I'm looking to have my first deal as a rookie investor this year here in Toledo, OH. I will have $16k of money borrowed from relatives and I intend not to use personal money. Maybe up to $5k personal money if really needed.

From the $16k, I intend to allow $12-16k for 20%DP and $4k-5k for rehab/renovation costs. This is the reason why I'm only looking at houses/apartments which I can deal with for $60k-80k which is very, very limited. Then use a traditional loan for 30 years.

As an aspiring first-time investor, I'm torn between getting either a house or an apartment.

If I get a house, I may not have enough capital for rehab purposes to make it attractive for tenants and force higher-than-usual appreciation. Not even enough to do the "B" in BRRRR at this time. I will enjoy not paying HOAs but I have to manage the property myself.

If I get an apartment, there is the advantage of having property management available, but I need to pay HOA which kills my cash flow. The apartment units I saw are also in good condition and only require minor rehab/repair like painting which I can do. However, a lot of simulations I did with apartments give me <$100/month cash flow at ~$900/month rent. CoC is 3-7%.

I have a lot of rookie questions but here are my main ones:

1) I cannot recognize if I am being very restrictive and careful to myself. Every time I run a rental evaluation simulation, I would get lucky to have at least $100/month cash flow. I used the following assumptions: Tax, Insurances from Zillow; Rent value of ~$900/month from BP Rent Estimator; Repair 8%; Capex 5%; Management fee 10% for a house and 0% for an apartment; Vacancy 5%.

2) Returning the $12k borrowed money may be a challenge--maybe I'll just offer my relatives a percentage in equity rather than returning the $12k money, or hopefully a refi will help me return the 12k two to three years from now.

3) I'm sure the first deal will not be perfect but I definitely want to learn from the experience--hence, the question is would it be best to start with a house or an apartment? Or am I even asking the right question?

Eventually, I want to have and grow my portfolio and will be doing this for 4 more decades.

I do not have any network yet, except for a trustworthy realtor that I worked with 2 years ago when I bought my current home and an insurance agent. -- I will definitely have to work hard in this area.

Maybe I'm looking in the wrong direction or asking the wrong questions?

Any advice is greatly appreciated. Thank you.

Toledo, Ohio

3 Votes