Just Starting Out - What to Do?

Question

Hi Guys,

This is my first post here. This is a great site. I read the forums daily. I just need some general advice. I'll try to make this short.

I'll be graduating school in May and will have student loans to repay - $80,000 worth. I have a 1-year position in D.C. that pays $50,000. After the year is up, there is a slight chance that I'll stay in D.C. There's a greater chance that I'll relocate to Miami-Dade Florida, New York, or Georgia.

With that background, do you suggest I stop paying rent now and purchase a home to live in for about one year, sell it, and then relocate? Or, rather than sell it, hold it, and then relocate? Or, not purchase a house now, aggressively pay down on my student loans while I save to purchase a house once I relocate?

That's the first issue.

If I do decide to purchase a property, I'm torn between single family rentals versus multi-family properties up to four units. Whichever I purchase, I will try to have tenants or roommates. Ordinarily, notwithstanding the common advice to start with a single family property, my preference is to acquire a fourplex, triplex, or duplex (in that order). However, I do know that one disadvantage with these properties is that they are not as easy to sell as is the single family property.

That's the second issue.

That being said, any advice as to what to do with either the first or the second issue or, ideally, with both will be greatly appreciated?

For your information, the strategy of investment that I will be persuing is the buy-and-hold strategy (generally speaking). Also, I plan on making this purchase, if I do decide to purchase, around July or August.

Thanks.

P.S. One thing I will be doing is joining my local real estate investment club.

Minna Reid · Answer

Do not become an out of state landlord for a 1-4 fam. 100 unit building with an onsite manager - cool. Small time 2 family out of state landlord, NO.
And 3-5 years away - who knows what's coming that far away. i think you're reaching way too far to make this work.
If you really want to buy, buy a home for yourself at a STEAL, live in it, and sell it for a profit when you're ready to skip town. And don't forget - hefty taxes follow at less than two years, so it better be a sweet deal.

N/A N/A · Answer

Thanks again for the response Minna.

One option I'm actually considering is that if I were to purchase a property (assuming, as you said, its a great deal), rather than sell it after a year, I would continue to hold it. Although I would be moving to Florida, there's a decent chance that I could return to the DC-area after three-to-five years.

What this would mean, of course, is that I would be an out-of-state landlord. I do have connections in this area because I've lived here for the past three years and will also no doubt be traveling to DC for non-real estate reasons. So, notwithstanding the inherent difficulties of owning property out-of-state, purchasing a property (especially a multi-family home) may not be a bad idea if I could find a property that could cash flow while using a property manager.

So, presumably, after three-to-five years, if I were to return to the area, I would have somewhere to stay already. Of course, the property would have to be purchased right. I'm just thinking out loud here.

I'm assuming that as long as a sufficient percentage of the rent covers the mortgage, taxes and insurance, then this wouldn't hurt my chances of acquiring a second mortgage for the purchase of a property in Florida. This is referring specifically to the mortgage and the debt-to-income ratio analysis that credit lenders undertake. I am keenly aware that in any cash flow analysis, the expenses of the property are greater than simply mortgage, taxes, and insurance. They also include, vacancies, maintenance, legal, management (whether I hire a property manager or do it myself), etc.

If this assumption is incorrect, then please feel free to let me know.

Thanks again.

Minna Reid · Answer

Being a landlord comes with its headaches, so be prepared for that, but the more units the merrier. I have a single rental, and now that I'm evicting the deadbeats I haven't gotten paid in 2 months. Zero income, hefty mortgage payment. If that was a fourplex, and one didnt pay me, it would hurt less.
But certainly do not get into a rental situation if you're moving far away.

N/A N/A · Answer

I appreciate the response. Once I decide to purchase my 'first' property and assuming I will be in that location permanently, do you suggest that I begin with a single family rental rather than a fourplex, triplex, or duplex?

Your experience in this matter is invaluable guidance. Clearly, each person brings different levels of risk, abilities, etc to the table and have to select a strategy that suits their personalties, preferences, etc. However, as a general matter, do you foresee any significant difficutlies in starting with a multifamily property up to four units verses that of a single family rental?

Regardless of the option, I would be living on the property as this would be my first rental.

Thanks.

Minna Reid · Answer

As being an older newbie investor I wish I had started younger. The advice I'd give you, is that IF THE DEAL MAKES SENSE..( as in - will make you money even in the worst circumstances), and you're in a position to buy...BUY.
But if you're looking for an out in a year and you want to make money, it better be a deal, whether its a single fam or a multi fam or whatever. Don't even try to get into a rental situation if you plan to walk away in a year, cause that's easier said than done. And I wouldn't try to manage a rental without being less than 45 minutes away, unless its a building with an onsite manager.
But rent is a waste of money no matter how you look at it..IMHO.
And school loans have crazy low rates. I still have one from way back when that's just not worth paying off cause they charge me next to no interest.

Just Starting Out - What to Do?

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