Not sure what kind of property to start with & looking for advice

[Justin C.]

Hi Everyone!

I’ve been doing a lot of reading and listening to podcasts to learn more about the RE investing world and form a foundation of knowledge. As someone starting out with no actual experience, it’s a bit of information overload. Since I’ve been lurking for quite a while I figured it was finally time to introduce myself and make a post to see if you knowledgeable folks could share your wisdom and help me break down some of these ideas and concepts so that I can figure out the best plan to move forward with.

Bit of background about me:
31 years old
Single (in a relationship but unmarried)
20k student loan debt, no other debt
70k saved (20k more in Roth IRA but probably wouldn't want to touch that since it's for retirement)
Stable full time office job - 70k/year
790 credit score
Located in the greater Boston area of MA
Currently renting and do not own any property

Now that you have a little bit of background, I was hoping I could get advice on the best way to get started with something. As you may be aware, housing prices are ridiculously crazy around here with low supply and high demand. Because of this Ive been looking in areas outside of the city like Framingham, Billerica, Norwood, Dedham, Stoneham, Tewksbury, etc as this is all I can get a loan for. My struggle so far is that any good deal that comes up is grabbed super quickly by cash buyers or someone offering way over asking price.

I'm interested in house hacking and the BRRrR method after listening to the BP podcast on it, but I'm open to any ideas where I can use RE to build equity/passive cash flow. Ideally, I'd love to find a 3 bed 2 bath SFH that needs work but not a complete gut, live in it for a year while I fix it up, then refinance and start renting it out. The downside seems to be the lack of options. Anything I can afford is going to be pretty far outside the city and much more rural which I imagine would be harder to rent out and would also probably need a complete rehab on top of the already high sale price.

One idea I've been toying with is buying a condo/townhouse. I know they don't have the best reputation on here, but there's a lot of them around those towns I mentioned and many seem to be in my price range (under 350k). I've found quite a few with fairly low condo fees which include exterior maintenance which is a plus and some even include heat. Cash flow probably wouldn't be much at first but over time as rent increases and mortgage stays consistent it'll slowly get better. With the crazy rise in cost of housing here, condos are gaining popularity because it's all people can afford and young professionals like them because they tend to be in busier downtown areas.

Another idea I had was buying something out of state. It’s mind blowing how much cheaper real estate is in other cities further south and I feel like I could possibly get a multi family somewhere else that’s in decent shape. Is this even realistic to look into as a first time buyer? Could I even get a loan for this?

Again, SFH would be most ideal, but given the location/prices/competition I'm just a little discouraged and feeling like that's probably out of the picture.

I know this has been a long ranting read, so if you've made it this far I appreciate it. Let me know your thoughts! What would you do if you were in my shoes? Should I avoid townhouses/condos, or keep looking into them? Only go for SFH? Buy out of state?

[Sebastian Marroquin]

Everyone on here is right :) really even me :) (except for the comment that said... you are too inexperienced to do it... you may be right now, but you sound intelligent enough to learn. 

What I mean by that is that you actually have a lot of options! That's the good news. First of all you need to know that you "can do it!" You have to believe it and you have to make a plan and take action. You are already asking better questions than people that are on their 3rd and 4th homes, so you are ahead of a lot of people. A couple of things: 

with 70k : you could probably buy something cash somewhere else and get 100% cash flow minus expenses. But do you actually want to is the question... 

It sounds like your market is a lot like our market in CA: prices are high and low inventory makes it extremely difficult. 

The problem is that a lot of buyers/investors want to hit a home run their first deal... and you may not or will not... 

Ask yourself: 

1- how conservative do you want to be? or what kind of risk are you ok with? 

2- what is your 1,3 and 5 and 10 year goal in real estate ? 

3- how stable is your job

4- do you have any other debt and expenses over all? (reduce overhead and save more). 

* the answers to these questions will enable you to choose a strategy and to draft a plan! 

Less risk: strategy 

See what you qualify for with a lender with your current situation? What about paying your student debt off completely and any other debt and how much do you qualify for now? (this is bc debt to income makes a difference with buying power and a lender can tell you these numbers). If you pay off 20k in student loans, sure you will have less cash to work with, but your buying power may go up by an extra 100k or more... and this way you may be able to leverage loans further (so you can put less of a down payment and therefore use less of your savings also!) 

Look into: getting an FHA loan (3.5% down) on a property (say a condo or town home): this is a marathon (if you choose to run one :) based on your answers to the questions above).

Look for a fixer condo: say condos are going for $400k renovated : you should be able to find one for $350k or even $300k (how do i know this? well, bc although I am not there... I bet you investors are finding them and flipping them, you just have to learn how to find them and get them). Trust me they are out there: even if you get one for say $375k as a fixer: then you put 10k to 15k and walk in with some equity! 

The math is this: you buy a condo for $400k : after 5 years - that condo will have appreciated to about $450k and the mortgage loan on it will have been paid down to about $340k (down by about 50k also): so in 5 years you will have about 100k equity on it. At that point you can choose to hold it or sell it and trade up. Wait a bit longer and refinance it or do a HELOC and buy a second home (now maybe a SFH/ SFR ) and again do a 3.5% down payment and do it all again.

At that point you will have saved money from wages and the equity from the first one, along with hopefully getting a higher salary: so you will qualify for more! and also have more experience owning property to now have one rental and one primary home. Do that every 2 to 5 years and become a millionaire by the time you retire. 

Theres more aggressive and risky methods : as you can see - i would need more time and space on here to explain... but you get the point. 

Flip condos, flip homes, buy 2plex , 3plex etc, look at for sale by owners, expireds, off market deals... etc 

** Look for a good realtor to help you and a lot of this would have come from them a long time ago. :) 

Do you want to leverage your money or not... do you want to buy and live in the property or not... do you want money yesterday or are you willing to wait a bit... You have been very conservative thus far so I don't see you doing anything hasty any time soon... but I could be wrong... 

Choose a focus, study it, learn from other investors, read books, visit different markets when you travel, and take action. 

Set a standard you want to follow and do it. :) 

Here to help if you needed. (no agenda as I am not licensed there... )