Just looking for the best way to (re)start out

[Teddy Mao]

I started working back in summer 2018 and was very interested in real estate investing. I bought my first property for self-living back in early 2019, a condo in Dallas TX. I was living by myself at that time, and was very much into house hacking, but the pandemic hit and disrupted my plans. In late 2021 my wife and I both found jobs in Chicago, bought our second property (also a condo) there, moved in and had our first kid there. We were super lucky to have hit relatively low rates (15-year 2%-3% range) that we would not see again today.

The Dallas property is now rented, giving a almost zero cash flow over a 15-year fixed mortgage, until the recent HOA increase pushed it into the negative side slightly. I have been a passive remote landlord throughout the time, thanks to my agent and nice tenants over there.

We have almost enough cash to pay off the remaining balances of the mortgages but obviously we want to use it in a different way. But my real estate investment knowledge is very limited to the basics that one always starts buying it as their primary residence. I was thinking of PRR but it seems challenging with a toddler. Getting a property solely for investing purpose (without living in it first) is completely new to me and seems costly at this time.

So I am here to ask for some ideas on how I can start out with this. Thanks!

[Nathan Gesner]

Quote from @Teddy Mao:

Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a fundamental explanation to get your juices flowing:

Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.

Pay cash for one house and rent it for $1,500. You will have earned $90,000 in rent income and gained $34,000 in appreciation after five years.

or...

Buy four houses with $50,000 down on each. The mortgage payment is $1,000 on each house, so you earn $500 per house or $2,000 monthly. After five years, you'll earn $120,000 in rent income and $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.

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. Prioritize your financial stability. Eliminate debt, establish a budget, and save. Remember, the notion of amassing wealth without investing is a dangerous myth perpetuated by self-proclaimed experts. A prudent investor doesn't seek quick riches through shortcuts. To thrive in real estate investing, you must maintain a firm grip on your finances. Explore my personal favorites, Set For Life by Scott Trench or The Total Money Makeover by Dave Ramsey, for invaluable financial insights.

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. NETWORK!!! Get out of your comfort zone. Stop hanging out with your deadbeat buddies who spend all day drinking, talking sports, and otherwise wasting away. Go to BUILD YOUR TEAM at the top of the screen and look for local investors or meetups in your area. You can also find real estate investing groups through meetup.com, Facebook, or a Google search. Birds of a feather flock together!

5. Now, you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books on this topic, or you can learn about it by watching podcasts, reading blogs, and interacting on the forum. A handy search bar in the upper right makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator 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, recognizing a good deal will be much easier 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.

6. Study the market. You can learn to do this independently or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR who works with investors and knows how to help you best.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. You could read 100 books and still need to learn more because certain things must be learned through trial and error. You don't need to know everything to get started; you 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 forgiving; the average person can still make money even with some big mistakes.

[Rene Hosman]

Quote from @Teddy Mao:

I started working back in summer 2018 and was very interested in real estate investing. I bought my first property for self-living back in early 2019, a condo in Dallas TX. I was living by myself at that time, and was very much into house hacking, but the pandemic hit and disrupted my plans. In late 2021 my wife and I both found jobs in Chicago, bought our second property (also a condo) there, moved in and had our first kid there. We were super lucky to have hit relatively low rates (15-year 2%-3% range) that we would not see again today.

The Dallas property is now rented, giving a almost zero cash flow over a 15-year fixed mortgage, until the recent HOA increase pushed it into the negative side slightly. I have been a passive remote landlord throughout the time, thanks to my agent and nice tenants over there.

We have almost enough cash to pay off the remaining balances of the mortgages but obviously we want to use it in a different way. But my real estate investment knowledge is very limited to the basics that one always starts buying it as their primary residence. I was thinking of PRR but it seems challenging with a toddler. Getting a property solely for investing purpose (without living in it first) is completely new to me and seems costly at this time.

So I am here to ask for some ideas on how I can start out with this. Thanks!

 Hi Teddy! Welcome to BP, and congrats on having two properties already. Especially with those interest rates you're in a super solid place already. It's incredibly difficult to find anything that breaks even on a note less than 30 years, I mean you're nearly half way to having that place in Dallas paid off! 

Based on what you've said I would highly recommend Dave Meyer's book Start with Strategy because it goes over various tactics, or strategies, for investing in real estate. The book talks a lot about what your long-term goals are, and also sets a framework for writing out your long-term goals, then helps you align what strategies in real estate investing might fit best into your life given what resources you have in terms of time, money, and skill. I just finished this book earlier this month and wish I had read it sooner! I was really struggling to decide what investing option to prioritize but I got a lot of clarity from the decision making process in the book, so much so that less than a month after finishing the book, I'm under contract for my next place that aligns with my strategy! The book is really great for anyone on their investing journey whether you haven't started investing or you already own property.