Starting as a new investor in an expensive area

Member since 2023 · 8 posts · 8 votes

Hi All,

I've been lurking and reading for a little while now, so wanted to just post some questions I had to see if anyone has opinions that they'd be willing to share. I'm in the Seacoast region of New Hampshire, and real estate is very expensive, so as a first time home buyer/hopeful real estate investor it's pretty daunting. I like the "house hacking" idea that I've read here at BP and in other places quite a bit, but even as I've been doing the math for that strategy and others, the high prices seem to really make starting out in such an expensive area awfully difficult. Do I need to adjust my expectations? Work extra hard to find the right deal? Curious how others have dealt with starting out their investment journey in a really expensive area. Thanks a lot! Looking forward to hearing your thoughts

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Mitch HartfordPro Member

Investor · Rochester, NH · Member since 2017 · 31 posts · 14 votes

I know this will most likely be unpopular, but, as a guy who has lost everything trying to push too hard in the past, I would suggest earning and saving more until we are certain the market is not going to correct or has had the correction. Just my 2 cents. Good luck!

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Abbey Humphreys
Member since 2023 · 303 posts · 324 votes
3y
Hey Nick- nice to have you here. That is a lovely area- Portsmouth has so much charm. As far as the REI opportunities, I agree that investing can be intimidating in an market that is so expensive. House hacking can be a good method to deploy but that is not your only option.
Networking in order to get your feet wet and potentially finding off-market deals is certainly feasible, as well as buying a fixer-upper and even utilizing the BRRRR method, a tried and true way of scaling your portfolio (if that is a goal of yours).
There is also always the option of investing OOS. If there is a market that you are familiar with/you have some sort of connection to- it is always possible to kick off your REI career in an area outside of your hometown. This is particularly advantageous if said market is less expensive!
1 Reply
Richard Dale-Mesaros
Investor · Campton, NH · Member since 2010 · 285 posts · 143 votes
3y
Starting out there are several strategies to make money in real estate using very little or no money, plus we have various ways to find off-market deals such as delinquent tax payers, driving for dollars, foreclosures, redemption deals, non-town-tax-paying entities, wholesalers, tax deed auctions, estate homes, the list goes on - there are always opportunities regardless of what area you live in!
1 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Richard Dale-Mesaros:

Starting out there are several strategies to make money in real estate using very little or no money, plus we have various ways to find off-market deals such as delinquent tax payers, driving for dollars, foreclosures, redemption deals, non-town-tax-paying entities, wholesalers, tax deed auctions, estate homes, the list goes on - there are always opportunities regardless of what area you live in!

Hey Richard thanks for your thoughts, that's a good idea to go a less conventional route to source a lead like that, I'll look into those and how they may fit, thanks a lot!
0 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Abbey Humphreys:

Hey Nick- nice to have you here. That is a lovely area- Portsmouth has so much charm. As far as the REI opportunities, I agree that investing can be intimidating in an market that is so expensive. House hacking can be a good method to deploy but that is not your only option.
Networking in order to get your feet wet and potentially finding off-market deals is certainly feasible, as well as buying a fixer-upper and even utilizing the BRRRR method, a tried and true way of scaling your portfolio (if that is a goal of yours).
There is also always the option of investing OOS. If there is a market that you are familiar with/you have some sort of connection to- it is always possible to kick off your REI career in an area outside of your hometown. This is particularly advantageous if said market is less expensive!

Thanks Abbey! Portsmouth is a great town it's true, unfortunately a little too pricey at least to start but hopefully someday! Fair point about OOS though, I just wonder if that's biting off more than I want to chew to start. BRRRR method is a good idea though, I may have to start targeting that and looking that way. Thanks so much for your thoughts, really appreciate it!
1 Reply
Jaylan ArcherBusiness Member
Real Estate Agent · Portsmouth, NH · Member since 2014 · 150 posts · 65 votes
3y
Hey Nick!
Congrats on taking the first step and posting about what you are looking to do. Getting around others that have accomplished what you are looking to do is always important.
I'm actually a real estate agent out of Portsmouth and an investor myself, so you can take everything I have to say with a grain of salt. :)
The seacoast really is expensive - but with every negative - there is always a positive, it also has huge rental demand with steep prices for rents. If you are starting out I most definitely would recommend going the FHA owner occupant route and purchase a two to four unit. This is the best way to get started in real estate with little money down, and start the process of investing without a ton of risk.
I would focus on the areas you would like to be in and see what the market is there. Some of the seacoast has historical high appreciation and steady rental rates while other areas are known for a bit more cashflow and less appreciation over time. If you haven't already connected with a great local lender, I'm Happy to send over a couple of options for you to consider.
Archer and Associates of KW Coastal587 Reviews
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Richard Dale-Mesaros
Investor · Campton, NH · Member since 2010 · 285 posts · 143 votes
3y
Quote from @Nick Sadler:

Quote from @Richard Dale-Mesaros:

Starting out there are several strategies to make money in real estate using very little or no money, plus we have various ways to find off-market deals such as delinquent tax payers, driving for dollars, foreclosures, redemption deals, non-town-tax-paying entities, wholesalers, tax deed auctions, estate homes, the list goes on - there are always opportunities regardless of what area you live in!

Hey Richard thanks for your thoughts, that's a good idea to go a less conventional route to source a lead like that, I'll look into those and how they may fit, thanks a lot!

Feel free to give me a call, happy to chat
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
3y
Brandon Turner used to always say there is a good investment market within a 1-3 hour drive of an expensive market.

If your market is too expensive, you may just need to drive out a bit.
Furthermore, the goal with a house-hack is that your living expenses(the rent you would normally pay is decreased).

We also are in a weird real estate market where prices and interest rates are high.
You may need to put down more of a down payment to properly cash-flow.
[email protected]917-280-8544
Basit Siddiqi CPA4.979 Reviews
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1 Reply
Josh Bowser
Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes
3y
Hey Nick - house hacking is typically the best way to go when you're living in a HCOL area if you plan on staying there for a long period of time. Reason being, you're going to be collecting 'market rent' that you would otherwise be paying to help offset your living costs.
With that being said, I am not at all familiar with your market.
Do you have any friends/family/family friends in the area that own rental properties that might be willing to throw you a bone and sell one to you at a discount where it makes sense for you to get in? I have a few buddies that got their start this way and it's made a large, positive impact on their finances!
1 Reply
Patrick McCannPro Member
Realtor · NH · Member since 2022 · 112 posts · 59 votes
3y
Hi Nick,
I currently househack a duplex in Dover. During the closing process I had thoughts of whether or not I picked the right property, if it was a good investment etc. Purchased in December 2022 so with the interest rate, PMI, high property taxes in the area the PITI is a pretty big number, but great part about seacoast are of New Hampshire is rents are fairly high too and there's a lot of people looking to rent. Tenant covers 2/3rds of the mortgage so I get to live in an area I like for much less than what it'd cost to rent, and when I move onto the next property it will definitely cashflow pretty well! Also have been doing quite a bit of value add to the property slowly. My opinion I think NH is great market to invest in.
[email protected]603-818-9095
1 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Jaylan Archer:

Hey Nick!
Congrats on taking the first step and posting about what you are looking to do. Getting around others that have accomplished what you are looking to do is always important.
I'm actually a real estate agent out of Portsmouth and an investor myself, so you can take everything I have to say with a grain of salt. :)
The seacoast really is expensive - but with every negative - there is always a positive, it also has huge rental demand with steep prices for rents. If you are starting out I most definitely would recommend going the FHA owner occupant route and purchase a two to four unit. This is the best way to get started in real estate with little money down, and start the process of investing without a ton of risk.
I would focus on the areas you would like to be in and see what the market is there. Some of the seacoast has historical high appreciation and steady rental rates while other areas are known for a bit more cashflow and less appreciation over time. If you haven't already connected with a great local lender, I'm Happy to send over a couple of options for you to consider.

Hey Jaylan thanks for your thoughts that's really of nice of you! Once I learn a little more I might take you up on that, that's very kind! Great to hear the pros and cons. The rental rates may make it all worth it here after all I think you may be right!
0 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Richard Dale-Mesaros:

Quote from @Nick Sadler:

Quote from @Richard Dale-Mesaros:

Starting out there are several strategies to make money in real estate using very little or no money, plus we have various ways to find off-market deals such as delinquent tax payers, driving for dollars, foreclosures, redemption deals, non-town-tax-paying entities, wholesalers, tax deed auctions, estate homes, the list goes on - there are always opportunities regardless of what area you live in!

Hey Richard thanks for your thoughts, that's a good idea to go a less conventional route to source a lead like that, I'll look into those and how they may fit, thanks a lot!

Feel free to give me a call, happy to chat

Appreciate that Richard! Very kind of you, may take you up on that in the future!
1 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Basit Siddiqi:

Brandon Turner used to always say there is a good investment market within a 1-3 hour drive of an expensive market.

If your market is too expensive, you may just need to drive out a bit.
Furthermore, the goal with a house-hack is that your living expenses(the rent you would normally pay is decreased).

We also are in a weird real estate market where prices and interest rates are high.
You may need to put down more of a down payment to properly cash-flow.
Basit that's a really good idea, think I may need to at least explore areas within that radius, that's a great idea appreciate that very much! Hopefully I can make the math work by playing with the down payment thanks so much for the awesome ideas
0 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Josh Bowser:

Hey Nick - house hacking is typically the best way to go when you're living in a HCOL area if you plan on staying there for a long period of time. Reason being, you're going to be collecting 'market rent' that you would otherwise be paying to help offset your living costs.
With that being said, I am not at all familiar with your market.
Do you have any friends/family/family friends in the area that own rental properties that might be willing to throw you a bone and sell one to you at a discount where it makes sense for you to get in? I have a few buddies that got their start this way and it's made a large, positive impact on their finances!
I don't unfortunately, but that's a good call to at least explore if they know others who may! Thanks Josh, really appreciate your thoughts even though it's not your market!
1 Reply
Nick Sadler
OP
Member since 2023 · 8 posts · 8 votes
3y
Quote from @Patrick McCann:

Hi Nick,
I currently househack a duplex in Dover. During the closing process I had thoughts of whether or not I picked the right property, if it was a good investment etc. Purchased in December 2022 so with the interest rate, PMI, high property taxes in the area the PITI is a pretty big number, but great part about seacoast are of New Hampshire is rents are fairly high too and there's a lot of people looking to rent. Tenant covers 2/3rds of the mortgage so I get to live in an area I like for much less than what it'd cost to rent, and when I move onto the next property it will definitely cashflow pretty well! Also have been doing quite a bit of value add to the property slowly. My opinion I think NH is great market to invest in.
Hey Patrick that's honestly so refreshing to hear the math you're seeing, I really appreciate you commenting. I've been trying to simulate the calculations on different listings around here just to practice the process and I kept seeing negative cash flow so thought maybe I was doing the math wrong/not enough units/just a poor investing area, but I think having the attitude that someone is paying for much of your mortgage and one day you can capitalize and be positive is probably the right strategy to have around here. Thanks so much for giving your thoughts that really made me think a little differently! Thanks so much man
1 Reply
Julien J.
Investor · CO · Member since 2016 · 757 posts · 1k+ votes
3y
I'm in the Seattle market and we share similar market dynamics.
What took me out of the W2 world and what I have seen work is a long term strategy.
Buy a duplex, live in one unit, cash flow negative, but still better then to rent.
Make sure the duplex has a value add component. Over time, the cash flow will catch up, especially when you move out. Look at the local year over increases in rent to forecast.
The equity build is the magic ingredient in expensive markets (usually.) A leveraged property at lets say 10%-15% YOY appreciation will grow your equity quickly and the property value 2x in 5-7yrs. Cash flow will be quite nice as well with fixed debt.
Keep in mind, you are dating the rates. If it comes down, refi to improve cash flow or to take cash out for your next property.
1 Reply
Mitch HartfordPro Member
Investor · Rochester, NH · Member since 2017 · 31 posts · 14 votes
3y
I know this will most likely be unpopular, but, as a guy who has lost everything trying to push too hard in the past, I would suggest earning and saving more until we are certain the market is not going to correct or has had the correction. Just my 2 cents. Good luck!

2 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Nick Sadler
answers to your questions: yes and yes. but you should still do it. house hacking is an incredibly powerful strategy.
go look at 50 deals and report back to us.
1 Reply
Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
3y
@Nick Sadler..thanks ...you might consider looking to invest in another area that you have some familiearity with in order to get your feet wet with a property that will cash flow so you can learn the process / meet people....Always keep working to locate what you want in the area you want and eventually you might come up with an opportunity
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