Should I start/Where to Start with Real Estate Investing

Question

Hello,

I've read several books and have had a solid mentor over the past couple years. I just joined bigger pockets, although I've been listening to podcasts for a while. I've wanted to get into real estate for the past couple years ever since I started my new career during covid. I need advice on if it's time for me to get into real estate this year or not in my current situation. I'm an airline pilot and my girlfriend (fiance in the next few months) is a doctor in physical therapy finishing residency this year. We are both in our mid-twenties and really just want to get started investing/owning a home and be successful. Together we make ~200K and will go up pretty rapidly over next couple of years. With that comes debt from school and 2 cars totaling 250K (n0 credit card debt). We have 50K in the bank and saving for a house, wedding, etc.

What would you do in our situation? Should we just pay our debt off over the next 3-4 years and keep renting? I've wanted to buy a house, fix up and live in for a year or 2 before getting renters. Should we look at multi-family? Any advice would be great. Maybe this is more so geared to finance rather than real estate, but is it okay to invest in real estate with debt (low interest rate school loans)?

Thank you for any responses! I'm new but hoping to be a lifelong member and successful investor.

-Jimmy

Nathan Gesner · Answer

Welcome to the BiggerPockets forums!

I'm in a rush, so forgive the curtness.

Pay off all debt before investing, including your low-interest student loans. If you don't believe me, do the math with two scenarios:

1. Pay the minimum on student loans and invest.

2. Pay the student loans off as quickly as possible, then invest.

The latter scenario will produce a greater return, not to mention the psychological/emotional value of being free from debt.

Secondly, consider finding a new mentor. There's no benefit to a coach/mentor that spends "the past couple years" and produces nothing. First off, they should have told you to focus on the debt so you can invest from a position of strength, but you are still asking that question a couple years later. Second, it doesn't take two years to figure out how to buy a house and manage it.

Here's my basic beginner advice:

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 Turner or 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 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.

Dominic Pizzi · Answer

Hey Jimmy!

Great story for you guys! Financially speaking, I am the same way with investing in real estate with debt attached to my name.

My honest opinion would be something along the lines of purchasing a Duplex/Multi family property with a FHA loan or if you can afford the 20% down payment yourself, go that route. The possibilities of you guys living in one unit where the tenants you have rent out the remaining will bring you passive income to put towards your principal each month. If you go the FHA route, after one year of living in the property you can leave it and rent the whole thing out as passive income when going to purchase another property.

Just something to consider!

Gordon Campfield · Answer

Hey Jimmy!

Congrats on the pilot career and soon-to-be fiance! You're doing better than most 20-year-olds.

To answer your question though, YES, it is ok to invest in real estate with debt.  As long as it is low-interest debt.  I would make the minimum payments and use your free money to buy real estate and grow your overall net worth.

I do not however recommend you purchase a property, rehab it yourself and rent it two years later.  Probably for the same reason you would not recommend I fly myself to San Diego the next time I go there.  Basically, stick to earning income the way you know how and invest with a company like ours (JPC Real Estate Consulting) that does investing & development full-time.   This way your investments make the maximum return.

Unfortunately, a lot of people try to become investors/developers part-time and find out the hard way it is competitive, time-consuming, and there is a steep learning curve.

Send me a message if you want more info about real estate investing and I can explain in more detail.

Carlos Valencia · Answer

Hey Jimmy congratulations to you both on your engagement and current careers. Its ok to invest in real estate with debt as long as your total DTI including your new mortgage with taxes and insurance does not exceed 45% of your total income. If we use 200k as an example for your income that means 200k/12 = 16,666 X 45% =7,500 is what your total debt can be including your mortgage and any minimum credit, student loan and car payments you may have. In order to have a higher borrowing power you might want to pay off which ever minimum payment is the highest to qualify for more. Thats some insight on how debt works against your income and what to look after when deciding if you should pay something off.

@Albert Bui @Matthew Kwan

Should I start/Where to Start with Real Estate Investing

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