Prioritizing First 10 Properties for Out of State Real Estate Investing

[Siddhant Pradhan]

I have been reading Long Distance Real Estate Investing - David Greene, and came across an interesting tidbit of information: Your first 10 (1-4, 5-10) property loans are Fanny Mae insured, after which your loan criteria become more unfavorable (variable rates, stricter credit score requirements etc.). Of course, I'm dumbing this down but it's focused on the gist here.

Now, I planned on going long term buy and hold in a student housing market with SFH around the $100-150k mark. This would be my first investment property. But after reading about the above, I am thinking, should I save up more and go for multi-family in the same/ similar market? Should I save up significantly more and invest in a bigger town? Are there other strategies I should apply?

As of right now, I work in tech, and house hacking is not an option since most opportunities are here, and hybrid/ WFO. Any insights and or pointers to resources would be greatly appreciated!

[Mike Paolucci]

Hi @Siddhant Pradhan. I'm originally from San Francisco and ran into the same issue. I would recommend checking out of state markets where numbers and landlord laws make sense. I ended up investing in Columbus and have been pretty happy in my decision. 

Single family investments are an awesome way to start. My first investment was a 3/1 single family in Columbus, and was probably (in my opinion) the best decision I could have made as an rookie out of state investor. It allowed me to learn what owning property was like, while getting some positive cashflow. 

Pros to SF homes:
1. Less wear and tear on the property = less of a financial burden while learning what it's like. 
2. Single family homes are very desirable for renters from my experience. I've been able to fill my vacancies relatively quickly compared to my duplexes in the same neighborhoods. 
3. Depending on how it appreciates over the next couple of years, you can always 1031 into a multi-family property relatively easily. 

Cons
1. You don't have multiple income streams like you would with multi-family 

The key is having the right local teams in place. With the right property manager, a little TLC and preventative maintenance, it'll be a cash cow for you. 

Let me know if you have any questions and good luck on your investment journey!