All Forum Posts by: Steven L.

Dear BP Community,

I have (partial equity in) one SFH that I'm trying to make a rental in a few months. It isn't investment grade, meaning that rough calculations tell me the net cash flow will be a lame $75/month. My goal is to generate a flow of at least $10,000/month so I can replace my 9-5 job and care for my family. My intent for investing is noble, so I hope the universe will be on my side.

I'm willing and able to relocate anywhere in the US to get a good deal and house hack MFHs, go commercial, BRRRR, flip, become a hard money lender, anything. I regret getting my first SFH because it feels like I pulled the trigger too soon and made a poor investment (despite my book knowledge). I sadly also assembled a bad team that dragged its feet and so I ended up taking that SFH deal for my desired deadline. I'd prefer not the sell the SFH but would consider doing a HELOC; on the bright side, I've got some equity now.

What strategy do you recommend in your wisdom for my goal? How do I assemble a good team (lawyer, agent/broker, lender, contractors) that won't run away as soon as they receive my money? How can I break out of 9-5 dependency in within the next 4 years and take care of my family?

I'm ready to network, take action, and make some deals.

With humility,
SL

BP Community:

I am fairly new to BP, sorry if this is a basic question.

I recently listened to BP podcast episode 336 interview with @Robert Jones, and fell in love with his "owner occupied to rental" strategy of taking an owner-occupied mortgage, living in it for a year and a day while improving the home, then renting it out and moving to a new owner-occupied mortgage home.

My questions are:

I would like to use this strategy, but what is the minimum amount of time I could live in a home before renting it out? Obviously I do not want it to be mortgage fraud (because I sincerely want to move homes at least annually while improving them).

I know you need to move into a home within 60 days after closing... is the minimum for moving out a year and a day? Or is that just for tax benefits?

Also, if moving out before a year and a day is legally fine (i.e. not mortgage fraud), what are the tax implications (tax benefits/deductions) of moving out earlier than a year vs. later than a year?

I know this information can vary regionally, so just looking for overall guidelines here. And for region-specific info, what kinds of terms should I search online?

-Steve

Howdy BP Community,

I am fairly new to BP, so sorry if this is a basic question.

I recently listened to BP podcast episode 336 interview with @Robert Jones, and fell in love with his BRRRR-like strategy of taking an owner-occupied mortgage, living in it for a year and a day while improving the home, then renting it out and moving to a new owner-occupied mortgage home.

My questions are:

• I would like to use this strategy, but what is the minimum amount of time I could live in a home before renting it out? Obviously I do not want it to be mortgage fraud (because I sincerely want to move homes at least annually while improving it).

• I know you need to move into a home within 60 days after closing... is the minimum for moving out a year and a day? Or is that just for tax benefits?

• Also, if moving out before a year and a day is legally fine (i.e. not mortgage fraud), what are the tax implications (tax benefits/deductions) of moving out earlier than a year vs. later than a year?

I know this information can vary regionally, so just looking for overall guidelines here. And for region-specific info, what kinds of terms should I search online?

Thank you all you masters of the REI world!

-Steve

Thank you for the welcome @Kathy Henley and @Eric Martel.

Multi family is what I was thinking of too. I'll check out that book!

- Steve

Hey thanks again @Jaysen Medhurst!

@Jaysen Medhurst Thanks for that clear explanation! I was almost losing hope in SFR being a profitable enterprise. Obviously I've got to fill in many knowledge gaps.

How did you break down the monthly expenses so nicely? I've watched Brandon Turner's 4 square analysis video. Is there an in-depth expensing technique, or is it based off your personal experiences?

Finally, do you think starting off with a 4-plex or small apartment is too much to handle for a real estate newbie?  (Maybe not the right forum for this question).

@Ted Beringer, thank you for sharing your example here as well.

-Steve

Hi BP Community,

I am an absolute beginner to real estate investing (never made a deal). I read Brandon Turner's Ultimate Beginners Guide and want to overcome analysis inertia. My goal is to make a deal within the next 3 months. I hope this is a good forum to ask this.

Niche

I would like to start with a multi family (duplex or even small apartment), but don't know if I'm being too ambitious. If I start with single family homes, I would like to start with 2 of them (to still be somewhat multi family). I can make down payments for both properties.

What are your thoughts on niche (single vs. multi family) for a novice?

Strategy

BRRRR sounds appealing, but certain aspects seem too similar to house flipping, which I'm not comfortable doing. But I also want to become a well rounded real estate investor, which BRRRR seems to quickly make you. I like the buy and hold aspect built into BRRRR.

Is it best to pay off mortgages with other people's money (OPM) or making mortgage payments from your own job income? How you can get cash flow using OPM confuses me.

For (a realistic) example, a single family home costs 250K and I make a 40K down payment. The objective is to use OPM for the mortgage. Let's say I can get $2500/month rent tops in my area. Using the 50% rule, I should set aside $1250/month for repairs/expenses. This leaves me with $1250/month to pay off the mortgage. Taking a 30 year mortgage, it should be possible to owe no more than $1250 monthly for the mortgage. At this rate, it will take 210000/1250 = 168 months = 14 years to pay off the mortgage.

So 14 years with no cash flow? Does this seem right? If this is the case, it seems impossible to win with buying and holding single family homes.

Conclusion

Buy and hold for small apartments or multi family homes sounds most appealing to me. I am open to commercial loans. But given my short timeline, single family is fine: I just still don't understand the single family profit mechanism. (Without expecting appreciation in property value, is it pretty much no cash flow as in my above example?)

Finally, I'm soliciting your suggestions for a reading list that has worked for you on these topics.

Hi BP Community,

I am an absolute beginner to real estate investing (never made a deal). I read Brandon Turner's Ultimate Beginners Guide and want to overcome analysis inertia. My goal is to make a deal within the next 3 months.

Niche

I would like to start with a multi family (duplex or even small apartment), but don't know if I'm being too ambitious. If I start with single family homes, I would like to start with 2 of them (to still be somewhat multi family). I can make down payments for both properties.

What are your thoughts on niche (single vs. multi family) for a novice?

Strategy 

BRRRR sounds appealing, but certain aspects seem too similar to house flipping, which I'm not comfortable doing. I think I'll be a buy and hold investor and rent out properties. Is it best to pay off mortgages with other people's money (OPM) or making mortgage payments from your own job income? How you can get cash flow using OPM confuses me.

For (a realistic) example, a single family home costs 250K and I make a 40K down payment. The objective is to use OPM for the mortgage. Let's say I can get $2500/month rent tops in my area. Using the 50% rule, I should set aside $1250/month for repairs/expenses. This leaves me with $1250/month to pay off the mortgage. Taking a 30 year mortgage, it should be possible to owe no more than $1250 monthly for the mortgage. At this rate, it will take 210000/1250 = 168 months = 14 years to pay off the mortgage.

So 14 years with no cash flow? Does this seem right? If this is the case, it seems impossible to win with buying and holding single family homes.

Conclusion

Buy and hold for small apartments or multi family homes sounds most appealing to me. I am open to commercial loans. But given my short timeline, single family is fine: I just still don't understand the single family profit mechanism. (Without expecting appreciation in property value, is it pretty much no cash flow as in my above example?)

Finally, I'm soliciting your suggestions for a reading list that has worked for you on these topics.