Novice Looking for a Bit of a Roadmap

[Cole Holloway]

Hey guys and gals. I want to start this post by saying thank you for taking the time to read it (if you do so). I'll try to keep it short and sweet. Over the last few months my wife and I have become incredibly excited about real estate investing and I just recently finished Brandon Turner's book on Rental Property Investing. It was a great read but obviously there's so much more information to gather and acquire that it can be overwhelming. 

My wife and I are considering a move to be in an area more conducive to our future investing so I want to be as prepared and diligent as possible and put us in a great area (right now we're in Denver and while I know that great deals can be found anywhere, it feels like a bit of an uphill battle here). I'm currently finding myself experiencing a bit of analysis paralysis looking over all the information on this site alone. My questions are this:

1) Do you guys have any opinions on how a newbie might tackle all of the information present on the BiggerPockets site (Blog Posts, Forums, Videos, etc.)? Or how you might have approached it in your own past?

2) If you know of any good, data supported articles on some of the best places in the country for real estate investing at the moment (particularly buy and hold/cash flow oriented)?

Thank you all again for any responses and I appreciate your time.

[Enrique Huerta]

Hi Cole, congrats to you and your wife on the decision to become real estate investors. It is always awesome to see someone willing to do whatever it takes to make a reality happen (aka moving locations). Best of luck in that regard!

1) Yes. I would make a list of the biggest questions I have. Where are the gaps in my knowledge? After reading the book, what are the topics that confused me and intrigued me? Then pick 1 and start there. I'd pick a single topic and read a handful of articles or watch a handful of videos. 

2) Yes. Marcus & Millichap Research. CBRE Research. IRR Research. Axiometrics. Google these websites and download their reports. The unfortunate reality is that a lot of these reports are out the window due to COVID-19. HOWEVER, fundamentally strong markets WILL recover and bounce back so there is value in looking through these reports. With that said, below are some metrics I would focus on:

• Population Growth
• Job Growth
• Median Household Income Growth
• Household Formation
• Job Diversity
• No New Supply Imbalances relative to current inventory

In general, the Midwest is recognized as a strong cash flow market (but it is NOT risk free) with good deals in Ohio, Indiana, Missouri, Minnesota, etc. The reality is that (as you said before) you an find good deals anywhere. If you're in Denver and not looking to immediately move, start with Northern Colorado or Colorado Springs. The Cash Flow is a lot better and the prices are lower.

Let me know if you have any other questions. I am doing a real estate video series online so any questions you have I will put together a video for you. Feel free to message me or reply here.

Talk soon!@

[Cole Holloway]

Wow! Thanks so much for the insightful response Enrique. I greatly appreciate that. I'm looking forward to going through all of the resources that you mentioned. Out of curiosity, what risks does the midwest hold in your opinion (aside from the obvious tornado issue)?

[Zeke Liston]

Hi @Cole Holloway, you won't know everything before purchasing your first deal. It seems like you're doing a great job of applying yourself to the site, so I would continue to do that. You will learn a TON on your first deal though, so I wouldn't stress about knowing it all before hand. Columbus, OH is a great market to invest in due to the population and job growth.  

[Bryan Blankenship]

@Cole Holloway One step at a time! @Enrique Huerta gave you an AWESOME starting point. The Midwest is solid, affordable, and can be diverse in the RIGHT areas/regions.

Investigate different states and areas, find a few you like, and then locate some great people to connect with that live and work there and can help you invest there. This could be a turnkey provider if you're interested in the full service package, or a realtor if you want to try to piecemeal it all together yourself (NOT recommended for beginners!). Do your due diligence on whoever you might want to work with, and then figure out how much you can realistically afford in the area you choose. Keep in mind that these are long-term, buy-and-hold strategies. 

One last thing - property management is KEY. It can easily make or break your investment, so make sure you get good property management lined up no matter where you invest. :)

[Joseph Cacciapaglia]

1. Don't try to learn everything. I'm sure you already know way more than I did when I bought my first property. I started investing by house hacking a duplex. If you're willing to move anyway, a house hack seems like the path of least resistance/risk. No amount of reading will prepare you for it. Once you understand the basic concepts, it's time to start making offers. I hate to steal internet guru's lines, but right it's like you're reading about doing push ups. You'll never get good at doing push ups by just reading about them.

2. I have moved several times in my real estate career to try to be in the best market at the time. I haven't always been right, but it's worked out pretty well. I now have a school aged child, and 2 years ago decided my next move would be my last one. At that time, I did a lot of analysis and settled on San Antonio, TX. I've been here since, and believe that all the macro economic reasons for coming here remain in place. It's the only top 10 metro with tier 2 pricing, which leaves a lot of room for both rent growth and appreciation over the very long term. It also has an extremely diversified economy, relative to many other large cities.

[Remington Lyman]

Originally posted by @Cole Holloway:

Hey guys and gals. I want to start this post by saying thank you for taking the time to read it (if you do so). I'll try to keep it short and sweet. Over the last few months my wife and I have become incredibly excited about real estate investing and I just recently finished Brandon Turner's book on Rental Property Investing. It was a great read but obviously there's so much more information to gather and acquire that it can be overwhelming. 

My wife and I are considering a move to be in an area more conducive to our future investing so I want to be as prepared and diligent as possible and put us in a great area (right now we're in Denver and while I know that great deals can be found anywhere, it feels like a bit of an uphill battle here). I'm currently finding myself experiencing a bit of analysis paralysis looking over all the information on this site alone. My questions are this:

1) Do you guys have any opinions on how a newbie might tackle all of the information present on the BiggerPockets site (Blog Posts, Forums, Videos, etc.)? Or how you might have approached it in your own past?

2) If you know of any good, data supported articles on some of the best places in the country for real estate investing at the moment (particularly buy and hold/cash flow oriented)?

Thank you all again for any responses and I appreciate your time.

I started investing before I started doing research. This is risky but I did a house hack for my first purchase. Afterward, I realized how to make better investments. I think learning by doing is the best way to get started. Otherwise, you get overwhelmed with information and never make the first move. 

[Ian Whitney]

Hi Cole-

If you're starting out, I'd say the best place to invest is where you live (or where you have lived).  I currently have 24 doors across 5 buildings here in Denver, and the key to starting out is finding value where others don't see it - which requires you be on the ground in the market where you are investing.  Books and reports focus on the quant side of things (and Brandon's are good books), but only by driving and visiting can you get a read on the qual side.

There's the allure of smaller price tags offering higher CAPs, but when you factor in the economic risk (which is why the price tags are smaller) and the risks of remote management (which are significant) it doesn't seem worth it - at least to me.  It feels a bit like the penny stock approach to the stock market, which fails far more often than it works.

Down South, Colorado Springs is a bit over heated and there's some real garbage, though I've seen some interesting opportunities in Colorado City. Fort Collins isn't bad, though it's getting close to Denver pricing based on Boulder proximity - and Denver is stronger. Greeley has been on a tear and it's a boom/bust oil town so I'd avoid that for the moment. If I were starting, I'd take a hard look at Englewood where you can get Denver rents at a discount per door. Depending on your situation, best way in is to house hack a duplex or SFR with an AirBnB angle (present craziness aside).

In terms of next steps, get yourself an underwriting template and practice evaluating deals you see on the MLS. It's not difficult, and it's a practical necessity if you're looking to get into investment real estate. For properties that look good on the numbers, drive them and practice evaluating neighborhood and condition.

Best - Ian

[James Orr]

@Cole Holloway, I'll send you a PM with some videos on exactly how to get your first deal done and a spreadsheet for analyzing deals here in Colorado (and elsewhere with some video walking you through how to use it).

[Cole Holloway]

Just wanted to send a big thank you to everyone that provided insight! I appreciate all of your time to help a new investor out.

[Enrique Huerta]

Originally posted by @Cole Holloway:

Wow! Thanks so much for the insightful response Enrique. I greatly appreciate that. I'm looking forward to going through all of the resources that you mentioned. Out of curiosity, what risks does the midwest hold in your opinion (aside from the obvious tornado issue)?

The Midwest is a large geographic region and each state, county, city, and even neighborhood will hold different risks and rewards.

With that said, my general observation is that many jurisdictions have very high property taxes (I’ve seen this personally in Ohio, Wisconsin, and Michigan). These taxes are highly variable and the mill rates are high. People do lose assets to unexpected high tax assessments so it is something to be aware of. Be sure to have a solid tax advisor and understand the calculations and systems in each region you’re interested in.

Also, the natural disaster risk you mentioned is very real. Tornados, hail storms, etc do happen and that translates into high insurance costs. So be sure to get a few real quotes for your deals and don’t neglect this important piece because insurance costs can also hamper a deal.

Another thing to watch for is certain markets that have no job diversity or a declining population. There are still good deals in these markets, but the risks are different.

And my last thought is related to the real estate itself: many buildings have substantial deferred maintenance so do a thorough inspection and budget accordingly.

Hope this helps!

[James Orr]

Some additional data on property taxes info by state:

And here are Wisconsin, Michigan and Ohio broken out by city.

Of course, you really should research EACH property you're analyzing, but this can give you a feel for relative taxation magnitudes.

[Enrique Huerta]

@James Orr

This is great data! Thanks for sharing. I’ll be browsing your website for more.

[Cole Holloway]

@James Orr Thanks so much James! Incredible data.

[Alfred Uda]

@James Orr hi can you include me in that email? I am also interested in the resources you are sending.

[Jeff Piscioniere]

@Cole Holloway congratulations first of all by choosing a tract with your wife in real estate. I firmly believe you’re setting yourself up for future financial security and sooner than if you didn’t. I agree with much of the great advice you’ve gotten. Don’t get too hung up on feeling like you need to read everything yet try to continue to consume as much info as you can. Like what was said above, you kind of have to learn on the job before ever thinking you’ve studied everything you can. I love the BP blogs and will cut and paste articles onto my smartphone’s notepad under categories that I want to focus on all for future reference. Listen to the podcasts and check out the books that they talk about. I’ve bought so many of the books mentioned on my Kindle which is cheaper than the physical copy. Speaking of the podcasts, they have been kick *** for the last 3-4 weeks getting into the virus implications and what would appear to be a coming real estate recession! I just bout J. Scott’s new book on real estate investing in a recession. It was incredible and I can see myself reading that 3-4 times in the next couple years. I feel we are heading into a downturn where all the green shoot deals will be springing up that will result in the next expansion.

As was mentioned, I hear lots of great things about investing in the Midwest but at the same time agree more with the advice to try to invest locally especially your first or earlier deals. Long distance investing is possible but can be stressful and time consuming. I own and self manage a vacation rental in TN from 700 miles away. It mostly runs smoothly but occasionally there are some nighttime or weekend stresses that can cause nerves. Long distance investing will necessitate establishing a team to manage the aspects of the property.

Best of luck to you and keep coming back to BP for assurances!

[James Orr]

@Alfred Uda... will send you the same PM I sent to Cole.

[James Carlson]

@Cole Holloway

First off, congrats on taking a big step. I've got a couple thoughts on this. 

1. Do you own the property you live in? If not, then like @Ian Whitney, I think your first "investment" should be the place you live. You can house hack if you want by the room, though I find most couples aren't super psyched about that. I'd suggest trying to find a home with a basement apartment or other mother-in-law setup that you can Airbnb or medium-term rent. We have searches set up to find those properties for our buyers. It allows you to offset your mortgage a bit while also maintaining privacy for your own residence.

2. My suggestion on how to handle all the information is ... to not try to handle it. Read a book or two. Listen to a few podcasts but then take the plunge. You'll never learn as much in a book as you will by doing it. We didn't know much when we bought our first place in 2015 but we learned a ton. We have four investment properties (five doors) now, and each new one teaches us something. I am prone to analysis paralysis myself, so I try to keep it simple. Can I cash flow on this place? Even a little? Is it in an area with appreciation potential? (Like most places in Denver.) Great, let's get it, work it, learn some things and move on to the next.

Not the traditional advice, I know. I wish you luck. 

[Brian Walker]

Hi Cole,

Your right we’re we all started, at the beginning wondering what to do next. I’m a private money lender and work with investors of all experience levels. I’ve always found that you don’t always have to move to a new area to invest in properties but you do need to learn about the areas you think you want or can invest in.

Next it’s figuring out how to buy right. If you don’t buy at the right price then you can get stuck with a property that won’t perform.

The other issue is can you gather the money and the right people to get the job done while still making money. It’s just math.... Get that right and you’ll make more than you lose!

Reach out anytime. Good Luck!

Brian Walker

[Davis Doan]

Hi Cole,

I am also a newbie and also am I analysis paralysis, but finally started taking my next steps

Here is a super quick road map:

1. Set a two month deadline on reading Bigger Pockets books and listen to Podcasts, have your capital ready, don't do anything weird with your money or financial accounts, deadline is important otherwise you'll just want to keep on reading so you're "prepared" 

2. Next two weeks research which market to invest in (research five cities, tons of articles and posts on which markets to invest in and what metrics to look for)

3. Next week, Pick three cities based on your research, post on BP, in the respective City that you are interested in investing in that city and a handful of agents will reply, coordinate with them to get on a call, find two more agents per city via Google , BP, or referrals

4. Next week schedule calls and talk with all of them to learn about the neighborhoods and what properties they sell to investors

5. Next week Narrow down the one market to continue to invest in and work with your agent and define your real estate Goal for your first property (cash flow or appreciation, single family or multi, how much per month in cash flow, what cap rate and what is your exit plan)

6. Next week find a lender to get pre approved

7. Next week send paper work to lender for pre approval and now find other BP investors that have worked with the agents you like

8. Next week research property management, build a list of five, find other BP investors that have worked with them and get referrals

9. Work with your agent to put in offers, have your due diligence check list(roof, foundation, what fees the city charges for utilities, county tax rate, eviction laws, closing fees, ect )

10. Work with agent to close deal and have property management lined up

11. Get tenant in place, setup payment system and update process with your PM

i am definitely missing details but it's good enough for me to move forward and take action. I don't know everything and probably never will, but that's part of the process.

I am on step four and was in your shoes a few weeks ago. I just kept reading and researching for the longest time. I have probably listened to over 100 BP Podcasts and read 50+ blog posts and felt like I was making progress on my investment goals, but In reality wasn't taking any real action.

I hesitated to post on BP, but when I did a lot of people reached out and helped me. Good luck, feel free to message me to just chat about your journey. 

[Ian Walsh]

Learn your market and learn to market.  It's the path I recommend to anyone.  

[Mayson Madden]

@Cole Holloway Great post, was scrolling along and made the decision to read this. This is awesome stuff.

@James Orr- Those charts you have for the tax rates.. Where did you get them? Those are very useful, as I am currently in Wisconsin looking for my first purchase.

[Steve Vaughan]

No matter where you land,  keep it simple.  A house is a house. Estimated rents and expenses will guide.  Don't get emotional, etc.

When researching other markets, I also look into things like weather, storms, flooding, earthquakes, humidity, etc.  Things not discussed as much.  Taken with all other market, tax and tenant law considerations, it narrowed my search significantly.  

There you'll be with the perfect property hoping the coming freeze, flood, earthquake, tornado or hurricane doesn't erase it, right?   Very little discussion about climate and geo risk in diff markets. 

[Frank Wong]

Hi Cole,

You mentioned  "My wife and I are considering a move to be in an area more conducive to our future investing so I want to be as prepared and diligent as possible and put us in a great area."

Work backwards. You will need to have a job to create income while you start your investing venture. (Unless you have a ton of capital already). Start looking at areas that will land you a position for that. If you work from home perfect you can pick anywhere.

Look at how much money you have to invest with. From that point you can look into areas with price ranges that fit that. Example. You have $50,000 to invest but looking at an area that has a avg price of $400,000.  Makes no sense and you are wasting your time. You build your plan and pick an area that fits your scenario. A common mistake is trying to find a needle in a haystack type deal. Those are low percentage plays and a complete waste of time. Each area provides a certain type of deal and return. You need to find what fits your situation.

Once you have the list then pick where you want to live and fill in all the blanks with all the other Econ info growth blah blah. 

[Marcus Auerbach]

Great point @Steve Vaughan - I had an intern once helping with our rentals and he wrote his thesis about geographic risks and how Milwaukee fares against other parts of the country. We have no earthquakes, forest fires, hurricanes, usually no tonados, no floods and droughts - but we are on one of the largest fresh water resorvoirs. I had never thought about how blessed we are. The problem with a real estate portfolio is it's quite immobile, so I am glad we are at a good spot. 

Winter can drag on here a little, but I'll take that over other issues. I also have the theorie that even if people complain about 40F weather, it is good for productivity - who wants to work when it's 90F or more lol.

@Mayson Madden We do have high property taxes and a lot of people complain and forget to consider that we have very low sales tax. If you look at what a typical household spends per year it makes up for it. Of course nobody complains about the extra 17 cents on their starbucks as much as the extra $3000 on their tax bill.