I’d like to ask everyone on BP to help provide some guidance on what my best option might be for getting started. I’ve broken my post down into key sections as there is a lot of information that must be digested to understand my situation. Apologies in advance for the long post.
My living situation: I currently rent a 3 bed 1 bath home from my friend’s aunt and uncle. My friend will be moving out tomorrow and her aunt and uncle will be looking to put their property on the market in the spring. I believe I will have until May to find somewhere else to live. Right now I only pay $300 a month to stay at this place and they rented the house to us as more of a favor then to generate any income. Overstaying my welcome isn’t something I want nor holding up their plans to get the house sold.
The work situation: I’m a powertrain engineer at a motorcycle company and spend 45 hours of my week working on engine designs. Yesterday I was informed that it is very likely I will be traveling to Japan throughout the summer (possibly starting as soon as April) to support one of the projects we’re working on over there.
The financial situation: I’m 25 years old, have no debt, earn 50k per year and have saved up 20k to invest in real estate. My credit score is good and the lender I’m working with has told me that I can probably get a loan for around 175k max.
My education and other relevant life experiences: I graduated in 2013 from a university in Wales, UK with a degree in motorcycle engineering. By day, my background is in powertrain engineering, by night I’ve been reading as much as I can on real estate investing over the last few months. BP podcasts are my bread and butter, I have read J. Scott’s flipping books, among the other popular titles listed during Brandon and Josh’s talks on the podcast. During my first stint of college in the U.S. I got my Realtor’s licence in the state of MN as well as ran my own painting and handyman business for seven years working closely with a Realtor friend of mine fixing and preparing properties which were about to go to market. Unfortunately, I was too busy with college to make a good Realtor, but the license is still on ice and I learned a lot from the experience.
My end goal: I would like to build up a successful flipping business, part time at first, with the hope of going into it full time. Of course I know that this is not the easiest thing to do with a full time day job, however I believe I have the skills required to make it work and a partner that I can count on to take care of some of the activities and decisions which must be made during the day. My partner is unable to start helping me until the end of summer, so for now I am on my own.
What I need help with: I don’t know which route to go will be the best for me.
Scenario 1:
The original plan was to purchase a property, live in it while I fix it up, and then sell it. Whether I travel for work or not; this is achievable it is just a matter of how long it will take. One of the things I wonder about is if my time is best spent doing all the repairs myself or hiring the work out and just jump right into building a team of trustworthy people to work with. I fear if I hire out the work to start with and live there I may get in the way of the contractors and often times I will be inconvenienced with no kitchen, water, electric or whatever. On the flip side- I worry that if I do the work myself it will take a much longer time plus I’m not that passionate about doing the repairs when I know my time would be better spent working on other aspects of building this business for myself. Once the first property is done I would then look to move into the next property which I acquire, repeat process of potential frustration.
Scenario 2:
Alternatively, I have thought about looking at purchasing a duplex to get started and renting out one half while living in the other. This would permanently solve my living situation problem with the hope of living for free. Once I have the duplex up and running I would look to start flipping. I’m worried that with the salary I’m currently on I won’t be able to get any more financing to put another deal to begin flipping for some time. On original idea of mine was to to build up capital by flipping so that financing would become less of a problem when I look to start buying and holding rental properties.
What I’ve done thus far: I’ve identified what I believe is a good farm area in the Milwaukee suburbs, have looked at over a dozen homes, am working with an experienced Realtor for those areas, created several analytical spreadsheets to help me in analyzing potential deals, put in a few offers, and for the most part have my financing in order. I should point out that the offers I had made were for fix and flips, prior to any news of me traveling to Japan over the summer for work.
So now I’m part way into executing my original plan and I’m wondering whether or not I’m making the right choices. Falling into analysis paralysis is the last thing I want to do, and I understand that making mistakes is a great way to learn, but I don’t want to make any mistakes that would prevent me from moving forward with making this into a functioning business for myself and my partner. Any feedback, advice, or wisdom in regards to my situation, financing, farm areas, starting out with landlording with duplexes, etc. would be appreciated.
