New Investor Advice.. Where to start.??

Question

Hello to all, I'll set my situation with you. Hopping to hear some suggestions.

- Currently good paying job, combined income + $200K
- Savings $60K (Could save a little more if needed)
- Experience Zero.
- Currently living in Southern Ca, so there is no such a thing as cheap property to buy over here. People want $$$$$$$$$ for their run down properties, so buying ugly home, move in and fix is not a cheap option.
- Currently rent: $3k a month
- Goal get into REI ASAP, probably out of state
- Zero real estate owned
- Rehab experience zero

I have a good friend in Atlanta with experience in flipping and brrrr.  Originally he was willing to mentor me, get a property from his wholesaler. he wanted to finance the property cash and me finance the rehab. Because of current state of finances in the country he is not interested in doing any deals for now.  I know interest are high but It makes purchasing easier for the small guy like me, I understand that currently buying and flipping may not be good idea, but the opportunity of buying and holding seems good.

Currently I am back to Zero, I want to get started ASAP, but out of partner. I do not know many ppl with extra $$$ willing to invest, or the ones I know do not have much saved. I am interested in SFH or MFH.  How to fund my BRRR? Should I jump into a property and trust a contractor to run numbers for me?

Suggestions?

Sam Yin · Answer

@Rick Albert I will second this recommendation.  I'm in LA area and have been/still am investing in SoCal. I'm a very small time investor but there are deals to be had. You may need to drive about 30 to 60 miles out of LA to make the most of you money.  The benefit is hands on, house hack possibility, better control of rehab/renovations, and knowledge of your local market. Out of state works as well, but I think you would grow faster locally with the above things I just mentioned.  Population and demographics is a big player in your formula.

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.

Osazee Edebiri · Answer

The sentiments from this string is House Hacking in LA where you currently live is the way to go. I currently house hack in San Jose, here in the Bay. I would say it is more expensive that most LA County cites.  The 60k you have can get it done.

Also once you start house hacking you will immediately make $3000 a month in the money you are saving not paying rent. So evening if you don't factor in any other benefits you would be saving $36,000 a year which is more than half your current savings, this will obviously allow you to save for future investments faster.

This is assuming you find a home that lets you break even with your PITI vs the rent you are collecting, which you can do, with the amount of money you have saved and your income.

Rick Albert · Answer

You can house hack in Los Angeles with the money you have. I have clients do it all the time and I've done it twice.

Keep in mind if you invest in rental properties but still renting yourself, you have one asset bringing in money towards someone else's equity (your landlord). It can be a better strategy to have one appreciating asset help you pay another appreciating asset.

I would consider buying the cheapest 3-bed condo you can find. Rehabbing a condo is much easier than a house and a good transition. For example a $500,000 condo at 3% down is only $15K plus closing costs. That leaves you with money left over to invest. But at least you have an appreciating asset and equity building. A condo at that price might be around $4,300/month, but you can rent out each room and you get tax benefits.

With $60K, you could buy MFU up to $1M with 3.5% down. I'm not saying I recommend it as you would have $0 cash left over for repairs, but I think it is about getting creative.

Happy to discuss further if you would like.

Steven Foster Wilson · Answer

I think you should choose the market in which you want to invest in and start to build your core 4. If you want to grow and continue getting passive income it is about building that core 4 (https://www.biggerpockets.com/...). You should check out Columbus or Cincinnati. Your money will go very far, you'd be able to pick up a multifamily portfolio and start your cash flow. Not to mention Ohio is a landlord-friendly state.

Wale Lawal · Answer

Hello @Rafael P Martinez

If I was in your shoe, I would start with getting adequate knowledge and then choosing a real estate market.

Once you select a real estate market, you can get in touch with local investors and other real estate professionals to get local market knowledge.

Initially you can also partner with experienced local investors and then go from there.

Good Luck!

Rafael P Martinez · Answer

@Osazee Edebiri @Sam Yin @Conner Olsen   Thank you very  much for the advice I greatly appreciate it.

Allyson Dohan · Answer

@Nathan G. Thank you so much for this list! As a first time investor, seeing this listed out makes the process look a little less daunting. Besides having your financials reigned in, I think setting a goal is the best thing to do when first starting out!

Andrew Garcia · Answer

Hi @Rafael P Martinez, I agree with Conner.

House hacking is the best way to get started as it requires only 3.5% down and can save you thousands of dollars a month in mortgage payments.

With 60k, you should be able to find something to house hack and still have tens of thousands of dollars left over to put towards your next deal.

With your drastically reduced mortgage payments, you should be able to save $1,000+ per month that you can put towards REI.

The median home price in Atlanta is around $400k so for a newbie, you should be able to get 80-85% LTC financing on a BRRRR.

Therefore, you will need $32k for the down payment and $8k for closing costs to be very conservative.

Then, depending on how much you spent acquiring the house hack, you should be able to buy your first rehab within a few months.

A few months later you can refinance into long-term financing, take all your money out, and repeat the process.

That would be my recommendation.

Alternatively, if the house hack idea does not suit you, you can jump straight into the BRRRR strategy.

Make sure you have a solid contractor, agent, and property manager when investing out of state.

Hope this helps! Let me know if I can be of any assistance.

New Investor Advice.. Where to start.??

Most Popular Reply