Seeking Input on My First Real Estate Investment Strategy for Passive Income

[Noah Fele]

Hello BiggerPockets community,

I'm thrilled to join this forum and seek advice from experienced real estate investors. Here's what I've considered so far:

1. Markets:

Local Market: I live in the DMV area (DC/MD/VA) which primarily experiences appreciation, making it challenging to find cash flow properties.

Out-of-State Priorities:

       - Price Below National Average: I'm prioritizing markets where property prices are below the national average.

       - Positive Population Growth: Markets with growing populations tend to have increased demand for housing.

       - Low Unemployment Rate: A stable job market is crucial for tenant stability.

       - Rent-to-Price Ratio: I'm looking for areas where rental income justifies the property price.

2. Potential Markets:

 I'm currently researching the following markets:

       - Huntsville, AL: Low unemployment rate and steady growth driven by large aerospace and defense industry.

       - Columbia/Greenwood, SC: Affordable properties and potential for cash flow.

       - Cheyenne, WY: Small market with stable economy.

       - Syracuse, NY: Decent A education and growing tech industry.

      - Open to other markets that I should be researching       

3. Property Types:

I'm considering mainly 3bd/2ba in the following property types:

       - Single-Family Homes

       - Townhouses

       - Small Multi-Family (1-4 Units)

4. Starting Small:

   - I've been interested in real estate for years but lacked the courage to take the plunge.

   - My strategy is to begin with an easy deal, even if the numbers aren't optimal.

   - Goal: Gain confidence, understand the process, and get my feet under me before scaling up.

5. Financing and Budget:

   - I’m thinking of starting with no more $50k out of pocket for all upfront costs including the down payment to keep with my “start small” strategy.

   - Considering a conventional loan with 20-25% down 

   - I'm open to exploring other investor-friendly financing options that allow for a lower out-of-pocket down payment but I’m not familiar with what’s available to me 

6. Property Management:

   - Given my W2 job and the out-of-state nature of the investment, I'll have to work with a property manager.

7. Networking and Education:

   - As a beginner, I started to reach out to real estate agents here hoping to find a good match and hoping to expand my network from there

   - Connecting with experienced investors will provide valuable insights.

8. Timeline:

   - I’m thinking 2-6 months will give me ample time for learning and evaluating deals but open to other suggestions 

I appreciate your warm welcome and look forward to learning from your insights. Thank you for being part of this supportive community!

[Jeremy H.]

Sounds like you almost want a turn-key property if your investing long distance from the get - a rehab can end up in an absolute train wreck

Is there anything on the outskirts of your city that work? Just realize that not being local - you are already having the deck stacked against you. I don't care what any "guru" says - it's much easier to inspect, buy, rehab, manage etc a local property. Not only that but you KNOW the area. You really need to get a feel for the area - remember you can change anything about a property BESIDES the location. I cannot emphasize location enough 

That being said your research on (2) locations looks fine to me, (3) property types is fine, (4) starting small is a good idea as well, (5) conventional 30 year loan is a solid easy cheap route

Onto (6) Property Management - research and essentially interview them. Especially if you're going out of state. Where do they like to manage? Where do they not like to manage? Why? Why not? Best schools in the area? Lowest crime? Prices? Attractions around your property? They intimately know the area and can be your friend. Do they have anyone selling? Know of any deals? Know any investor friendly agents? 

(7) You need an awesome agent, lender, property manager - talk to a lot of them

(8) timeline is fine - I did about 6 months research before buying my first property 

What I like: You have a plan. Preparation and education is key. Build up your capital during this time. Experience will just be learned through the real world 

What else I would like to see: How do you plan on calculating your numbers? MAKE SURE THEY WORK. I only buy great properties in great locations - they must be great deals. That's what makes you successful doing a small volume of deals. How do you plan to find your deal?