All Forum Posts by: Katherine Serrell

You need to contact a 203k consultant and a realtor familiar with the 203k process (preferably one that has done at least one 203k deal) to help with the logistics. If the total value of the projects will be more than $35,000 or involves structural repairs, you are required to have a 203k consultant anyways so you might as well go ahead and get them involved from the start. The 203k consultant will perform a feasibility study/analysis for you to see if the deal will even qualify. They will be able to help guide you on how to tackle this project and avoid pitfalls. If you don't know of a realtor who is familiar with the process, the 203k consultant can likely put you in touch with one. 

Hope that helps a bit!

If you are still renting or living with family, I would start by buying a primary with a low-down payment loan (3-5% down) to live in for 12 months and househack/airbnb rooms or a separate unit while you live there then after 12 months, rent the whole thing out and repeat the process. I did this on 3 houses in Raleigh, NC and really helped me get started when i had little to no money but wanted to stay local. 

Otherwise, I would read 'Long-Distance Real Estate Investing' by David Greene. This will help you decide if you are comfortable getting started with a property in another city or state.

Facebook Marketplace is home to a lot of "false sales" so just something to be aware of. First and foremost, you should ask the seller who owns the home and then cross reference that online with what is in the county/city deed book. People try to sell properties all of the time that they don't actually own even if their intentions are completely innocent.

For example: Parent died and child thinks they inherited it and can sell it but doesn't realize their other siblings or family members may have ownership interest in the home. There could be outstanding HELOCs, mortgages, liens, unpaid tax bills etc that you can also find on the county website.

If that checks out, I would ask the seller what would make your offer attractive to them, what day they are looking to close, if they will need any special terms or conditions (such as a leaseback), and (if you feel comfortable) why they are selling. I would also ask who will be managing the sale for them (attorney, agent, etc).

I used a 0% down loan for my first property. Highly recommend if you can swing it. You will never find another loan product that great and you can only use it once - for your first home. As long as the rate is not absurdly higher...go for it. You can always refinance if its not a great rate. Keep your cash for the next deal.

For reference, I used a USDA loan which most people think is for rural homes but if you look at the map of what is USDA eligible you can find some pretty cool spots. My first house was 4 miles from the center of Raleigh in a good area, nice neighborhood (townhomes 330-400k, single-family 600-750k) and backed up to a golf course. 

You have to consider the other benefits to househacking besides saving money on rent. In this example, you would be saving much more than 6k/year when you factor in the tax deductions you can take for househacking, appreciation of the home, principal pay down, as well as the learning experience of finding, buying, and presumably managing the property. Renting is literally throwing thousands of dollars down the drain and Not getting a reduction in living expenses, tax benefits, principal pay down, appreciation, and experience. 

If you want to increase the bottom line and your city, neighborhood, etc allows for it, you can househack by the room on Airbnb, Furnished Finder, etc with short term or mid term rentals to significantly increase your cashflow if you want to cashflow or at the least eliminate your living expenses. I am in a pricey market (Raleigh) and have managed to do this on 3 houses I have househacked over the past 3 years using USDA, FHA, and conventional loans. If you buy right, you can make it work.

BRRR's are tricky in this market (especially when just starting out) with rising costs of labor and materials coupled with housing prices falling...can be extremely risky if you dont have any experience, a solid background in a related field, team, etc and as a result funding can be much harder to secure. Not saying it cant be done but you dont want your first deal to be a bad deal or even an "okay" deal that is so much headache that it completely kills your motivation to do the next one.

Not a dumb question! In my opinion, the best way is to just call a local broker. Insurance depends on so much including the specific property. The state/city, type of property, age of the home, location, cost to rebuild, flood zone, age of roof or major systems, your deductible, etc. all factor in. I would identify the area or a few areas you are looking to invest and just call 2-3 companies and give them an example property to get a ballpark idea. The biggest, most common factor that I can think of that can really drive up the cost is if the property is in a flood zone which you should avoid anyway.

Just a tip, when practicing analyzing the numbers, if the math is so tight that the insurance being a bit higher than anticipated is what makes or breaks the deal then that is probably a good indicator that it is not a good deal in general. 

I used a USDA loan for my first property. It was a great decisions and I would do it again in a heartbeat. It's a great 0% down first-time homebuyer option. Additionally, you dont need two years of work experience. If the bank tells you that you do, go to a different bank. You just need an offer letter stating what your salary will be (bonuses dont count unless they are guaranteed). If you are going to be hourly or self-employed, then you do need 2 years of work experience. You can only use this loan as a first-time homebuyer and you can only use it once. That being said, it is a good idea to take advantage of it for your first property and I would buy at the top of my budget since it is a 0% down loan and you will NEVER get this opportunity again unless you get someone to seller-finance something to you in the future and they still normally never do 0% down. 

After I finished school I was able to get pre-qualified by my bank, find and buy a house, and move in BEFORE i even started my first job. All I needed was the offer letter with my salary amount and start date. I bought and moved into the house on 8/29/2019 and started my first job 9/23/2019. I was salaried at $52,000 and was pre qualified for like $250,000. I lived in it a year then moved out and repeated the process with an FHA loan.

Hope this helps! Feel free to message me with any questions. 

Pros:

- Guaranteed rent direct deposited to your checking account each month by the U.S. government (and they are never late)

- HUD publishes the fair market rent increases every year so you can ask the section 8 office for an increase in rent and as long as it is within reason, it is normally granted.

- It is hard to find landlords that accept vouchers (in my city the waitlist alone is 200+ families) so people are more likely going to want to avoid getting evicted once they find a home. There are statistics on average occupancy for Section 8 occupants depending on your county but based on my memory it is like 7 or 8 years at a time on average.

- You can screen them and run background checks just like any other tenant. The tenant's is obviously not going to meet your standard "3x monthly rent" criteria, hence why they have a section 8 voucher.. so you dont have to scrutinize their income or credit score to the extent you normally would. 

- You can evict section 8 tenants the same way you evict non-section 8 tenants 

- Your property is inspected by the section 8 program

- You have the tenant's "housing counselor" as a point-of-contact to help you throughout the onboarding process and if issues arise with the tenant (to an extent) 

- Your helping a family in need

- The tenant and the neighbor/friend would presumably get along

Cons:

- Bad stigma because landlords think "oh the government is paying! I dont need to screen these tenants very well (or at all)!" and they end up with trash tenants and blame "bad section 8 tenants" versus their lack of due diligence. 

- You have to go through a pile of paperwork for your first one as a landlord.

- You have to wait for an initial inspection to get approval to have the tenant move-in (could be a few days or a couple of weeks)

- Your unit has to pass the standard HUD inspection but if your not a slumlord this should be a non-issue.

- The tenant and the neighbor/friend could suddenly stop getting along 

You are right, anything could happen. Anything could happen with any tenant even if their background check, credit, income, etc are perfect. Based on the fact pattern you gave, I personally would jump at the opportunity to get guaranteed rent (especially going into a recession), a multi-year renewal, low turnover, and annual rent increases even if I had to go through a little red tape. 

Have you considered househacking or a live in flip/BRRR instead? There are 0%-5% down loans options for primary residences and you (normally) only have to live there one year. If you got a 0% down loan you could take your 20k cash to start a live-in flip or BRRR either now or when the market picks back up. Alternatively, you could househack to eliminate your cost of living and build up your cash faster. You could also do a combination of both. For example, you could renovate then househack or buy a duplex and only renovate one side while houshacking the other, etc.)

For the two deals you listed, it may be hard to get creative financing for your first deal (outside of seller financing) in this market unless you partner with someone on the deal or can convince a hard money lender to lend to you. Hard money/private money lenders normally require you to have some skin in the game (more than 20k) for your first deal or either to put down as a down payment or as collateral/reserves.