New Twin Cities Investor Looking for Advice Getting Started

[Bob Avery]

Hey folks!

I've been lurking on BP for about a month, so I have a rough idea of the regular newbie steps which I will try to address below. I'll greatly appreciate feedback on any subset of my questions. Thanks!

First and foremost, I'm in Minneapolis / Saint Paul, so I'd like to know if you have any suggestions for 1) what investor meetups I should attend, and 2) recommendations for building my team (CPA, real estate lawyer, handyman / contractor, insurance broker, and agent (I have one but they don't seem to have much investing experience)). Also, if any investors in the area want to chat I'd love to hear about your experience.

Second I've read the BP intro doc (forget the name, was recommended in another post) as well as The Book on Rental Property Investing. I appreciate Brandon's advice on posting etiquette. Speaking of which... BRANDON, I decree that you are my mentor! Please reach out to me to schedule a trip to Saint Paul at your expense and my convenience. Thank you.

From what I've learned so far (aside from posting etiquette) I realize I need to have a clear plan, which so far consists of:
- My Goal: to have $10k/months of income to replace my day job. Once I hit that goal I'll take stock of how much I like scaling real estate vs. how much I dislike my job, and make a call on retiring vs continuing to scale.

- My Strategy: I'd like to buy and hold residential rental properties. I'm not 100% committed either way between the income benefits of multifamily vs. the reduced headaches of SFH tenants. I don't have the skill set YET to gauge rehab costs and try to BRRRR, but I'd like to learn.

- My Resources / Constraints: I'm in a by no means unique, but perhaps less common situation for those getting started; I'm a somewhat senior software engineer at a tech megacorp and should be able to save a couple of down payments per year for lower priced houses (100-200 in my area), or perhaps one medium priced house (300-500). House hacking is out of the question, I have two young children and a wife who will truly think I have lost my mind if I suggest we move and / or rent out a portion of our house. Aside from the financial resources, I suppose one skill is I write algorithms to distill signal from bulk data for a living, so if there are any other programmers out there please reach out! I'm sure you've all been down the same road that I'm starting on right now ("how do I scrape my county's property tax and crime data?" "What do you mean I can't get API access to the MLS?!") and maybe you can tell me how it ends.

Where am I now in my journey? Well, I'm in the process of purchasing my first rental house. It's not going to be the best investment, but it probably won't be that bad either (with the leverage of the mortgage it will probably outperform my stock index funds). It's actually to rent to a section 8 family which is *very* important to my wife and is facing housing insecurity right now. No, wait, stop! Please don't rabbit hole on this comment and ignore the rest of the post. I know, there are plenty of red flags there, but I do believe it is worth the risk when I consider how happy it makes my wife, how life-changing it will be for the family, how minor the financial impact will be on me, and how it gives me the opportunity to practice the steps of real estate investing with forgiving tenants.

Finally, I am going to attempt to self manage as nothing comes close to cash-flowing if you include PM costs. I've looked at PM software and it seems AppFolio is the clear favorite, but it requires a minimum of 50 units to sign up. I figure stability of the platform is important and so it seems like Buildium is the runner up, but if anyone has strong opinions here I'd love to hear them.

If you've made it this far, thank you so much for reading! I'm excited to learn from this community.

-Bob 

[Tim Swierczek]

Hi @Bob Avery Welcome to BP and Twin Cities Investing. That is an excellent first post. It’s so comprehensive that I’m compelled to give you a great answer, but there is so much to unpack that a full proper answer to every question may take longer than I have tonight. I have included snippets of your message and my replies or comments in bold.

What investor meetups I should attend

- BP rules prevent posting outside events/meetups here. We have at least a dozen meetups that I think are valuable in the Twin Cities. I can send you links to the ones I think are best if you DM me. I saw two recommendations to attend the local REIA. I have been a member off and on a few times. I want to like our REIA. I want to attend, but every time I go I find it to be all sales and no value. I recommend you check for yourself, but I contend that you will find much more value in the meetup list I will send you.

Recommendations for building my team

CPA - I can’t help you hear. All the best ones I know are full and not taking new clients.I would encourage you to hit this one hard because they get very busy in a month and they have little to no time for anything other than servicing clients after the Holidays, until May.

Real estate lawyer - I use and recommend @Brad Schaeppi. He is a great real estate lawyer, who is efficient with his time and does not require large retainers. For all of this, you do pay for all services (no free consults) but I stand by him and will tell you that you will pay less with him and get great service. He has a forms subscription that will keep your forms up to date and he is very well versed in Real Estate. His website is built for investors and he is an investor himself. He is also a city councilman in Minnetonka or at least he was. I haven’t looked in to see if he ran in the last election. Either way, he knows how both city governments and the courts work.

Handyman / contractor - This is the hardest team member to find. I have a handyman but he is 80 years old and only works for me at this point. He started with me just after retirement and I recommend you look for a handyman who is retired because they are typically less expensive and as my guy likes to say, every day is a Saturday and that means they can get repairs done quickly. The best way to find a handyman is to look for business cards at coffee shops and local restaurants. They are a fraction of the price of those who advertise online.

For general contractors, I would network with local investors. It can be a struggle to find those who offer adequate service, price, and quality. I struggle with that myself.

Insurance broker - I can introduce you to a couple of great agents, but they are not on Bigger Pockets, so I cannot tag them. PM me and I will send you their contact info.

Agent - Adam Tafel is your guy. You can check out his property walk-through videos on Instagram, Vimeo, and Facebook, and get insights into his knowledge on his Twin Cities Investing Show podcast. He is a real pro and constantly finds cash-flowing properties for his clients. You will kick yourself someday if you don’t reach out to him for coffee.

- My Goal: to have $10k/months of income to replace my day job. Once I hit that goal I'll take stock of how much I like scaling real estate vs. how much I dislike my job, and make a call on retiring vs continuing to scale.

Your goal is both hard and very realistic. Realistic because I see people do this all the time, but hard because the amount of deals and capital it takes to get to 10 K passive per month is no joke. You're going to need 15-20 duplexes that are considered good deals to get to that kind of profit. That is totally reasonable but you have to want it. That being said you can make that kind of money with fewer properties but you would need to do more intense work and higher risk Short Term Rentals, co-living, or Section 8.

- My Strategy: I'd like to buy and hold residential rental properties. I'm not 100% committed either way between the income benefits of multifamily vs. the reduced headaches of SFH tenants. I don't have the skill set YET to gauge rehab costs and try to BRRRR, but I'd like to learn.

This is definitely a choice but my option is that you will do better if you focus on duplexes and cherry-pick a few SFRs as you come across them.

As for your Strengths, it sounds like you have an excellent ability to save and your ability to bulk analyze data will serve you well to identify big-picture areas, property types, and characteristics to focus on.

I like that you realize the first investment will not be your best investment. Many early investors put too much pressure on their first purchase and have unrealistic expectations. Time in the market is very important to long-term rentals and if you can learn to buy one good deal per year and become well-versed in Section 8 you will succeed.

I like the model of starting with self-management. We have self-managed for 21 years and I believe its the best path for the small investor. The beauty is that you can easily change your mind on this issue in the future. Learning what it takes to properly manage properties will serve you well even if you hire a manger in the future.

Good luck and reach out if you want to chat!

~Tim