Just Starting out. Best Strategy?

Question

Hi!I am looking at buying my first property sometime before the end of the year (trying to give myself a nice Christmas present). I have a few questions though for current investors in Northwest Arkansas. I am unsure of the strategy that would work best for this area. I would like to house hack and get a duplex, but I can't seem to find a deal good enough yet with the prices in the area. Are there other strategies that you have seen work well for you here? Brrrr? others? Thanks!

Nathan Gesner · Answer

I recommend you build a strong foundational understanding of real estate investing. 1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turneror The Unofficial Guide to Real Estate Investing by Spencer Strauss. 2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey. 3. As you read these books, watch the biggerpockets podcasts. This will help clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes. 4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. Biggerpockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you. 6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education. You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Eliott Elias · Answer

If you can BRRRR it you can flip it. Try to find something 75% of its value and give yourself a chance to have multiple exit strategies

Ty Ash · Answer

Hi @Matt Aiello!I definitely recommend that you keep/start learning! Podcasts, Books, and Mentors you find by networking. I'd pick up a copy of Set for Life by Scott Trench as it has a good framework for financial independence, especially for a newer investor. Real Estate is just a part of your total financial picture so don't become too focused on just real estate. You'll want to learn more ways to increase your income now and in the future, keep your expenses low, and take the difference to invest into assets, real estate/business. As already mentioned above, a house hack will probably be one of the best strategies for you to get started and take action while giving you a great return because of the low % down needed to get started. Once you get to this point, make sure to run your numbers for both while living in the house hack (lowering your living expense to less than what it would be to rent in your area) and post move out where you need to be at least break even after accounting for your monthly payment + maintenance, capex, vacancy, property management. In today's competitive market, I've found that it's better to focus on how much reserves you can build outside of your mortgage because finding post move out cash flow is definitely a challenge right now! This allows you to take action and start getting your equity built. Best of luck getting started! Here for you with any questions you have along the way!

Juan V Lopez · Answer

@Nathan G. gave you the most in-depth and detailed response you'll get on this. I feel pointless trying to add anything on lol.Househacking is a great method to start (once you have a good foundation of knowledge and finances). Get very narrow in your focus and find the deal that will work with your numbers. It's out there. Find it.

Alexis DalPont · Answer

Hey @Matt AielloI see that people are recommending getting educated, which is definitely important. However, you don't want to delay your purchase as you get educated. I would recommend buying something sooner than later. The sooner you take action the better. Don't get stuck in analysis paralysis, which is easy to do. For the NWA market, the appreciation is what is going to pay off in the long run. I personally don't think it is super important to get a "good deal".

Jeremy Kitchen · Answer

You can always run the numbers of what would work, and submit offers! Worst they can tell you is no. But going FHA and putting 3-5% down and house hacking the other side/possibly half of your side as well is a great way to get started!

Ryan Blackstone · Answer

@Matt Aiello. I have seen most investors get their deals through their websites, cold calling, and direct mail marketing. It is a huge numbers game. You will have to call 600 to get 1 lead, and that lead might not even want to sell at the right price. So, I would say stick to a prospecting strategy that you are good with and do it every day to a high volume of people over a long period of time. You will find a deal if you do that. I bought two duplexes last year for 180k a piece that are now worth 350k after BRRR. A great strategy in a college town is to close in the garage and make a third bedroom. We have a meetup every second Wednesday of the month in Fayetteville that you can come to. There are some great investors that show up there that will tell you exactly how they are finding deals. I do want to stress that it is very hard to lose at house hacking... You have to live somewhere, and it is always good when your tenant pays even half of that as opposed to none of it like a person buying their single family house would be.

Conner Olsen · Answer

@Matt Aiello Use NWROI when you are analyzing house hack deals. It's not uncommon to see returns of 50%+. When comparing that to a BRRRR or long-term buy and hold it's a no-brainer.

Drew Sygit · Answer

@Matt Aielloas already stated, start researching and getting yourself ready!You do need to understand a market though, BEFORE jumping in blindly! How many real estate agents have you chatted with to gather market info? - How many properties do they think sell to investors?- Are investors buying for LTR or STR?- How many flips are done?- Etc...

Andrew Garcia · Answer

Hi @Matt Aiello, obviously house hacking is a good strategy.I am not super familiar with the area but even if you don't cashflow or have no mortgage, house hacking is still a good strategy.A significantly reduced mortgage payment is still a win.BRRRR is a great strategy but it is not super beginner-friendly. If you choose this strategy, make sure that you have a great team supporting you.Buy-and-hold is a tried and true strategy that still works today.STRs can be a good option.It really depends on what your goals are and where you are financially.Hope this helps! Let me know if I can be of any assistance.