I feel stuck. Any advice?

Question

Hey everyone,

I was hoping someone can give me some insight on this... So I recently moved to San Antonio for my job last August and my lease expires at the end of July.  I probably only have 5k in capital right now and will have almost 12-16k by July in a perfect scenario. There are duplexes in the area that are going for 180-200k that I can purchase via FHA.

I have one duplex in Chicago that is currently half rented. I'm waiting on the property management company to rent out the other unit so it can be fully cashflowing (two weeks now). But basically, I feel that it's going to be cutting it really close. I know I'll be able to afford the mortgage payments of the duplex because it'll be the same price and maybe cheaper than my current rent payment.

Either way, I feel stuck. My lease ends at the end of July and I'm waiting for my first unit to get rented out by the property management company of my first property and I only got 5k in down payment money right now. I haven't been motivated in real estate but I recently got remotivated and ready to get back in the game. I feel once I get my duplex I'll have my confidence back and get ready to grow. Anyone ever been in this situation? What did you do?

Kevin Sobilo · Answer

@Tony Sawah, what are your options with the rental you currently live in? Do you have the option to go month-to-month when the lease ends? Or perhaps sign a short term lease?

If you can extend even a short time more, it sounds like you'll be in a better position to buy.

Also perhaps consider looking for a 3 or 4 unit. An extra unit would likely make it even less stressful on you over the long term and you can still use an FHA loan.

Aaron Bihl · Answer

Tony,

Welcome to BP and to San Antonio.  I would definitely agree with the folks above who cautioned you about spreading yourself to thin.  I'm sure you could get approved and I'm the guy who cringes when I hear loan officers talking about how they could get anyone approved.

That being said, I don't know your situation but there are million ways to make more money  the side and/or reduce expenses between now and July.  I moved out of my house a few months ago and now rent a room from a friend so that I could lower my expenses and make that house a short term rental.  Its not the most desirable situation but I took a house costing me 1300 a month that now makes me well over 1300 a month after it pays my mortgage.  There are also things like uber and other odd jobs you could do to increase your pay between now and then.

You have options, and its a pretty good spot to be in when you already have a cash flowing rental and are trying to figure out how to get the next.  Good luck man, let me know if I can help!

Frank Geiger · Answer

The duplex in Chicago is a new purchase? It sucks when the owner has to pay the mortgage; there's no getting around that. Only thing you can do is factor It into your numbers. At some point the property will be vacant.

The only caution I would extend to you is to keep reserves and try not to over leverage. Every property I have ever purchased required additional money to become rent ready.

I would be a liar if I told you that I bought all my properties with cash I had. I have used personal loans and LOC. It's stressful but sometimes the risk is worth the return. Depends on the level of risk you're willing to accept.

Mike Castellow · Answer

@Tony Sawah I would be careful about overextending yourself and not having any money saved for unexpected emergencies or extended vacancies. If you can save enough for down payment, closing costs, and an adequate  buffer than by all means move forward in trying to meet your real estate investment goals.

Will the duplex in Chicago cash flow and if not could you sell it for a profit and then reinvest that money in the San Antonio area?

Tony Sawah · Answer

Hello everyone thanks for your replies. So the duplex in Chicago is paying for itself currently with one unit rented. I got the property for such a good deal that I really don't want to sell it and in fact want to hold onto it. I'd also like to utilize it down the line and use a cash out refinance to purchase an even bigger property. I'm not really worried about handling expenses on a month to month scale. My mortgage on my property in Chicago is covered for by one tenant and should be fully rented this month. I guess my only worry is using pretty much ALL of my available money to get this property in a time crunch. I think I should. I know it's risky. But in six months I think I'll be stabilized and should build up a good reserve. If I want to stay on my apartment lease for one more month it's double the rent, and if I stay for three extra it's 50% more per month. Six months 35% more per month. I really think I should say screw it, buy a duplex here in San Antonio with FHA, low down. Occupy it,  the other side is rented out. Also, @kevin  trust me I would love to buy a 3-4 unit right now but FHA requires 15% down and that I don't have at the moment. Should I have been more responsible in the last six months maybe I would have.

I feel stuck. Any advice?

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