So I am at this cross roads. With such a big step of an investment, I could start on a path that can ultimately lead to a great future or just get a one and done and wish I would have done it differently from the beginning.
My passion for real estate has always been in long term investing. I don't jump out of the bed in the morning super jazzed to lease or sell someone something. I do this because I want to get the fuel to power my investing machine.
The Data:
2015 = $137k on my 1099
2016 = $100kish on my 1099
2015 = $76k after right offs
2016 = I have no idea how much to claim.
The Fuel:
Jan. 1st 2017 = $90k in savings
The End Goal:
$10k monthly in rental income for retirement
To Get There:
$1,200,000 in real estate investments that has a monthly 1% ROR (Preferably in the next 5 years. If 80% is held at the bank in debt that is okay)
Possible Paths to $1.2 million
1. Put 25% down on 5 $240k homes. (-$60k each down payment before closing costs and personal take home commission) Rent at or near 1% of purchase price. Focus on Duplexes
2. Use BRRR Strategy. Buy 6 $120k homes at 25% down (-$30k). Rehab them for less than $15k each. Rent them out. Refinance them for $200k each. Focus on Single Family Home fixer uppers.
3. House Hack. Live in a $300k duplex/house for two years at a time. Repeat this 4 times. 8 year path. Apply for a loan at 5% down (-$15,000). Rent out two of the rooms and live in the third one. Have my room mates pay down most of the costs of the house. Focus on Town homes or Duplexes.
4. Lease Option/Lease Purchase. Get 10 $120k homes to allow me to rent their house for them and with the option to buy the property at anytime. Put renter in there to cover cost and buy the property after 20% equity has built up in the property. Focus on Single family homes.
These are the options that I have found that make the most sense to me. Now here are the pit falls.
Hurdles:
- 1099 income is very difficult to get a loan. As of right now I have to claim all of my income to get approved for a $250k loan. If I don't go this route I can save $20k a year in taxes. That savings can go to paying for option #2.
- I make $30k+ a year in apartment locating referrals from living at apartments. If I move into a home in the house hacking strategy then I will lose my access to building my Dallas referral Network.
- Once a bank lends me my first loan it will be difficult as a 1099 to get a second loan. Possibly two years and will need to use creative financing/private lenders during that time and possibly after. This will be a higher interest rate that will cut into my profit.
- Finding a General Contractor to do the work that is reliable and will not over charge you is difficult.
- Market is peaking now vs buying in a low market. Rates are also going up.
I would love your feedback on which route you think is the best bet given the difficulty to get approved for lending and high costs of taxes to get approved for lending. What is the highest and best use of the $90k that can get me to the $10k a month end goal.
Help this kid become a man!
