Investing in a Syndication or Investing in a House Hack

[Ying St.Cerny]

A bit of personal background. I am currently residing in southern NJ, just over the bridge of Philadelphia. I work a typical 9-5 corporate job. I am very new to real estate, just a couple of month. My rental apartment lease ends in June 2023 and debating if I should renew. I would like to get started by house hacking. However,in NJ and Philadelphia, on-market deals in the area that I have evaluated are mostly negatively cash flowing, and most deals that would be positive cash flowing would be off market, but would most likely need some renovations. In addition, these markets are not really preferred by areas to invest in by most investors. I thought about using an FHA loan, but that would wipe out all my cash saved, in addition to the potential risk listed above. I could park my money into a syndication and let it accumulate, while simultaneously investing in learning more about real estate on the side as an alternative to immediately jumping in. I am not in any financial distress or rush, but I would like to be smart and build a strong foundation in becoming a real estate investor. Any advice is greatly appreciated :)

[Matt N.]

Ying,

Here is what worked out for me. I am retired at 33 years old. Writing you from beautiful Sun Valley Idaho, on a ski trip. Disclaimer: buying houses all cash is not the smartest way, this is just what I did at the time. My journey was a marathon, not a sprint. Started in 2013 with the hack, and the rest of the journey is below. 

I house hacked right out of college. Bought a 3 bed in Manayunk with PITI @ $1000. Rented the two spare bedrooms to my friends for $500/month each. I lived for free. Built in a 4th, smaller bedroom. By then I rented that for another $500 and as roommates changed over, I upped to $600 for the bigger rooms. I was making $700/month + saving around $1000 in rent. So I socked away that $1700/month for a while and bought a house for all cash in brewerytown. Rental #1. from a wholesaler.

Fixed and rented #1 for $800/month (small and not a great house). Pulled a HELOC on #1 and used that to buy Rental #2, all cash again, wholesaler. #2 rents for $1450 a month. I guess I just like showing up at closing with a briefcase full of money. Rents from #1 and #2 were used to pay down my HELOC quickly to avoid interest.

Rental #3 came from a wholesaler. $21k cash purchase (used that same heloc, AKA SOMEONE ELSES MONEY). Easy rehab. Rents for $900/month... im now I'm at $1700hack + $800 #1, + $1450 #2 + $900 for #3 and I'm making $3400/month after PITI but before any expenses. Not bad.

Rental #4 another all cash deal. $35k... What was I doing!!!. Squatter special 3 unit. One family was living in all 3 and running an illegal daycare out of it. I came in with a lease agreement and an eviction notice, their choice. They signed the lease :) ... Triple net lease for $900/month. That means I FIX NOTHING AND PAY NO BILLS.... $4300/month Not great but not bad for a young person with a full time job. #2-4 were all bought with that same HELOC. Just kept recycling those benjamins.

Rental #5 First BRRRR! 3 units. Hard money 90k purchase, 80k Rehab. Cross collateralized my free and clear properties to secure the loans with no money down :) Maybe buying all cash was smart? At the end of the day, COVID happened and my refi did a drive by appraisal and I got screwed. Had to bring $20k to the closing table to get my final mortgage. PITI was $1200. Rents for $3200 total, so that another 2k for me.... we're at $6300/month now.

#6 and #7... due to low interest rates and my income I bought two homes for around 100k each. They rent for $1200 and $1100. PITI for both is $1100/month. Thats another $1200 for me and now I'm at $7500/month income after debt servicing and taxes.

This is when I quit my full time job. People here might say, $7500/month is not great. But Hey. I'm fishing and skiing every other week :)

Good luck. I hope this is helpful or useful in someway!!