Best Way to Start Out

[Scott Baker]

All,

I'm new to the forum and have been doing lots of reading and talking with friends/coworkers that have already begun their real estate investments.  I'm looking to do the same within the next year.  I'm 23 and make a very good salary but I have moved around for the past 2 years.  I'm now settled in OKC and will be here to stay for a while, at least a few years.  I'm currently renting a house with 2 buddies.  After next August, I'll have somewhere around $30k to invest with.  I could have substantially more if I have liquidate some stock investments and reduce how much I contribute to those.  The current lease is up in September of next year.  I see a few options and I'm trying to understand which route is the smartest.

• Don't buy anything until September, try to save up for a conventional 20% loan and buy my first primary residence.  I would look in the $225-$325k range.  I would have to liquidate some assets but that would be acceptable to me as I would buy a 3-4 bedroom and rent out the extra rooms.  A few of my buddies currently do this and it works out well.  I would then continue saving until I can afford 20% on future investment properties.  I would likely start with much cheaper homes- <$100k.  I also have a friend who is very serious about this as well and is interested in going in together.
• Do the same as the scenario above but instead of a conventional loan, put 3.5% and go the FHA route. I like this option as it leaves substantial cash and I could buy 2-3 rental properties with 20% down conventionally quickly (I'd start with 1 for 3-6 months). I would live in this house for at least 12-24 months as it's required before I could move out and rent it out.
• Don't buy my own house yet and focus on acquiring a few income properties first.  If I don't buy a primary residence, a buddy of mine will and I could have very cheap rent (~$600/month).  However, I do see a house of primary residence in my relatively near future 1-5 years unless I move cities/change jobs before then.  I haven't done any serious calculations with this, but it would take a fair amount of time to save enough for 20% if I were to go conventional on primary residence.

Any insight is greatly appreciated.  I look forward to reading and learning more from all of y'all on BP.

Scott

[Eric Robinson]

Hi Scott - Welcome to BP - and OKC! I'm a bit older than you but also starting out in REI. I've decided that house hacking with multifamily properties is the best way for me to start out. Have you considered this as an option? If you're looking at possibly spending $255-$325K on a rental property, then a duplex, triplex, or 4plex would be very doable. The amount of rent you can charge would be quite a bit higher (more income per investment $) and renting them out would probably be easier. And you can use FHA, VA, or conventional loans to do them. Just a suggestion.