The real estate approach for me?

Question

My wife are in our mid twenties. We don't have kids yet, but plan to eventually. The most important things to us are family and being good people. Both of us work full-time corporate jobs in the bay area, and neither of us are passionate about those jobs. Whenever I have been asked what my dream job is, my answer is that the profession actually doesn't matter much to me. Work is work. My dream job is whatever will give me access to my time and pay well enough that I can do the things that I love - spending time with my family, being a good dad (when the time comes), traveling, surfing, boating, etc. I have always been fascinated by real estate and believe it could be the key to reaching my "career goal" of having time and resources to do what I truly enjoy. I would love to quit my job and run a family RE investment company.

As far as experience goes, we don't have any yet. We are living in San Jose, renting out the basement apartment from family (for an affordable price) while we save up. We would like to stay in the area if possible, but sticker shock is real and the bay area is not cheap. We have been reading books, taking udemy courses, and listening to the BP podcast. We've talked with friends and family that have been involved in real estate deals and we participate lightly in the forums here, just trying to learn whatever we can. The common reply to our posts is "well, what are your goals," or "what type of real estate do you want to be involved in?" Those are tough questions to answer. I mean, the first step is probably to buy a starter home and house hack. Thinking longer-term, I know I want to buy and hold, and I like multifamily, although multifamily is a loaded word - there is a big difference between a duplex and a 150-door syndication. Long-distance small multifamily BRRRR is intriguing to me, although I'm not sure where. I have also considered joining a coaching group that would give us access to passive deals, introduce us to other investors, and teach us how to underwrite big apartment buildings.

I am writing this post because I need some direction, and I'd like to see what others in the biggerpockets community might recommend based on their own experience and the information I've provided. Please do not comment if you are just a real estate agent looking to win a new client. I am looking for genuine advice.

Osazee Edebiri · Answer

It's good you are thinking about it and planning. I definitely wish I would I have the base understanding I have now, when I graduated college.

My thought is focus aggressively on "Delayed Gratification".

Many people always talk about ways to focus on buying property with low or no money down, or ways to do things on the low. However, the reality is the more capital you have the easier and the faster you will scale, to get the family RE business you are shooting for.

So, I am not saying become a scrooge to where you burn yourself out and have no joy in your life, and I will tell you I still struggle with this concept, but I like to think I am getting better with it on the daily. Watching the likes of the way a David Greene operates is super motivation in the regards of delayed gratification.

So set minimum monthly savings goals, and save over those amounts. Create one, two or more accounts that funds go into that are only dedicated to purchasing property, that you act like they don't exist until you purchase your first one.

If can be helped, maybe don't have your first kid till after you purchase your first property. I say this because, it is very likely your first investment will be a house hack and not have children especially a new born, will give you the most flexibility to be able to capitalize and maximize your potential income from that property.

I would focus on continued free education for now, you don't need to pay for any kind of learning until at least after you get that first investment, since there is more than enough information out for you to be able to do that without paying for education at this point.

Good Luck, Keep us posted on how its going.

Jeet Sangha · Answer

Hey Nick! I think it would be a wise decision for you to consider purchasing a starter home or a multifamily property with 2-4 units. Making the numbers work in San Jose can be challenging unless you come across an exceptional opportunity. I recommend exploring cities like Gilroy and Hollister, which are experiencing growth but are still relatively affordable. Recently, there was a condo listed in Gilroy for just 325k, and it was in great condition, ready to move in. Although it likely attracted a lot of interest, it demonstrates the significant price difference between San Jose and the southern county area.

Tristan Romero · Answer

Hi Nick,

I was born and raised in South Side San Jose and just recently purchased my first investment property in Roseville CA as a house hack with my gf earlier this year. I also got my RE license shortly after buying my house. I would say continue doing what you are doing reading and listening to podcasts. My next suggestion for you would be to the narrow down what "strategy" you would want to focus on. As some of the other comments you got suggest househack I couldn't agree more. With wanting to do so in SJ might be a little tricky so you would probably want to look at the surrounding cities that are more affordable. I would love to hop on a call to understand your situation a little better. As I always advise my clients, now might not work for you to start investing but what you can do is put yourself in the best position to do so wether that's 6-12 months from now.

Steven Gary · Answer

Hi Nick.  Being in your 20's and believing that Real Estate can propel you to live out your life in freedom is an obtainable goal and will take some time and sacrifice.  It isn't necessarily for everyone but house hacking your first property with maybe a FHA loan to help get you into your first multi-family or single family home could work.  The biggest issue is cash flow in the bay area with the median price of 1.5 million as of May, 2023.   Even with house hacking and squeezing out what you can per room there could still be an annual net loss.  There are some areas that are less expensive like Gilroy, Hayward, San Lorenzo, San Leandro, etc. where the price point is lower where you might be able to achieve this easier.  There would be a commute involved so that would be your primary pain threshold.  However, once you have one property under your belt it gets easier from there as you learn the ins and outs of managing your property and finally...using it as leverage to help grow your portfolio.

- Steven

Nick Hulme · Answer

Thanks for the replies. I'll add a bit more detail about our situation...

My mom is widowed and lives in south San Jose with my 13-year-old sister. My wife is in a starting position at Apple, and she has a strong chance of being promoted within the next year or two. I am the head of sales at a medical device development company. Since we are young, our salaries are low by bay area standards, but we both have good care trajectory and make a combined $155k gross, plus commission bonuses. We rent the basement apartment for $1,000 a month.

Long story short - we're not planning to jump ship on our careers right away. We anticipate real estate investment being a side hustle for the first few years, unless we can instantly make significantly more than our current income. Leaving town is also a tough option to consider because, not only would it force us to find new jobs, but it would separate us from family that needs us around.

Zane Cress · Answer

Short answer - Start house hacking

Find something you can get at a low down payment and make it work for a year, maybe build some sweat equity on a fixxer upper, learn how to fix things on google and youtube. Grab a duplex if you can, are you stuck in your current market or do you have mobility to a more affordable market? Could you find something to buy that has an ADU already? Live in the ADU and rent out the house? Find a split level with a separate basement apartment to buy and live in, you see how that works already. Without kids there are so many options in front of you. Start small and understand key concepts, then start snowballing. In 3-4 years you could have multiple houses that you got into for 5% down, tax benefits from all, rent from all, freedom to plan a bigger move.

Tim Ryan · Answer

Nick, Love you post and life question.  Here's is what I am preaching to people in their 20's, including my own kids.  It is 100% ok, and actually preferable, to buy a real estate rental before you buy your primary residence.  I live in LA so I understand the prices here and NoCal.  It's ridiculous. So where?  Out of state of course.  It's the only way.  That has risks too. But you can navigate them.  Here's a story I'd like you to hear.  In 2011 I bought a 42-Unit Apartment with a business partner in Chattanooga TN (yeah, I was in that market before anyone. Now it's booming).  I placed an ad and hired a 20's, newly wed couple, to be our onsite managers. It was a part-time position. He was a police officer (hated his job) and she was a freelance photographer.  They came to me one day (like your post) and said they really want to own rentals someday but know they need to buy a house first, etc. etc.  I told them my strategy of getting rentals first, and I pointed out that they were in an incredible emerging market.  Long story short, they bought two duplexes which provided positive cash flow. Their friends struggled to buy their own houses and make the mortgage payments. Finally, they were ready to start a family and had twins! Then the time came to buy a home.  What I told them would happen did.  They went to the bank and when they showed their portfolio of duplexes, the bank bent over backwards to work with them and even included the income from the rentals towards their household intake.  I'd love to see you follow a path like this. Problem is our parents, uncles and aunts, colleagues, and friends will all expect you to buy a home and "look successful". So, you'll need to fight against that.  You can do it.  PM me if you'd like to talk further.  BTW, I have three kids 26, 24, 22.  Two own rentals, the third will this year, none owns own house, and doesn't want to at this point...

Zach Edelman · Answer

Another vote for Avery's book! Would seriously recommend checking out the STR path as the cashflow is typically stronger as compared to that of LTRs or MTRs.

Napoleon DeCiutiis · Answer

Nick,

There are a lot of great books out there to help you start. I would recommend Avery Carl's "Short Term Rental, Long Term Wealth", Brandon Turner's "The Multi-Family Millionaire" and J Scott/Dave Myers' "Real Estate by the Numbers".  Start hanging out with people in the game, as previously said, attend the meetups and learn as much as possible- open your ears to both the success and the defeat, and learn lessons from both of them.  Keep your options open and always be looking for when that "Golden Pony" rides by, and don't be afraid to jump on. Good luck, and keep us updated here on BP!

Erin Church · Answer

Hey Nick,

It sounds like getting some experience in the RE world would be beneficial to help you pick a path. Have you looked for meetups around you? I'd definitely try to attend those. Also, if there's an option to work with a wholesaler (one that has a few employees with titles containing words like acquisitions and dispositions in them), I think that could stat to help you see what that side of things look like. Depending on the wholesaler, it may not fit your "good person" goal. There are great wholesalers out there though - they literally help people from going into foreclosure, get rid of a burden that they would pay any amount of money to not think about, etc.

You could also start to dip into the agent world by being an assistant. I don't think most agents are "in real estate investing", but having a better understanding of the process and laws is useful.

Maybe you'd want to help out a property manager? Again, lots to be learned there. You could offer to be boots on the ground for a flipper or someone BRRRRing a property in your area - checking up that the contractors are doing what they need to do, sending pictures, and learning what to look for (the investor should be able to tell you what to look for, otherwise, it isn't a good fit without you already having that experience).

Unfortunately, most of my suggestions are to work more. I feel like this is the best way to get the experience and really "own" the information. It sounds like you have family in the area that you'd like to stay around, but CA isn't a state I'd invest in. The laws are quite biased towards the tenant. I don't know if it's worth it to you to consider moving to a lower price point that is landlord friendly to achieve your dream "more easily" or not.

I do want to say - huge kudos for diving into learning! There's so much good info on in BP - drink it all up! :)