All Forum Posts by: Josh Young

I really like the 10 and McCartney. I recommend the new builds, especially for my out of state investors because they are turn key with minimal maintenance and no cap ex for a while, also you can get a lower rate if you use the builder's lender.  If you have the resources for a rehab you can/might force some equity, but there is also more risk involved, especially if you are out of state, you need to really know the area in more depth so you can act fast when a deal comes up because they sell very quickly when they are a good deal, and you must know your numbers better as the financing becomes more complex and more expensive. 

The rent price of a new build is going to be similar because rent prices are primarily based on location, bed/bath count and sqft; obviously other things affect the price and quality of applicants too, but those are the big things.

I would say it will make a 15% difference, that's the problem with taxation it may seem nominal and insignificant, but in a state like California they are the example of taxes compounding. There is also a housing shortage and people want those residential homes to be used as residential homes, so this is a way to push some STR operators to sell or rent long term. Lucky they didn't outlaw STR like some cities have done, that would have made a bigger impact, but this way they generate some more tax revenue. You had to see something like this coming though.

@Jossy Mundo you will need to borrow money from a lender to buy a home and they will want to see your income on your tax returns to qualify.  My advice is to finish school, keep saving money, don't take on any extra debt and when you start making more money as a w-2 employee after college don't change your spending habits, just keep saving. You will also need to learn how to qualify for a mortgage, so talk to lender and they will help you create a plan. Here is what I did, this might help you: https://www.biggerpockets.com/...

@Nadine Smith buy a primary residence putting as little down as possible, do the same thing again in a couple years and keep the 1st one as a rental, in a few years rents will increase, and interest rates will drop, you will refinance, and you will be a real estate investor. Here is a link to how I did this with less than $40k: https://www.biggerpockets.com/...

@Kevin C Means negative cash flow is not ideal for most people, but you are right if you have the w-2 income to cover then you could invest for equity growth which will also mean future cash flow growth, but that means you need to invest in a location that has population growth and job growth, we have both of those things here in Arizona. If you are looking at new builds here I really like Florence and Casa Grande; Coolidge and Maricopa are good too. If you feel you can cover the negative cash flow with your w-2 for a few years you should be able to refinance into a lower rate in a few years and if you have rent growth you should be positive cash flow at that point. There are more ways to make money in real estate than cash flow, in my experience cash flow is one of the smallest parts of the overall return, but if you don't properly manage your cash flow then you can crash and burn, so make sure you have access to at least 6 months of PITI payments as reserves.

@Sam Kovatovich

I would do a HELOC as it is interest only during the draw period and designed to be more of a short term bridge debt, this gives you time to stabilize the property/rehab/raise rents and then cash out refi to a lower rate in a few years and pay back the HELOC. If you qualify for a conventional loan the rate should be lower than a DSCR loan. You can find cash flow and your numbers will work if you do 30% down on a $300k purchase in Mesa, or if you look farther out you can find a deal on a new build and a lower interest rate if you use the builders lender on a new build in Florence, Coolidge, Casa Grande or Maricopa.

@Shiloh Lundahl I appreciate the detail in your outlined plan, and I respect your input as a successful investor. However, I don’t think this is good advice for someone who has no investing experience and doesn’t have enough reserves to cover the closing costs and debt service of a hard money loan. I totally agree that if you learn the dance it’s a beautiful thing, but I think someone should learn to stand and then walk before they learn to dance. Especially since @Ashley K. Butler has access to a no money down VA loan which is basically risk free and costs her nothing if she house hacks. Then there is time to learn the dance while gaining valuable experience as an investor and time to build her reserves and relationships. I honestly love your outline I just think getting started is more important for most people than perfecting a BRRRR using hard money with minimal reserves right out the gate.

@Jared Cruz the only scenario where paying it off is a good idea is if you need the extra room in your DTI to qualify for a mortgage to buy real estate. When I was trying to qualify for my second house so I could become a landlord I paid off a 0% interest car loan because I needed the extra $300 of debt for my DTI to qualify. I cannot think of another logical reason why you would want to pay off the loan early. As you learn more about real estate investing you will learn that debt can be used as leverage and if used correctly it can accelerate your returns and your growth. I recommend this book for you "The Millionaire Real Estate Investor by Gary Keller"

@Michael R. they only offer it because they collect more in fees than they pay out, most all protection/warranty/insurance is a slow bleed, just save an extra $5000 for your reserves and don't pay it to Zillow.  Also, you are right about wanting to have a deposit from the tenant, so they have some skin in the game to take better care of your property.

@David Cole there is risk in everything you do, I like what David Greene says on the podcast, "there is risk of getting hurt if you go to the gym and exercise, but there is also risk of being unhealthy and not living as long if you don't go to the gym and exercise. " 

He also says the same idea applies to real estate investing.

All of the things you mentioned are risks that could happen if you invest, but they pail in comparison to the risk of working a job the rest of your life and never achieving your financial goals if you don't invest.

I have found that the easiest way to mitigate risk as an investor is to have extra reserves, use a lot of leverage and offset it with reserves (6-12 months of PITI payments).

It's smart that you want to learn as much as you can before you invest, but I would focus more on the big picture and how to get started, don't worry about every detail now, you will learn the details with experience.