When should I invest?

Question

Hello BP Community,

I just turned 24 years old and got my first "big boy" job with a defense contractor. I am eager to begin investing in real estate but I'm not sure what the right timing should be.

I got into a leadership program in which I will spend 8 months in three completely different locations (Boston, LA, Tucson).

Would you recommend holding off investing until I find a permanent location or just jump into something if I find a deal in my current city?

Thanks in advance for your comments!

Christopher Richardson · Answer

http://www.fha.com/fha_article?id=585

Also, if you house hack, and your moving for your occupation you could get another FHA loan.

http://www.fha.com/fha_article?id=574

I hope this helps everyone. I posted the from the FHA website so no one has to take my word for it.

Always with my best,

Christopher Richardson

Alec Bewsee · Answer

@Ryan Giblin,

I recently graduated into my first "big boy" defense contracting job as well. I agree with what others have said. 8 months rotation for leadership programs in this industry is a fairly short amount of time to be jumping into deals, but it sure is possible. I acquired my first owner occupied rental when I was 20 and rented it out when I left the area after university. You could look to do the same in those 8 month periods, just be sure to have a contractor or someone in the area to look after it if/when you leave.

I would emphasize what @John Vo said. It took me a good 1-2 years in college to really understand the basics of real estate investing and what I was getting into before signing that first deal. Networking can also be tough if you're moving around that much. So maybe take this rotational period to learn as much as you can and figure out what you'd like to focus on in REI.

Best of luck!

Joe Splitrock · Answer

@Ryan Giblin the purpose of leadership programs is to learn the business. At the same time you are establishing your reputation and essentially interviewing for a longer term position. My company has a leadership program and often it is connections made during the rotation that lead to a long term role. I would recommend focusing on your career to establish your W2 salary before getting side tracked in real estate. You will need that W2 money to fund real estate, so it is all related.

Lamar George · Answer

@Ryan Giblin,

I recently attended a REI meeting inTucson. I live here also. According Bob Zachmier last month 70% of the houses sold on the MLS were on the South side of Tucson. People are buying ones in the100K-200k mark. Also he is seeing a pretty good up tick in manufactured home sale. FHA loans require that you live in the residents for a period of time. I have some multi family properties I am selling. If you are interested let me know. Tenants in place. Great cash flow properties. The Tucson market is a good market. Start making connections wit investors here and stay put to date on the market and you will know where to invest and what to invest in. Hope this helps.

Eric Harding · Answer

@Ryan Giblin 1st and River would be a great area as there are some condos/townhomes near that intersection that could be good investments. But in general you want to stay in stable areas that won't loose value. Demand for rentals will always be greatest the closer you are to the University (85719) and as a result rental rates will be highest. The most important factor is to buy right and make sure you can make your positive cash flow when it's time to move on.

Ryan Giblin · Answer

Thanks for all the advice, BP! You all are awesome. @Eric Harding, do you have any suggestions for good locations to invest in Tucson, Arizona? I am currently living near River and 1st and am really liking that location.

Also, @Christopher Richardson, I am not familiar with that rule as I have never bought a house before. Is this true even with a FHA loan?

Thanks everyone!

Eric Harding · Answer

@Ryan Giblin I would recommend house hacking since you'll be moving around quite a bit at first. Tucson would require a relatively low risk entry into this in terms of overall cash outlay and you could potentially use equity to finance your move to LA and Boston and do it all over again. House hacking would also give you a chance to learn as you go, so to speak.

Ken Badziak · Answer

I like math. It's hard to argue with numbers. 1+1=2. (Unless you're using Common Core, then 1+1= apple).

And math says that California is NOT a great place to invest. Between absurdly high acquisition costs, absurdly high taxes, absurdly high operating costs... not even absurdly high rental rates can makeup for it, long run. Yes, one can find good deals in California, I'm certain. But for every 1 "good deal" you might come across in SoCal, one could EASILY find 10-20 deals secondary markets.

California is a cyclical market; when RE appreciates, it appreciates well, but when it crashes, look out below. And when your tenants can no longer afford the absurdly high rental rates they were paying prior to the next crash (i.e., today) what's going to happen to your investments as tenants flee?

Not to mention that practically not a week goes by without a newspaper headline showing a net outflow of population (I guess people can only take absurdly high taxes, government regulations, cost of living,etcetc for soloing before they decider's not worth it.) and SoCal continues to be a lousy place to invest, compared to other, more stable and "boring" Midwest and Southern markets.

I agree with the "house hack"; if one HAD to live in SoCal, possibly THE BEST way would be through a house-hacked duplex, try or quad. But to build a viable long term portfolio? SoCal isn't the place. Maybe after the next crash when prices come down to earth somewhat,but not today.

If you're happy with single-digit returns, then yeah. SoCal is wonderful. I personally like double-digit returns. Which is why I'm not spending too much effort looking for rentals locally here in Miami; I'm looking elsewhere. Which is why David Greene, of Oakland CA, is doing the same. http://greeneincome.com Which is why many many many investors are doing the same.

Math doesn't lie.

Want buy and hold in SoCal? Wait for the next crash. THEN I'd be inclined to agree somewhat. But today? No way.

When should I invest?

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