All Forum Posts by: Joseph Walsh

I'm going to skip the tips on how to build your credit.  You are off to a good start with zero debt and some small amount of money banked.

assuming you google and do the "establish credit" thing, I'd suggest you to take a look at the "house hack" concept to get you started.  I think it's worth a look.  I am assuming you are single.  If you can get a lower cost house with your 3.5% down fha loan, and get roomies  (or better if it's a duplex, roomies plus renters) it could be a path to jump start you.  you'll also find out how much more you need to save to get into one of those properties.

My question is why haven't you moved on and forgotten about this already?

Well, first off, do you already have a HELOC? If not, get one.

I am no expert, but it might be worth writing yourself a check from the HELOC to deposit into your savings now, and "season" the money while you find a potential property. Otherwise you might have extra hoops to go through to document it (just like a loan/gift for the Down Payment would be). You pay a little interest on it, but if after some period of time you don't find a property, you can just pay it off with the money sitting in your account. Just don't let yourself "leak" the money away with additional spending. Also be mindful of the fact that you are leveraging you home to buy an investment.

I don't recommend it.  However, I will give you a scenario where it makes sense since everyone else is likely going to give you the blanket "hell no" response.  However, take note of this scenario's difference between this example and yours.

I have a fried, that started a summer/weekend business in High School when he was 15.  He started with a friend of his who was 17, it was unique, and making good money.  The following year, the older friend early enlisted in the military and then graduated.  He had no time for their little business, so he told my friend "it's yours"  During that time, my friends business grew to the point where he had too much work, and was making real money, at 16 years old.  He talked with his dad, and they agreed he should work to grow it.  He dropped out and went on to get his GED.  Now, up to this point, he was a great student, not a "flunky"  By age 30 he had 6 employees.  He also needed those skills learned to run a business, he just happened to have a existing application for what he learned.

The point, he did't quite because he was "bored" and decided to "give something a try"  he already had something, and it was promising, and he legitimately could reasonably expect to support himself, BEFORE he made the decision.  He still went for his GED to cover his bases.  You are only taking away a lot of opportunities in the future by forgoing your diploma on "potential" options.

Let's say you do what you are suggesting.  Being under 18, you have restrictions on what you can do on a job site, hours you can work, etc.  It might be hard to get a regular 9-5.  but, assuming you do.  and say, 5 months in, you fall off a ladder, break something bad, and can never do labor intensive work again.  What do you fall back on?  What is going to fund your budding real-estate empire?  Would YOU lend a kid with no job, and no diploma 100k to speculate on a fix and flip?  based on what years of construction/real estate experience?

Do some trials.  Take your summer to work your butt off, find some houses and run some scenarios.  Maybe find an investor willing to pay you a finders fee if any houses you find work out.  Then at least you'll learn what a good deal is vs. not.

I recently looked into this.  And yes, that's what I plan to do.  Due to a lot of "other" things going on, this happens to be on hold for me now, but its sound.  And if you are thinking the rich day/poor dad, your paid off house is still a liability (it costs you money despite no mortgage), and doing this actually turns it into an asset, assuming your cash flow is > than your heloc payments are.   I just wish I had that much equity...I don't have enough to be a straight cash buyer like you, so I need to do additional leg work... :D

Congrats.  what was the timeline?  As a pure flip, assuming it sold for appraised value, you'd of profited about 20k. As a "cash out refi" buy and hold model, you actually "lose" about 14k at 80% refi. (the rest left in equity or course), which could possibly be offset in ~3 years of rental profits.  It's an interesting contrast.  Something for me to consider in the future if my buy and hold projects end up with significant cost overruns, do the math and consider if a quick flip-exit makes more sense.  You took a third option where the math worked better for you, "keep it, move in, refi back most of my investment" essentially giving you a ~14k down payment on a 180k house, and still having ~20% equity.

BTW, the house looks amazing, and it sounds like this was a straight "win" for your family.

Not enough information, however, knowing what I know now, I would go back 25 years and pay off all my debt in a very "FIRE" mentality mode (even if I am not FIRE, but for the debt). I would of lived like a poor college student for 2 more years, paid off all my debt, and maxed a Roth those two years. What I have learned later in life is that I have missed on a LOT of opportunities to get more income options because my finances weren't shored up. And now being on the good side of financial mess(normally), I have been able to realize a lot more opportunities. That said, the best thing I ever did was trade in my rent check for a mortgage check, and that was when I was just starting to get my ship in shape, it actually helped me get on the right path. If your credit is decent,even with the debt, and you can get an FHA into a multi-family, that can help you like it did me, get on to the correct path. Of course, the biggest risk is if you have to move anytime soon.

There is a third perspective.  The former tenant believes he's being wronged, and wont let it go, he believes he has bent over a bit as a tenant, and the landlord should let it slide in light of previous "passes" they gave the landlord, and he may be right.  Even if he's not, he may truly believe his is right.  I had a land lord in college try to screw me out of a $400 deposit, only $200 of it was mine.  They had a bs reasoning.  Anyway, long story short, they just had a habit of stealing peoples deposits to cover their turnover costs.  because in hind sight, they were bad at this business.   It pissed me off, it was the principal of the thing.  I had graduated and taken a job out of state, and could of easily just wrote off the stress of the $200.  I fought it for months. I detailed all the ******** they technically owed us for over the course of the year (A couple days without head mid winter, etc.) eventually we got a check for $500.  My point, it might not be worth the $200 if you have someone with a "righteous" belief they have been wronged.  And you may also be setting yourself to also take that righteous stance, all over $200.  How much time will this take from you?  I value my time pretty high.

You should call bs.  Simply put, Do you have a car? Cell phone? heat? You can need a place to live first, everything else is secondary.  I had a problem tenant until I hired a good property manager, he explained this mentality to me.  It took a bit of time, and a couple late fees + eviction notices, and now he's a model tenant, pays BEFORE the 1st every month, even though his payment date is the 5th.  Also,  you might be surprised once the eviction notice is sent how quickly he suddenly finds the money.  Your notice should go out at 5 days late, not 20.  Or, a late payment notification with fee at day 5, eviction notice on day 10 at the most.  I suspect your "guilt" is more a bit of dread since you have to find a new tenant/buyer.

Good luck