Just starting out, can anyone help?

Question

I'm 23 years old and I just started working for a mortgage company for investment properties. This has really sparked my curiosity about real estate investing. I'm curious as to how most people got their start, what kind of properties should I be looking at, how much cash do I need, etc. Basically how to get into buying my first rental property and growing from there on out. I have good credit scores, only about $1,000 in my savings right now because most of my savings goes toward my IRA but I'm able to put back up to $1,000/month if I need too. Can anybody shed some advice to a beginner?

Marcus Hendren · Answer

Hi NA! I'm still a beginner myself and although my scope is small, maybe I can answer your questions with the actions I took to get started. I live and work in Columbus, Ohio and I figured the best place to start would be in my backyard. The first house I purchased was a 5 bed/ 2 bath house near Ohio State Campus. I sought out FHA financing for the low down payment. The house was ~$183,000 and so my down payment was about $6,400. If compound interest is the 8th wonder of the world, I surmise that leveraging real estate is the 9th. To skip over a bunch of non-essential details, I moved in four of my friends and had them pay the mortgage for me! Most people suggest you start out on a lower rung of the real estate ladder before landlording, but I feel I learn better when my feet is to the fire. Its been a fun couple years.

Brandon L. · Answer

Nathan Waddell Welcome to BP. I wish I would have taken more action with real estate when I was 23. You have an advantage over everyone that does not have good credit if you use it strategically. The first step you should take is to figure out EXACTLY what property you want.I have written a few blogs that may help you out. Click the links below to read.The first is to get started on BP:https://www.biggerpockets.com/blogs/5868/52761-the...The second will get you on track with investing:https://www.biggerpockets.com/blogs/5868/52743-im-...And the last will help you sort through all the real estate agents you will come in contact with:https://www.biggerpockets.com/blogs/5868/52724-im-...I have a lot of other stuff on my blog as well, but these are the 3 I think will help you right now. Do not hesitate to connect with me if you have any other questions. Good luck :)

Tom Ott · Answer

Welcome to BP! I would like to wish you the best of luck out there!

Ben Gammon · Answer

Hey Thomas! I just bought a 4plex in Northside. Which part of the city is your duplex? We should keep in touch.

Marcus Hendren · Answer

Hello Thomas! Too busy doing things I don't want to do in order to do things I want to do later. 'Tis the nature of the game I suppose!

Thomas Barrick · Answer

NA Waddell I am very new to REI as well. I am in Cincinnati, OH and there are many neighborhoods filled with duplexes. I purchased a duplex using an FHA loan. My property was 164,000 so I put 3.5% down and the seller paid closing costs. I use the house hacking method....living in 1 unit and renting out the other to a few buddies, having them pay down my mortgage. One suggestion I would have is to ensure you have sufficient funds set aside for unexpected expenses after closing costs, down payment, inspections etc...A majority of the properties in my area were built in the early 1900's. Save some money, listen to the podcasts, read and jump in!

Tiffany S. · Answer

@Sterling Jackson It really depends what your goals are. As i stated, i am currently just house hacking but I have the same questions as far as asset projection. From reading BP I get the impression that it is not worth the effort to form an LLC but rather have great insurance (not giving legal advice by any means).I did a VHDA loan...no money down to purchase my home. The downside is that I have to pay PMI until I have 80% (i think) LTV with is about and extra 120$ a month.

Sterling Jackson · Answer

Hi everyone I'm in the same boat as NA Waddell! I have great credit, but only a small amount saved. Would any of you recommend starting a LLC to protect your personal assets? What about partnering with a real estate agent? Thanks!

Michael Masterson · Answer

Hi NA Waddell I was in a very similar situation as you 6-7 years ago. My personal opinion is going owner occupied MF first, from there you will be able to save significantly more so you can focus on your next deal. Depending on the area you can typically cover your note plus some. Additionally to piggyback off Marcus Hendren I agree with low down payment financing. You can typically put as little as 3% down. But what's golden on owner occupied FHA is "seller concessions". If you find a property at a reasonable price you can sometimes have the seller give you a substantial amount toward your down payment + escrow, closing, etc. If you'd like you can PM me for more info. Most agents should be able to explain to you the power of concessions if you're new to This world. Within a couple years you'll be sitting on several units without changing much with your current investment strategy.

Tiffany S. · Answer

Like @Marcus Hendren I brought a 4 bedroom house and I am currently house hacking. I have 2 kids so I cannot house hack to my fullest potential but it still works. I am renting out 1 room and thinking about converting the den to another room to rent out. Meanwhile I am building capital and knowledge to get started on my first deal. I also met someone (via craigslist) and started helping her on some deals. Networking is key to getting started.