All Forum Posts by: Craig Moore

@Craig Moore you really come off as motivated, man. I wish I had your mindset when I was younger. I'm also researching real estate investing in order to diversify my portfolio. I'd like to briefly mention the importance of good personal finance habits in order to achieve your investment goals. Make sure, if you're able, that you are putting all available dollars to work through investments. I save well over 50% of my income each year, and invest every cent of it that I can. Like you, I want to have the ability to be a stay at home dad, or just not be reliant on a 9-5. Save as much as possible while still making sure to not deprive yourself of things you enjoy. While researching real estate, don't be afraid to also look into books about investing in general because there are a lot of common themes no matter what asset you invest in. 

With that being said, I think your best bet is the duplex house hack with an FHA loan. Maybe you can find something slightly distressed that could use some minor, superficial work. Maybe a 203k could be used. If you can have a tenant cover costs for you, then you can focus on earning more money through your day job and utilizing leverage to your advantage for your next property. Investing requires patience, so don't rush into things. Be smart and make sure you keep your risk at appropriate levels, so you don't set yourself back too far if things go south. Good luck man.

2k really is not. The gurus will correctly teach you to expect roughly 10% of your mailings to call you back. Of those you have to qualify the leads and so if your lucky, 3-5% of those folks will be qualified, motivated sellers...but you have to be a good salesperson to get a contract!!! so this numbers are small, but when you can market massively it can work.

I speak from experience here. Only when you can market consistently will you get any leads at all. Only when you market massively will you get a steady stream of leads to count on.

If you want a consistent stream of contracts, IMHO you need at least 2,000 potential sellers to mail to.  Anything less is doable but will be hit-or-miss until you can get a deal or two and re-invest in a bigger budget.

I have a few thoughts: 

1.  a duplex, 3 unit, or 4 unit:  forget about deciding which one, and focus on finding ANY one that is in an area you want to live in (or can put up with) and has a property that fits your budget and criteria.  Personally, I wouldn't do the 203k loan because of the restrictions.  they are worse now than when I did one 20 years ago.  Find a dated property that is livable, but that can be gradually improved as you get the money and can do some of the work yourself.  Rent out the other units and improve them first to get increased rents.  Don't spend time agonizing over how many units, spend time looking for a property.  The right number of units is the property that you don't mind living in and can improve and rent out and can afford.    My take is that you are still in the "talking about thinking about it" phase.  Start doing.  Look every day.  

2.  If you want to start wholesaling after you have bought your first property, go for it.  But wholesaling is much much more difficult than everyone makes it out to be.  And requires lots of knowledge and time.  

Hey @Craig Moore, we have not refi'd. We lived in it for a year then bought a SFH in Manchester as well. Then we bought another duplex in the center of the city. In 2006 we decided that we were done with winters and sold everything but the first duplex to move to California. I possibly typed without thinking when I said 'equity pay down' as I think it is more correctly 'principal pay down' or 'equity build-up'. My point was that despite getting in to the house for relatively low money down and not cash flowing much historically (plus we put a new roof on it, refinished the wood floors, new front porch, new side porch, etc.), real estate is a very tolerant business if you are in it for the long haul. We are now almost 14 years into the original note and the tenants have paid down about $70k of the loan amount. The ratio of principal to interest is now going up faster and each month we get more and more equity. Once it is paid off in 2033 (probably a couple years sooner since we applied extra principal the first couple years we owned it), we should be grossing over $25k/yr with no mortgage payment plus have $250k+ in equity. Not a big operation like some of the guys on the podcast but also not bad for a $10k initial investment if you can just be patient. If you can start with something bigger like a 3- or 4-plex then you could do even better than that.

I would recommend running the numbers for wherever you are considering in MA and compare to NH to see where it nets out and what you need to get into the property. I haven't lived back east in a while so maybe they work out to basically be the same. Or possibly you are going to get appreciation in MA that is not going to happen in NH which is more valuable to you personally. Our house is worth about the same now as it was when we bought it.

Hope this helps and good luck. Make it happen one way or the other!

@Craig Moore, have you looked at Manchester, NH? Way more affordable than the Boston metro area and still within striking distance. No state income tax, to boot. Not sure what the commute would be for you but I bought a duplex as my first investment / house hack there in 2003 (overpaid since I didn't really know what I was doing) and still have it. My buddy has a 3-plex from about the same time and we both still own them. He makes good money on his while I am just breaking even (but the equity pay down is ramping up now) so if I had to do it again I would go 3-plex or 4-plex. My wife couldn't get behind the idea at the time so we started small. We did an FHA first time buyer program and I think we brought < $10k to closing.

Can you explain this equity pay down? What did you guys do the next year? Refi?

 Hi Craig-

Great approach - sounds like House Hacking 101 - checkout this awesome article:

(3) Secrets Everyone Needs to Know about using a 203k Loan - Its Easy!

Here is my take on your situation.  Wholesaling isnt as easy as just making it happen.  There is a lot of work and time involved in building a buyers list and knowing how to evaluate properties, rehab costs, arvs, etc.  This can be very tricky especially to someone new to real estate.  Also you mention buying a duplex living in it for a year and refi and getting cash.  This is likely not an option.  Sounds like your plan for this is a low down payment, 3.5%-5%.  If the property is turn key it isnt magically going to have 20-25% equity in it within a year.  You wont be able to just take any amount of apprecitaion out of the property.  No lender will allow you to take a dime out of the property with out having at least bare minimum 20% equity in the home.  Now as far as a straight cash flow prospective it is a great idea to buy a duplex to live in and rent the other half out.  Same goes for a tri-plex, 4-plex, etc.  I def think you should try wholesaling, find a mentor in your area possibly to show you the ropes but dont count on making 10's of thousands of dollars right off the bat.