Which path to choose as a new investor

Question

Hello everyone, I'm new here and new to real estate investing and I'm at a crossroads. I see three main paths ahead:

1. Short Term Rental (in vs. out of state)

2. Long-term single family (in vs. out of state)

3. Multi-family

I'm looking for advise around what people think I should go for and why... there's logical reasons to go with any option so I'm trying to find the reason I resonate with the most. I have a couple key things I'd especially like insight on if possible:

1. In vs. out of state.

I'm worried that Colorado isn't a good place to start investing for cash-flow (but it may be for market stability in popular areas); investing out of state to start seems like the move in this case but I know there are lots of issues someone new to the world can run into which are harder to solve with remote investments.

2. Short vs. Long term rentals

I know there's more logistics with short term rentals but with the market and interest rates of today it seems like the only way to cashflow in many areas (CO areas at least) is to do short-term rentals since the return can be higher. Any advice from someone who has done both and had a good/bad experience with one? This also pairs with the question above since I could focus in or out of state...

3. Multi or single family?

I think there are a lot of good economies of scale associated with multi-family but figuring everything out and getting a large enough down payment seems like a mighty hurtle in todays market. Is it worth the extra work in payoff later?

Just looking for some general thoughts about the above at the moment, anecdotal or otherwise. Hoping some of the advice will resonate and make the decision easier! As a background I have about 70k in cash that I can invest if needed (although I wouldn't bock at spending less haha). I have a full time job and until I see some returns I don't have the ability to quit and go all in (time wise) on real estate so I need a relatively hands off approach (hands off, as in I can't dedicate enough time to fix and flip etc... not that I'm not willing to put in time/effort otherwise).

Let me know what y'all think! Happy to meet up in person around Denver as well if anyone wants to get coffee and chat.

Thanks,

David

Chris Davidson · Answer

@David Streben 70k saved up is solid. But not knowing how long that took or how much left over after your normal w-2 makes things hard. You need to invest from a point of strength and have the ability to fix things you need to when they happen. Don't over extend yourself. However if you are saving 2k a month and the HVAC goes out you likely can get it replaced and float it on a card for a bit if you have to. However if you are saving 50 bucks a month and you have a major issue and you used up all 70k on acquisition than you have a bad situation on hand.

Either way you need to figure out what you are looking for in an investment. You mentioned need a relatively hands off approach which makes me question would you be managing a STR? You have to figure out what kind of investing you want/ can do. But quit worrying about if your area is a good place to start, and start looking at deals and find out if it is.

Bob Stevens · Answer

If you are cash buy rentals out of state Connect with someone that provides 100% hands off. Allow them to do their job, and you earn 10% net caps or better,

Good luck

Kristen L Garner · Answer

I live in CA and invest in IN. I selected IN because it is where I am from originally so I am familiar with the areas and know people there.  However, I quickly learned that if you have the right team (property manager, contractor, agent, lender) that investing out of state isn't scary and any problems that pop up are solvable.

Best of luck...you will figure out what is right for you!

Chris Davidson · Answer

The nice thing about STR is you can pivot easily into Mid term rentals if you don't enjoy the larger work load. Furnishing the unit is a large expense and increase your capital outlay in hopes of higher returns. I would just make sure you have the market for your STR. If you get a deal that works as a LTR you likely will be able to run a MTR as well, and might be able to STR depending on location.

It sounds like you can float the expense I would try and house hack like you mentioned and focus on finding a deal that works for you. If it turns out to a LTR, MTR, or STR that is up to you. However going from furnished to not means having to sell the furniture which likely won't help your numbers. I like easier to manage and prefer LTR as it fits my life style and allows me to focus on growing my investments instead of working in my investments. However the markets I work allow me to do that. Keep it up and once you find the deal it will work it self out!

Conner Olsen · Answer

House hack should be your first option. David Greene said on a recent podcast “house hack every year no matter what. If you have money left over invest in a second deal but always house hack first”

Eliott Elias · Answer

You are never going to commit to one. Be the real estate investor that is knowledgable enough about very strategy that you become adaptable when a deal comes your way. Diversity in your portfolio is good

Ryan Williams · Answer

Hey @David Streben, everyone else has given great advice here. I agree with @Conner Olsen that house hacking would be your best first option, especially if you are looking to buy here in Denver. My wife and I house hack here in the city and it's given us a ton of flexibility with finances and now we have the option to buy our next house hack and buy out of state as well.

It's hard when you first start out (and I'm still at the beginning stages too) but you have to keep the long term in mind. What is going to be the best property 10, 20, 30 years down the road? Yes you can go to some of these cash flow markets and make $400 a month in cash flow, but it will take a long time for those markets to give you serious appreciation and return. Denver is still a lot more likely to appreciate and give an asset that will give you options in the future. My advice is to get a house hack deal here in Denver, let that property start growing some equity and paying for itself, then you have the option to buy out of state with the extra income you have in your budget or look for your next house hack in Denver!

Account Closed · Answer

Hey David,

As a Denver local, I agree that Colorado isn't currently isn't the best environment to be acquiring rental properties. I am an acquisitions analyst at Tangible Wealth Solutions, a real estate investment advisory firm in Denver. We are located in the Tech Center specifically.

If you'd like to come in and have a meeting with my boss/the founder, and I, we would be happy to discuss how we could help you get started. Many of my clients are first-time investors. We are focused on acquiring property in two midwestern markets.

Let me know if this is something that would be of interest to you.

Thanks!

David Streben · Answer

@Kristen L Garner thanks for the insight! Any good articles or advice you have on finding a good team remotely if I'm not familiar with the area I end up wanting to invest in?

David Streben · Answer

@Ryan Williams Good food for thought on the appreciation bit in the Denver area, more recession resistant as well. I'll have to look into house hacks near the front range that would provide enough cash flow in a few years to be self sufficient at very least. The duplex-quadplex hunt in CO has been a challenge haha!

Which path to choose as a new investor

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