I have been thinking about investing into real estate for a few years and have started taking the first steps toward that goal recently. I have been doing research, learning strategies and terminology, and begun to form an idea of what type of investing might work best for me in my market. However, I have similar hurdles as many do in getting their first property. Another thing I am doing right now is looking for a mentor to help with my strategy, but in the meantime I thought I'd make a post and hear what BP investors would do in my shoes.
For my situation, I am 26 and I have a very low income (55-65k annual) for my household and a growing family of 5 to support. Naturally my DTI is high, however my only debt is our primary residence mortgage I have had since 2020. We have some cash savings in the ballpark of 10k ready to invest today not including emergency fund and other savings, but that number is growing thanks to a recent bump in income.
Now for the pros. Our home was purchased in 2020 for 160k and I have done many renovations to the property myself. We currently owe about 140k and it was appraised last year at 250k. Today it would probably be worth more than that with further improvements, but I'm not sure how much more, maybe upwards of 280k.
Following this, I consider it another pro of our situation that I have the ability to do significant property renovations myself, and between my wife and I, we make a pretty good design team. Although my spare time to complete such projects follows seasonal work highs and lows, it would be smart for any type deal I consider to involve adding value myself to the property.
With at least 100k (possibly up to 140k) of equity in our home, I have done a fair amount of research in HELOCs and refi. I also have decided that with our current income, it is a necessity that our first property have positive cash flow. I think this is doable with my midwest market, but difficult with current borrowing rates. The fact that our current rate is only 3% doesn't help the refi situation, as we probably would not be able to afford (or would at least struggle to afford) the payment on the new mortgage with the higher rate and principal.
I think the best way to max cash flow would be with a small multifamily that needs moderate rehab. I have some ideas about how to make this possible (partnership, private loans, refi/heloc, or combination)...
But what would you do in my situation, if you were starting your portfolio from the beginning in 2024? If it helps, my goal is to scale, but I do not intend to go full time. Between my wife and I, we should be able to manage a small to medium portfolio and as of today, we don't desire to have a large portfolio.
Thanks in advance,
Quentin
