All Forum Posts by: Dion McNeeley

Hi @Kyle Wilson,

This sounds a lot like what @Mindy Jensen does. She has hosted a lot here on BP. She calls in "Live in flip". You may want to watch some of the episodes she is in. She has a ton of knowledge on this strategy. 

Good luck,

Hi @Tramone Russell,

Not too long ago I was in a similar place. I would recommend reading or listening to a book called "The richest man in Babylon". 

This can show you a knew perspective on money. Like most people I used to pay my bills and I thought whatever was left I would keep and invest. 

There was never anything left.

This book showed me how I could "pay myself first". By taking a small amount from what you earn, before anything else takes it, you can start saving and in a short period of time you could have the funds to do the 3.5% down house hacking method @Taylor Chiu mentioned. This is a great strategy. 

If you use the house hacking method of renting out the rooms in your place or moving into a small multi family, 2 to 4 units, and having tenants in the other units pay the mortgage, you can reduce or eliminate your own monthly housing costs. This can speed up the saving rate you have for the next investment.

I hope this helps. Thanks.

Hi @Axelson John,

@Marcus Auerbach has a good suggestion with house hacking. 

The idea is you live in a small multifamily, 2 to 4 units. You live in one unit and rent out the others. The big return on this is you either reduce or eliminate your own monthly expense for housing. This way you can save and reinvest the money you would have been paying for housing. The return is different for every situation but there are a few factors that are considered in each. 

Since it is less than 5 units it is still considered a primary house. So there are loans you can get into with as little as 3.5% down. 

The income is taxed differently than income from your job. You can depreciate the property on your taxes. Even if it appreciates and goes up in value, you get to report to the government that is is older and now worth less. Also it is considered passive income and is taxed at a lower rate. 

House hacking is something that is repeatable. You have to stay in each place for at least a year and after a few years of doing this you would have several properties with multiple units on each one. 

I only suggest this because it isn't as much of a job as flipping is. Flipping can make good money but its like earning a pay check. Taxes can be higher. 

I hope this helped. 

Thanks.

I am still fairly new. I have 7 units and am in saving mode for the down on the next place. I have had a SFH for a while and made all the mistakes I can think of. Last year I found BP and got serious. I acquired thee duplex in 2018. I will be getting a duplex and then pay down a mortgage and repeat. At least that is the current plan. I have read (audible) every book I can get my hands on and am an avid BP podcast listener. I try to take in one or two a day. I still have tons to learn and I am happy to share what I have figured out so far.

Good morning @Ismael Mathurin,

What you are doing seems like a good plan. Wholesaling is a job. It can have a good income but it can fluctuate from month to month. Getting into small multi family would be a way to start getting a consistent flow of money. This way, pursuing wholesaling would be safer since you could survive a slow spell. My goal with small multi family was similar. I wanted to house hack and stop paying for housing for myself. Then to use the passive cash flow to increase my savings rate.

What you may want to consider when looking at multifamily:

First, you may already know but there is a difference between 1-4 units and 5+ units. with 1-4 units lenders look at them as residential. Once you hit 5 or more the loans become commercial.

When looking at multifamily the number of units can matter. Here has been my experience and what I have seen three people do that I have helped. I am going for duplexes. The first one almost eliminated my monthly housing costs. If I had gone for a 4 plex I may have completely eliminated it. It can be hard with a duplex to eliminate your rent and add cash flow. 

I would do your own research on the rents in the area you purchase in. Sellers can list the rents and put in a clause of "buyer to verify" I have seen rents listed that were too high for the area and in one case the tenants had a lease that was too high. They had not paid a deposit and the owner had worked an extra $200 a month into the rent for the year. This made the place look great if you just saw the monthly rent. Make sure that the deal is good if you had to rent out units for 5% less than the average in the area. Trulia, Craigslist etc. are what I have used to see what the rents are.

I had a lot of apprehension in my first deal. I recommend going to any local meetups. Even if people are doing things a bit different than you plan to you will learn a ton. 

Good luck.

Hi @Jilanie Staples, I like that you are reaching out to BP before you started getting into real estate. I wish I had done that. It would have saved me several years of frustration. 

Here is something to consider with small multi family. You said your goal is to live for free or make money from the units. I primarily have been doing duplexes. If you live in a duplex you will more than likely reduce your own monthly expense for housing. It is possible with a really great deal to eliminate it completely. In order to eliminate your housing expense and make money it would take more units. If you were to have 20-25% down a duplex can cash flow with you living in it but in order to have positive cash flow with 3.5% down you may want to look at a four plex. This may bring the purchase price up but the numbers still work better with more units. 

Good luck, 

Hi @Jeffrey Bass,

I like the aggressive principal paydowns. This is something I do as well. I like to pay one down every two years and take one year saving the next 25% down. I also like that even though you are doing owner occupied, you are still doing a large down payment. I hear a lot of people say go owner occupied to get in for 3.5% down. This would make getting any kind of cash flow hard to get. 

My only concern with how you are doing this is the HOA. Like @Frank Chin said. Be careful. 

Not only can there be rules that make renting hard, living in the RV can be a problem as well. I would make sure there is nothing stopping this and be ready for the rules to change if the assoc doesn't like thee trailer being there. I am also concerned with random assessments that HOA's can have come up. You really have no control on those.

Good luck,

Dion.

Hi @Nick Pisano, I hope this helps.

When I first started looking for investment properties I was not sure if I wanted SFH or small multi at first. So I was making offers on each.

There seem to be tons of people, investors and people looking for a primary residence. So almost every SFH I looked at went for way over asking and had many offers. One had 27 offers in the first 24 hours it was listed. When I looked into duplexes I found a very different amount of competition.

Last year I picked up three duplexes. All three had at least one other offer and one had a total of three offers. I got all three for the asking price (One was 10k less because it appraised low)

So while I still have my searches on the MLS looking at SFH I haven't bothered making any offers on them. I am still looking for another 2/3/4 plex for the next place.

I like the house hacking aspect for a few reasons. If you look for strictly an investment property you may have some cash flow but you do not eliminate any of your own monthly expenses for housing. If you house hack and stop having to pay for most or all of your own housing you will increase the amount you can save for the next place. 

There is no one way that works best for everyone. You will find the way that works best for you.

Good luck.

@Natalie Wells This is the question most of us have in expensive markets. I am in Tacoma so I picked up places in Yelm, Lacey etc about 30 minutes from the expensive areas. So from Seattle you may want to go out a ways. 45 minutes or so in almost any inland direction. This may be easier to manage than going for Texas unless you only use property managers. I am still at the point where I like to manage the units myself. 

Good luck

Sorry to hear about your layoff. Is there work in your area? Other companies that have similar positions? Lenders are not as concerned with how long you have had a job as much as they want you to have worked in the same industry for two years.

What kind of work do you do that you are being laid off from? I run a non profit that helps people find work at no charge, maybe I can help.