How to go from Rent Living to Rental Investment?

Question

Hello Guys,

Hope you'll are doing great in life!

I am currently 30 years old, working a W2 full-time job, and living in a Rented apartment in Fairfax, Virginia. I don't have my own Primary Residence yet. Which strategies I should opt for in my real estate investment path?

My Short-term goal i.e. 1-year goal is to have my own Primary Residence + 1 Rental investment unit

My Mid-term goal i.e. 3-5 year goal is to get at least 1000/month of passive income cash flow

My long-term goal is to scale my Real Estate Investment Portfolio and replace my monthly W-2 income with Cash-flow income and then eventually have 13M Total Asset

Please advise, in Today's market, how should I go from absolutely Zero home to Rental Investment homes

I and my Wife are not willing/comfortable to house-hack in the same apartment/unit, however house-hacking via short Multi-family is fine with us.

Also, to achieve my long-term goal I guess I need to buy-and-hold. I am also ok to invest in-state markets or out-of-state markets.

However, I am not sure which strategy should I use to start as I currently don't even have my own primary residence?

Please your input and time are valuable to me. I would appreciate all the help :-)

Thank you very much in advance

Jessica Evans · Answer

My recommendation would be to look into purchasing a multi-family (2,3,4 units depending on your budget). You can take advantage of owner-occupied financing with a lower down payment and live in one unit and rent the others. This should allow you to save money on your monthly housing payment, which should help with buying the next property for your mid-term goal. I think starting out by making the property you live in make money for you is a great first step, as it will help you to become more familiar with some of the different parts of real estate investing that may be new to you, with relatively low risk.

Anthony Torri · Answer

Yash,

I think those a doable goals. A lot of people suggest creating huge goals, which is great, but not for the beginning. I agree, finding new home is very important and it will also be your first investment property. The FHA 3.5% down loan would be your best bet, but don't sleep on researching state specific first time homebuyer programs. In CT we have a housing authority entity that has many different special loans, some that will even provide forgivable grant money to cover the down payment.

Brandon Wagner · Answer

Welcome to the Real Estate investment world!  It is a great place to be.  I'm also investing in the Northern Virginia area.  The best advice I can give is to start with a primary residence.  That's the cheapest and most efficient way to get started.  Cash flowing in Northern Virginia, is going to be very difficult to do without house hacking.  I personally look at it from the perspective of I may not be making more money, but I can at least save money on my housing expense, which in the end is the exact same thing.  I also recommend starting to network in the area.  You clearly have already started by making this post, so you're on the right track.

Nathan Gesner · Answer

Read "Set for Life" by Scott Trench or "The House Hacking Strategy" by Craig Curelop. They both explain how to buy your first investment property, live in one part of it and rent the rest out. This is one of the easiest, most affordable ways to get started.

Russell Brazil · Answer

Start with how much capital you have. You'll need roughly 3% down-payment and 3% closing cost to buy your first primary residence.

Do the backwards math from there to see what you can afford.

From there pick a convenient commuting location that is good for both appreciation and rent growth. Live there 1 to 2 years. Move out, rent it out, repeat the buying process.

As a general rule in the DC metro area...locations convenient to major commuting routes and easy meteo accessibility often drive appreciation and rent growth.

Dock Newell Jr · Answer

Hi Yash,

Congrats on starting to plan your real estate journey. Two strategies that come to mind are house-hacking and BRRRR. House-hacking a duplex would be a great start. I suggest getting an FHA loan and putting down 3.5% to finance. Fairfax looks like an expensive market, so consider getting a decent down payment and/or moving to the surrounding area. Lastly, find an investor-friendly agent to help you find a place that meets your needs.

Good luck!

Grant P. · Answer

Hi Yash, first of all, let me just say congratulations on taking the first steps to reach out and work towards a goal that you have planned out. I was in a similar position as you a few years ago. I took the same route, posting here asking for advice on my first house hack. I have since continued in my real estate journey and became an agent myself with the goal of helping people exactly like you.

I've thought about situations like yours on many occasions since I became an agent. Even though the market was tough when I began, high-interest rates in our area are such a high hurdle to overcome, and you need to be incredibly motivated.

Your short-term goal is ambitious depending on your current cash on hand and income levels. A primary residence is very attainable, but an additional rental investment might depend on whether or not you're comfortable investing long distances in cheaper markets. As David Greene loves to mention on the podcast, house hacking is definitely the way to go when starting out. Especially in the northern Virginia area. If you decide to rent out your primary and transition to another house hack in one year, you'll be well on your way to your goal. Sadly for northern Virginia, multi-family residences are few and far between (as you've likely noticed), so at the very least I'd say attaining a primary residence to start building equity should be the priority, and once you have a home base, working towards that investment through more creative options.

I think your next step should be talking with a lender to learn more about the home-buying process and get an idea of what your household can afford, then narrow down a location you're comfortable with from there. I can send you a connection, pass along the lender I use and recommend to all my first-time home buyers.

Hope this helps! Would love to talk with you more and see how I can help get you started on your goal!