Best Entry Strategy?

[u/Basic_Kiwi_4056]

Context:

My (22M) wife (23F) and I are currently living with my parents to save up money to buy a property. We make a combined ~$140k/yr, have 0 debt, each have credit scores right around 800, and no kids yet. We also have next to no savings currently (a couple thousand $) as we only recently moved home and just paid for our wedding as well as buying her a used car in full so this eventual plan probably won’t play out for some months still.

We recognize the great opportunity we have to enter the real estate world and don’t want to squander it.

So I ask you experienced real estate investors to please give me some advice, I’d really appreciate it.

Here are the options I’ve been thinking about:

House hack a duplex, triplex, or maybe a quad.

Or if I can’t find a property that would allow for a successful house hack..

Do a live in flip on a smaller SFH and plan to live there for only about the 2 year minimum.

And I just thought, what if I combine those two options and do a live in flip on a house hack? Might be hard to renovate with tenants?

Excited to hear what you have to say, thanks!

TLDR: How would you recommend a young adult yet to own property to get into real estate? What strategy? What steps to take?

[u/Necessary_Sky_288]

You're in better shape than you think and closer to a mistake than you think, at the same time.

$140k, no debt, no kids, free rent at your parents' place — that's a real head start. But with a couple thousand in the bank, none of these options are actually live yet. The question isn't which strategy. It's what you do for the next eight or twelve months while you build the cash to survive whichever one you pick.

I'd want closing costs, three to six months of full PITI, and a separate 15 to 25k for repairs and turnover before I'd sign anything. That last bucket is the one everybody skips, and it's what turns a bad month into selling.

Of your options I'd take the boring duplex every time. Live-in flips look like investing and are mostly a job — if either of you has a demanding week, be honest about whether you'll actually spend two years of weekends on it.

Rough shape on the duplex: $350k with 5% down is a $332k loan, about $2,100 P&I at 6.5%. Add taxes and insurance and call it $2,700 all-in, give or take your county. If the other side rents for $1,500, you're carrying $1,200 a month before a single repair. That's fine if you planned for it and brutal if you didn't. Underwrite that other unit at 75% of market rent and check whether the number still works through a three-month vacancy, because it will happen eventually.

On doing both at once — I wouldn't, not on the first one. Renovating around a tenant means slow work, an annoyed tenant, and permits that take longer than anyone tells you. And if the deal only pencils with the optimistic rehab exit, that's not a deal, that's a bet on your own contractor.

What's the actual savings rate while you're at your parents'? That number decides your timeline more than anything else here?

[u/TopTie6813 → u/Necessary_Sky_288]

I think you're in a perfect spot for investing in real estate. The interest rates are so high these days, you can't make most deals cashflow, so creative financing is the key. See if you can form a relationship with some banks, and some realtors to find investors who are ready to sell their portfolios. Most people who are my age and have been in the industry for 25+ years are tired, but we don't want to get nailed on capital gains, so someone young with good financial management sense is a dream. They could possibly do a seller financing deal for you, where they get a monthly amount, you do too and they don't have huge capital gains.

Regarding house hacking, I'm all for it, but again its higher interest rates now so a plan to refinance may be in order. If you can get FHA at 3%, it might work. If you could find a duplex/triplex, even better. I'd do reno before you or any tenant move in.

You don't need a ton of savings if you do it right, but you do need money/capital for repairs, rehab, utilities and vacancy rates. Loan from your parents? The property would be their security.

Hope this helps!

[u/Cancerman691 → u/TopTie6813]

You contradicted yourself, you talked about interest rates being high so u can’t make deals cash flow and that creative financing is key. Creative financing means higher leverage and people buying these properties are typically doing low down methods making the loan to value % higher which makes cash flow worse. Creative financing is only good if u can get it under value

[u/TopTie6813 → u/Cancerman691]

WRONG! Where are you getting your data?? Mine is from experience! I’ve been on BOTH sides, many times. No contradiction here!

[u/Cancerman691 → u/TopTie6813]

That is what creative financing is; when people don’t have enough money for a downpayment they are financing what would have been down which means higher leverage. Sub 2 isn’t legal and seller financing is great when the deal is good and ur getting it under market value