All Forum Posts by: Jason Stephens

Any advice or guides that you can point me towards that can help me get started?

Good Morning, 

I have been kicking the idea of real estate investing around for a good 15 years with no progress.  My wife and I recently started to revisit the discussion of how to get started.   Right now we are putting a large amount of money away every month for college savings for both of my children (aged 6 and 2).  Instead of doing this, I had the thought of buying two properties and have renters pay down the mortgage over the next 15-20 years enough that I can use the equity to pay for the education. 

Thoughts? Has anyone done something similar?  

Whats the best way to start?

Good Afternoon.

Ok Guys, this is my scenario.

I am going to include my real scenario with as many specifics as possible so I can get the most detailed advice, I could use it.

I am 35 years old (today) and my wife and I have two kids. I am the sole provider for my family, and currently am bringing in around $209k. We have an existing home with a $430k mortgage, of that I still owe $370k. The house can appraise and sell for probably $650k. I have $50k in a HELOC and $50k in CC debt. My current credit score is 650.

My wife and I want a larger home for our family to expand. The neighborhood where we live has homes that range from $800k - $1.2 million. Right now I am paying $1300 or so a month in CC's, so moving would free me from that burden and allow me to put the money towards a mortgage payment. My existing payment is around $3200 a month, so I am thinking I can afford $5k-6k per month when all is said and done.

Here are some of the things going through my head:
1. Does it make sense to try and consolidate the CC / HELOC down so my CC's don't have maxed out balances and it will raise my CC score.

2. If i wanted to rent my house, I can get $3500 a month which would cover my costs. Are there any creative ways to use the equity in my existing house to keep / rent / buy a new house?

3. What is the best way to get qualified for a mortgage? With my existing scenario and credit score, I don't want to go through a nightmare scenario of being turned down. Any good suggestions?

Thanks for the help!

Good Afternoon. 

Ok Guys, this is my scenario.  

I am going to include my real scenario with as many specifics as possible so I can get the most detailed advice, I could use it. 

I am 35 years old (today) and my wife and I have two kids. I am the sole provider for my family, and currently am bringing in around $209k. We have an existing home with a $430k mortgage, of that I still owe $370k. The house can appraise and sell for probably $650k. I have $50k in a HELOC and $50k in CC debt. My current credit score is 650.

My wife and I want a larger home for our family to expand.  The neighborhood where we live has homes that range from $800k - $1.2 million.   Right now I am paying $1300 or so a month in CC's, so moving would free me from that burden and allow me to put the money towards a mortgage payment.  My existing payment is around $3200 a month, so I am thinking I can afford $5k-6k per month when all is said and done. 

Here are some of the things going through my head:
1. Does it make sense to try and consolidate the CC / HELOC down so my CC's don't have maxed out balances and it will raise my CC score.

2.  If i wanted to rent my house, I can get $3500 a month which would cover my costs. Are there any creative ways to use the equity in my existing house to keep / rent / buy a new house?

3.  What is the best way to get qualified for a mortgage?  With my existing scenario and credit score, I don't want to go through a nightmare scenario of being turned down.  Any good suggestions?

Thanks for the help!

Good Afternoon,

My wife and I made some good money on the appreciation of our existing home and we want to buy and invest in a new home.  

Here is my current situation:

Mortgage Amount: $370,000

Home Value - $650,000

HELOC #1 - $49,000

CC Debt: $45,000

Credit Score: 650

Income: $209,000

I am looking to sell my home, and get something in the $800k-$1 Million Dollar range. With all of the interest I am paying, I would rather pay off the debt with the home sale and put that money towards the principle on a higher mortgage.

I recently went to the first HELOC company and asked to increase the HELOC to $100k to pay off the CC debt and help my cashflow., they shot the idea down because they said I was going to use the money to do the same thing I did with the first HELOC. My financial guy said telling them less is more and that a new bank may say yes. Thoughts?

I thought if I was able to lower the balances on all my CC's so they weren't up against the limit, my credit score would improve. Is this a good assumption?

My goal is to get my credit score higher so I can qualify for better mortgages quicker. 

Any suggestions?

@Erik Johnson Thanks for the quick response. 

A little background.  I own a successful recycling company,  and will stay on at that company full time.  This would be extra income on top of what I am currently making. 

1.  I am looking to do both, build net worth as well as build income.  I guess at first, it is more important for the extra money monthly. 

2.  I would pass to management if it is at a distance, I need things to be automated the best I can if I am going to succeed. 

3.  My wife is a realtor in NY, but if it is out of state we would hire a real estate agent. 

4.  No, I will continue to work at my current job and use this as supplemental income. 

I am open to flipping and using that money for rentals.  The issue would then shift to getting a loan for the work I want to complete (hard money, etc).  

5.  Yes, I would want this to scale like any investment or business. 

I have been kicking the can down the road for 10+ years with REI and have never pulled the trigger. I think that is going to change though.

Recently, I sat down and wrote out all my dreams and goals and what the price tag of each of those would cost.  Turns out, I need to come up with an extra $7000 or so per month.  This sounds like a lot, but I was encouraged by the differential between where I am now vs what I need to accomplish 100% of these goals. 

My question is.... I am on Long Island, NY and the home prices here are very expensive.  I am trying to figure out the best strategy to come up with this extra money.  Is it to buy / hold and try to make a few hundred dollars per house?  Or is it to try and build up the number of flips I do, where I close $7000 a month on flips?  The main issue is that with the home prices and taxes being where they are on LI, does it make sense to do this out of state?

Thoughts, concerns, ideas?

The more I think about this, the more I realize that I need to create a war chest by doing flips prior to doing rentals.  I am trying to come up with a plan of how I can borrow money from a private lender (father) in order to start this.  The goal would be to do flips until I have $300-$400k in cash reserves so I can buy homes in Cash and not have to use a private lender.  Once I build the reserves even further then I can divest and park some of the money in rentals. 

So here is what I have learned, and tell me if I am wrong and also tell me if my plan sounds insane. 

1.  If my Father uses the money for a disqualified party, he has to pay a 15% tax on the money used.  With a 10% return, that would put him at a -5% return on the money.  This makes lending the money within a 401k prohibitive unless he gets a return of 15% +. 

2.  My father recently retired and has a significant 401k, and also a 400k mortgage left on his home that is appraised at $1,000,000.  He had the idea that he wanted to take the money out of his 401k in order to pay down the remainder of his mortgage so he can live stress free and not have to worry about cashflow in retirement. However, he realized he would have to pay taxes on any money that he took out of the 401k which dashed his dreams. 

I thought of a solution that may solve both of our problems.   If the average tax rate is 30%, we can estimate that he will need to pay $90,000 on $300,000 loan.  So if he takes out $300,000 and lets me use it for a flip he will have a $90,000 tax bill.  If he does this in January 2016, he will not have to pay the tax until April 2017.  This would give me over a year to do enough deals that give him the return he needs to cover his tax bill.  If he loans me money at a 12% rate, he would make $36,000 per deal, meaning it would take 2.5 deals for him to free up $300,000 and essentially wash away any tax bill.  He then can use the money to pay down his home mortgage over 2 years.  

Does this plan seem to make sense, and can anyone else find holes in it?