Investing in Western WA, How to retire in the next 25 years

[Kyle M Miller]

I'm a new initiate, looking to learn about what it takes to earn financial freedom in the next 25 years. My wife and I see real estate investing as the key to that, and we're hoping to get some advice and ideas from the community on what we should be doing to set ourselves up for success.

Background
I'm 29, and my wife is 27. Together, we make about $145k a year in Western Washington with our day jobs. We bought our first home (primary residence) in 2016, but that's the extent of our experience. Neither of us are in the real estate field, but we do have real estate agents in our family that guided us through the transaction. Our focus has been typical: pay down debt (education and consumer), invest in IRA, 401k, and save what we can. Our cash position could be better, but we're actively changing spending habits and focusing on cash flow in 2018.

Goals

• Overall: Earn financial freedom through real estate investments, be able to retire in 25 years (but still work because we want to)
• Buy our first investment property in the next 12 months

What we're doing

• Listening to BP podcasts
• Reading books from BP, as well as generalized books like Rich Dad, Poor Dad
• Strict budgeting
• Improving cash flow (refinancing our current home for lower payments, not being too aggressive with paying down debt, etc)
• Looking out for events in our area to network and educate ourselves (no luck yet...)

Ideas/Plans

• Get a real estate license for both educational purchases and so we can manage our own transactions
• Partner with likeminded friends on our first property to get the ball rolling; each couple saving up $30k+ in the next 12 months
• Focus on small single family / multi-family rental homes
• Keep our day jobs, real estate would be our side job

What do you wish others told you when you first started? What more can we do to set ourselves up for success? Are we doing the right things? How can we avoid obvious newbie mistakes?

[Brian Hughes]

I actually like to scout by bicycle. In addition to getting lots of fresh air and exercise, You can much more easily dive down alleys and dead ends and quickly pull a U turn to go look at that algae-covered FSBO sign in the bushes. It helps you to get a much more close up look at the neighborhood (how nice or run down are the houses, cars, how much trash is in backyards, how many homes look like they are being actively worked on, etc) vs. driving around by car though obviously you need to identify a narrower geographic region (a city or town) first.

I agree with the suggestions to look at small multifamily (2-4 units)  and make it something as close to you as possible.    Also,  try to make it something you would be willing to live in  yourself,  at least insofar as quality of the neighborhood and potential tenant pool.   If the building itself or units aren't in a condition you would consider liveable (even if they are legally rentable),  be sure to have a plan for getting them there.    It'll probably mean you ultimately have a better property than a lot of your competition,  and potential tenants absolutely notice and appreciate this.   I've had more than one vacancy where the application commented to me on how much better my unit was than others they looked at in the immediate neighborhood.   All I do is try to give a damn.  

Outside of Seattle,  WA state and most municipal landlord tenant laws are reasonably sane,  but be aware of the trends in those laws towards pushing more risk and responsibility onto property owners.   Be sure you are well versed in the laws wherever you choose to invest,  and stay up to date with changes.

One option depending on your circumstances and future plans (financial and personal) for getting the down payment is sell your current home and move into a 3 or 4 plex,  still leaving you with 2 or 3 units to rent.    

Another out-of-the-box down payment option: there is at least one local tech startup that is offering down payment assistance in exchange for sharing proceeds from AirBnB income from the property for a period of time. They are mainly focused on SFR's but they may have small multifamily programs too. Maybe worth considering. I believe its Loftium.com, there may be others. (I'm not affiliated in any way)

If you have at least $100K in your 401k balance,   you can loan yourself up to $50K and all the interest payments go back into the account.   This could be a good option for adding onto a down payment,  but it carries some risks if your job situation changes so be sure to know all the risks of using this method of obtaining down payment capital.