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Updated over 1 year ago on . Most recent reply

User Stats

346
Posts
389
Votes
Josh Young
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
389
Votes |
346
Posts

How I became a real estate investor, you can too

Josh Young
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
Posted

I saved money, learned some basic rules of lending like DTI, and bought a house in 2016 using a conventional 5% down loan. I kept saving and learning, paid off my car and student loans (helped my DTI) so I could buy another house in 2020 using another conventional 5% down loan (this time I prepaid the PMI because it was half the price of making the payments). I had to move and had to show I could afford both mortgages, so I didn't max out my DTI on the 1st one and I couldn't buy my dream house either, but I became a landlord and that was my dream.

I rented out the 1st house and kept saving. In 2021 I bought a 3rd house using another conventional 5% down loan, yes I had to move again, but now I learned a little trick on how to keep my DTI down since they only used 75% of the rental income on the 1st house because I didn't have a full year of collecting rent on my tax returns yet. The trick was I put a lease on house #2 and was able to use 75% of that rental income to offset the mortgage, this gave my enough room on my DTI to qualify for house #3.

At this point house #1 had basically doubled in value since 2016 and my return on equity was too small, so I did a cash out refi and pulled $130k out. This put me right at my max of my DTI and I wanted to use the money to buy another house, but I couldn't move again right away, because you have to intend on living in your house for 12 months when you do a conventional 5% down, so I bought a condo in down town using a conventional 25% down loan (lender required this because less than half the complex was owner occupied) the 25% down also helped keep my payments down to qualify with DTI since I had to wipe out the entire PITI using 75% of the appraisal projected rent.

A few important things to consider here are: my wife and I have had consistent W-2 income, we were able to find properties that would cash flow on day 1, and we always saved to have more reserves than we needed.

We plan to continue with this strategy of buying a house every few years using a conventional 5% down loan until we get to the max allowed 10 conventional loans.

  • Josh Young
  • [email protected]
  • 802-274-8121
  • Most Popular Reply

    User Stats

    38
    Posts
    37
    Votes
    Chris Evans
    • Real Estate Broker
    • Atlanta, GA
    37
    Votes |
    38
    Posts
    Chris Evans
    • Real Estate Broker
    • Atlanta, GA
    Replied

    @Josh Young congratulations sir! You have taken the same path that my wife and I started on in 08. Keep it up because it only gets better.

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