What would you do? Newbie investor trying to get started!

[James Hamilton]

I am about a month in on my REI education - I've been reading a ton of books, listening to podcasts, studying markets...

Curious, how long did it take for you all to pull the trigger and purchase your first investment property? I have been back and forth with SFHs, MFHs, STRs, turnkey properties...at this moment I am focused on small multi-family properties or SFHs that I can use for STRs. 

Here's where I could use some advice. I have $60K liquid that I want to use to fund a down payment, any rehab, and still have some left in reserves. So I am looking at a ceiling of around $225K. Not a whole lot of markets that I have found so far where $225K will break you into the multi-family niche. 

I would also prefer to purchase something local (St Louis) so I can learn the ins and outs of property management - i think that is very important in reducing costs and improving cash flow, at least at the beginning. Although I am not opposed to investing out-of-state if the deal is right. 

I also have a primary residence with approx $60K in equity. Househacking will not be an option at this point. 

What would you do with $60K and a strong desire to get into real estate investing? Need a little help focusing and straightening my path! Thanks to all of you. 

[Nate Sanow]

Man props to you on the education and the savings. You’ve got a great “financial runway” as Scott Trench put it so well. 

It took me about a year once I decided I wanted to invest. I managed to get a place on a 3% down with a conventional loan, from the mls but with a -$37k price reduction in my favor. That is the power of using owner occupied loans in REI. If you move out to rent it or flip it.

I’d suggest purchasing with liquidity growth in mind. Burning that $60k on a downpayment might stagnate your liquids.. what if a house is empty, someone doesn’t pay. Whatever. You get it. Really you don’t have $60 you’ve got $50 tops if you want healthy reserves. 

One rental won’t change your life financially. Neither will 2 or 3 or 4… ask me how I know :) I see so many people so excited to get ONE deal and then 5 years later they did that… ONE deal….. 

what will change your life is a blend of rental cash flow + liquidity growth. It’s REALLLLLLLLY why brrrr is king of the hill for me. flips are a close second. Imagine doing a brrrr and in 7 months it’s rented and you do your refi and when done you’ve got $70k instead of $60, because you did such a gosh darn good job getting all that capital recycled back out, and your value was so worthwhile that the appraisal comes in above what you expected. You now still have the $60k and you’ve got $200-500 per mo net cash flow and… you can do another… and… another… and….

If uncomfortable with that and not wanting a major project a STR could be good but I personally haven't done one (yet!). They seem to favor folks who want MINOR cosmetic upgrades and that's something I suggest when starting out - not a massive gut job level rehab (ask me how I know 🤪). They do seem to also favor those who are wanting to self manage, and give them self a second job…

I’m cheering for you and hopefully the friendly suggestions are well received.