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Ready to Invest, Seeking Feedback

Adam Reynolds
Investor · Ventura, CA · Member since 2017 · 45 posts · 25 votes

Hello BP Community, long-time listener/website stalker but first-time poster here. Reaching out for advice bc I’m currently stuck in the paralysis-by-analysis phase. Thought it would be smart to reach out to the awesome community here and get some actionable feedback.

I currently have about $50K cash that I’m willing to invest in RE. In addition, I spoke with my lender and I can qualify for an additional $225-$250K conventional loan for a “second home” because I didn’t borrow against my entire income to purchase my primary residence. The only stipulation is that the “second home” needs to be a minimum of 60 miles from my primary residence, which is not a problem bc I live in CA and can’t afford an investment property here anyway.

Inspired by David Green's investing philosophy and having read his book, I'm interested in purchasing an undervalued SFR or small multi-family property out-of-state, rehabbing it, and renting it out. I've done a fair amount of research into the benefits and drawbacks of different markets, but selecting one over the others feels like guesswork. I don't have any personal connections out-of-state that would be particularly helpful in this department. In addition, I've never been involved in any major home renovations and I'm not particularly handy so the the prospect of managing a contractor from afar seems a little daunting. That said, I am very excited to embark upon this journey and I will not hesitate to pounce on the right opportunity.

So if you were in my shoes, what would your next step be? Are there specific markets you would focus on and, if so, which people there should I connect with? What would be your target purchase price and ARV? Would you make this a solo venture and accept that mistakes (i.e. learning opportunities) will be made along the way? Or would you try to find someone with a complementary skillset and create a mutually beneficial partnership?

Sorry for the exceptionally long post, just wanted to be thorough. Thank you in advance for taking the time to respond.

-Adam

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Eddie Werner
Property Manager · Pittsburgh, PA · Member since 2012 · 267 posts · 136 votes
8y

I can only speak to Pittsburgh as that is where I invest but we are a lower cost rental market with stable rental rates, high cash flow, basically no appreciation (unless your force it by flipping).  If your after cash flow a rust belt state/city is where I would recommend looking (Ohio, Indiana, Pittsburgh, etc). 50k will easily buy you a house around Pittsbugh that rents for $800.  You just need a good team to support you because alot of the housing stock is older here.  If you can stay newer than 1950 build you will eliminate alot of headaches that comes with buying much older homes.

If I were in your shoes I would buy a good rental for 50k, rent it out, go to a bank and refi it, get all if not most of your 50k back out and do it all over again.  You can basically recycle your same 50k over and over again to keep buying properties.  You just need to make sure you buy a deal so there is built in equity to pull your 50k back out.

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  • Eddie Werner
    Property Manager · Pittsburgh, PA · Member since 2012 · 267 posts · 136 votes
    8y

    I can only speak to Pittsburgh as that is where I invest but we are a lower cost rental market with stable rental rates, high cash flow, basically no appreciation (unless your force it by flipping).  If your after cash flow a rust belt state/city is where I would recommend looking (Ohio, Indiana, Pittsburgh, etc). 50k will easily buy you a house around Pittsbugh that rents for $800.  You just need a good team to support you because alot of the housing stock is older here.  If you can stay newer than 1950 build you will eliminate alot of headaches that comes with buying much older homes.

    If I were in your shoes I would buy a good rental for 50k, rent it out, go to a bank and refi it, get all if not most of your 50k back out and do it all over again.  You can basically recycle your same 50k over and over again to keep buying properties.  You just need to make sure you buy a deal so there is built in equity to pull your 50k back out.

    2Reply
  • Adam Reynolds
    OP
    Investor · Ventura, CA · Member since 2017 · 45 posts · 25 votes
    8y

    @Eddie Werner, thank you for taking the time to reply. This is exactly what I was looking for. Are there specific neighborhoods in Pittsburgh that you would focus on? I’d like to purchase in an area with a higher quality tenant pool, even if that means slightly lower returns.

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  • Ali Hashemi
    Investor · Southern Indiana, IN · Member since 2017 · 178 posts · 95 votes
    8y

    If I'm understanding correctly, you've managed to overcome the financial & market research hurdles (congrats! Big first steps!) -- now you're up against the following:

    - renovation knowledge

    - Selecting from narrow list of markets

    - local relationships

    Personally, I'd do the following:

    - prioritize the closest market to you (2nd prioritization would be population growth)

    - take a day and drive around with a map

    - Circle/highlight/mark up the map with the areas that appeal to you

    - When you get home start searching for a property in the areas you liked

    - At the same time call inspectors in the area and let them know you're looking for a property and want to start looking for a qualified inspector. Also ask them to refer you to a general contractor

    - If a few inspectors refer you to the same GC call that GC and let them know you'll be a remote investor and would like to rely on them for all issues

    - If no properties pop up that meet your requirements, then move to the market with the best population growth and repeat all the same steps.

    - When the right property hits the market you'll have everything lined up.

    You're honestly past the hardest parts in my opinion! Now it's just timing and waiting for the right opportunity. Wish you the best!

    2Reply
  • Adam Reynolds
    OP
    Investor · Ventura, CA · Member since 2017 · 45 posts · 25 votes
    8y

    Thank you @Ali Hashemi for your feedback. Excellent advice. You make it sound so easy. =)

    0Reply
  • Scott Morongell
    Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
    8y

    @Adam Reynolds congrats on getting out of the paralysis-by-analysis! I am not in this exact space but if I had any advice I would certainly invest in an area where you know it like the back of your hand.  If it's not in your backyard thats fine but having someone in that area that you can rely on will save you a lot of time, money. & mistakes.  Best of luck to you as you jump into your first investment!

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