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REAL ESTATE First Time Homebuyer help...

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Walley

New Contributor
Read Millionaire Fastlane
Oct 1, 2007
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I'm thinking about getting a house when my rent ends in two months. I've been looking at houses that will cost me about $700ish a month for mortgage payments. My rent right now is $825 a month. I currently have a cashflow from my salary after expenses of about $700. My plan is to move into this house for about a year and fix it up during my stay. It's not that bad of a house maybe just some cosmetic works on the inside. Then after it's been fixed up a little I'm planing on moving on and buying another house at that price range and do the same thing until I get a decent cashflow. Does that sound like a good idea? How can I figure out my cashflow and ROI?
 

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NoMoneyDown

Contributor
Read Millionaire Fastlane
Aug 28, 2007
520
57
64
Round Rock, TX
I'm thinking about getting a house when my rent ends in two months. I've been looking at houses that will cost me about $700ish a month for mortgage payments. My rent right now is $825 a month. I currently have a cashflow from my salary after expenses of about $700. My plan is to move into this house for about a year and fix it up during my stay. It's not that bad of a house maybe just some cosmetic works on the inside. Then after it's been fixed up a little I'm planing on moving on and buying another house at that price range and do the same thing until I get a decent cashflow. Does that sound like a good idea? How can I figure out my cashflow and ROI?
There was an article in the Austin paper a month or so ago about two women who do exactly the same thing. They buy a cheap house (usually a pre-foreclosure), fix it up, stay in it for two years (to get the $250,000/person exclusion), and sell it for a profit. Then they move on to the next house. A slow way to get rich, IMHO, but a very good way to supplement your path to financial freedom.

BTW, if you are staying in the house, there is no cash flow (unless it's a multi-unit property). The ROI can be estimated, but you won't know until you actually sell the place in a year.
 
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Walley

Walley

New Contributor
Read Millionaire Fastlane
Oct 1, 2007
130
2
24
There was an article in the Austin paper a month or so ago about two women who do exactly the same thing. They buy a cheap house (usually a pre-foreclosure), fix it up, stay in it for two years (to get the $250,000/person exclusion), and sell it for a profit. Then they move on to the next house. A slow way to get rich, IMHO, but a very good way to supplement your path to financial freedom.

BTW, if you are staying in the house, there is no cash flow (unless it's a multi-unit property). The ROI can be estimated, but you won't know until you actually sell the place in a year.
Yes I understand that I won't get any cashflow from the property until it's rented out. I guess it's not the fastlane. Thanks.
 

yellowpad

PARKED
Oct 3, 2007
30
0
10
48
Orange County, CA
Buying a house is not just for an "American" dream anymore, it's an investment. If your rental cost exceeds your mortgage "if" you were to buy a house, I would suggest you buy it and it makes sense to do so. Base on your scenario above, you would save $125 bucks a month w/out considering tax, flood and home insurance. But most importantly, you have the opportunity to participate in future appreciation or equity.
 

8 SNAKE

Contributor
Aug 15, 2007
239
44
25
Midwest
Yes I understand that I won't get any cashflow from the property until it's rented out. I guess it's not the fastlane. Thanks.
It may not be fastlane, but it is a smart idea. You will get a great education in real estate while building equity at the same time.
 

yveskleinsky

Bronze Contributor
Speedway Pass
Jul 26, 2007
2,233
498
192
42
There are two ways to look at a property: personal or investment. If the property is personal, then there is generally no cashflow- if the property is investment, then are you investing with the hopes of monthly cashflow or are your going for capital gain (quickly appreciating area-equity)? Most people, if they don't have the money to flat a property if it sits vacant, generally opt for monthly cashflow. If you have money in the bank you can go more speculative, and go for capital gains without regard to cashflow. Ideally, a person wants both: monthky cashflow and capital gains. A way for you to start down the road of REI would be for you to get a 4 plex, and rent 3 sides out. In a nutshell, it would be ideal if 3 units were already rented, so you could just step in and live in the vacant unit. If you go this route, you would want to make sure that the rents collected from the other tenants cover all of the rent (or really close to it). Income-expenses=cashflow. You want positive cashflow. ...As far as apartment investing, I would say start smaller with a multi-family and learn the basics before you jump into something bigger. ...Maybe this is slowlane talk, but I think it is prudent advice nonetheless.

Can't wait to hear all about your real estate adventure! :thumbsup:
 

yveskleinsky

Bronze Contributor
Speedway Pass
Jul 26, 2007
2,233
498
192
42
Here's another .02 -learn how to weigh advice. When you get into REI, you will get a lot of advice from a lot of different people. Some advice will be obviously bad and some will be great. You have to develop what is right for you by figuring out what aspects of real estate you want to explore. For example, you may come across someone who has made millions of dollars in flipping homes. They may give you certain advice as to strategy. ...This is what worked for them- this may not work for you if you decide to buy apartment buildings. You can get a better grip on learning how to weigh advice by educating yourself in the field that you want to study...and asking lots of questions here! :)
 

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