ROOKIE WITH $65K SEEKS ADVICE

[Wayne B.]

Hello All,

I’m totally new to real estate and I would greatly appreciate some direction. I would like to know how to buy a home that I can realistically afford, ideally in Central Florida – either Volusia County (North of Orlando) or Pasco County (North of Tampa). I’m also open to living and buying elsewhere. Firstly, I’m interested in purchasing a home to live in, and secondly, investing in single-family and/or multifamily rental properties with long-term tenants. 

In late January, I spent a week in Central Florida (Volusia County) looking for a property. I was pre-approved for a 30-year fixed loan. I looked at several homes in what I thought was my price range but did not make a purchase and returned to California discouraged. My original plan was to buy a move-in-ready 3 BD, 2 BA, 2 Car garage, 1,500 sq ft house in the $280,000 range, but I later found that to be unrealistic. Due to the doubled interest rates since then and my taking a closer look at my budget, it now seems that I will have to downgrade to a first home of a 2 BD, 1 BA, 1 Car garage, 1,100 sq ft in the $230,00 range, which will probably require me to be more flexible as far as the area to buy in. I have $65,000 to invest as a down payment and closing costs for a home. I have zero debt, an excellent credit score, and a stable W-2 job in Civil Service.

A few months ago, I read Robert Kiyosaki’s ‘Rich Dad, Poor Dad’. In addition to enjoying Mr. Kiyosaki’s wonderful storytelling, I learned several important things about finances, real estate, taxes, and mental attitude. There was much that went over my head, so I plan to read it again. Immediately after reading the book, I discovered Bigger Pockets and have now decided that real estate investment is the most practical and realistic vehicle for me to achieve financial independence. For now, my goal is to earn an additional $2,000 a month of passive income (after expenses) within 3-5 years from now, in addition to my regular income. Even though ‘house hacking’ makes sense financially, I’m not sure I could handle it, as I’ve lived alone for many years.

I plan to visit Central Florida again in late October to look at homes. To be honest, I’m terrified of taking the first step and seem to be full of excuses. I just signed up for Bigger Pockets Pro Membership, but am not certain how to proceed. I’d really like to have a mentor to guide me and keep me accountable, which would greatly increase the probability of success. I would very much appreciate any advice that you can offer. ​

[Kristina Kuba]

@Wayne B.

If I could do it all over again and not have a spouse and dogs, etc. I would use my FHA loan for a 4 unit building. It is more difficult to house hack later in life if you have a larger family, so keep that in mind.

For example, in Hillsborough an FHA loan can finance up to $809,150 for 4 living-units. That is only 28,000 plus closing costs, well under your budget of 65k liquid to spend. Tampa, the main seat of Hillsborough county, has seen a cool off just like the rest of the country and getting a 4 unit in that price range is attainable.

As you mentioned, you first want to buy a place to live in; this could be the perfect setup: live in 1 and rent the other 3 out to cover your mortgage and maybe even have positive cash flow. Whatever you would normally pay for rent, put that away for 2 years and then after 2 years you have a nest egg for a downpayment for your next property. Rinse and repeat.

I am also a big fan of Robert Kiyosaki’s ‘Rich Dad, Poor Dad 'and in that book taxes are depreciation and tax savings are critical. If you go the multifamily route, I would recommend doing a cost segregation study within the first 2 years to accelerate depreciation, save on taxes and increase cash flow so you can attain your next property quicker.

Best of luck!