to.

If it were me, this is what I would do and is what I am doing. However my group that does the flips has now moved on to doing land development and building 20 unit multis. Lots of money to be made there. But this is where I would focus my attention.

I hope this helps?

Calvin Schofield · Answer

Great thoughts and replies so far thank you!

I would love to get as many opinions as I can! I'm all ears!

What would you do in my shoes? 🤔

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