How the newbie may start with real estate?

[Aleksey Wheatman]

Now I know the answer to this question: the best and safest way to start for any new comers in real estate with no money is wholesale. But when I eventually got to the point when I realized I have to invest into real estate, I already had some cash to buy a couple properties and I just didn’t know what to do with it. How to utilize it with low risk on one hand and good numbers on another. 

My local market wasn't great and numbers just didn't work. Everything was very expensive. By that time I already knew all these BRRRR, Subject To, Lease options and other strategies but I was scared to death of even thinking about implementing it in some other markets remotely without any team in place.

Yes, I could start calling and trying to find good agent, who can find and “sell” me some property that in theory could look good on the paper but before it renovated, rented out and refinanced so many things could (and I’m sure would) go wrong so by the end numbers would look not so much attractive. After these thoughts I gave up the idea of buying off-market properties. 

I wanted to illuminate at least some risks and wanted to buy decent property in some good neighborhood in the market that would look much better then my local market. So, I started analyzing the open market and comparing property by property, city by city, state by state. I know I want to invest into SFH so at least this part of the puzzle was clear. After spending a couple evenings looking into Zillow and comparing different areas I realized it may take a while and even if I identify some good area or market I can't be sure it's the best and there will be some odds that I can improve it a bit.

Having a technical background and experience with building complex software applications I've accepted the challenge - identify the best market in the US analyzing public data. My analysis was based on data provided by Zillow: sale price, estimated taxes, property insurance and approximate rent and I tried to calculate ROI depending on how much cash I want to put down and then I just compared the numbers.

I knew that I didn't want to go crazy and didn't try to analyze small cities that are too far from large metropolitan areas so I concentrated just on big ones. After several iterations I've identified a couple areas that look pretty attractive to me. I've got about 12%-15% on some properties on the open market and in decent conditions! For me it was exactly what I was looking for. No rehabs, no contractors, just RE agents who are happy to sell you a property from the retail market. After that I found a couple of property management companies to verify rents and my initial thought about neighborhoods. After looking deeper I found out a lot of new constructions going on around, so I decided even buying a new construction to eliminate one more potential problem at least for the next several years - do not worry if something serious may happen to the property. Yes, numbers were a bit less but I could sleep a bit better and eventually I got about 10% ROI with 20% down that looks to me not that bad at all for the first investment.

This kinda risk "free" investment allowed me to feel the taste of RE as well as learn a lot of things about it in general. Since that time I have already bought several properties in that area and all new constructions. I'm pretty happy with it so far. But now after a couple of years owning it and feeling more comfortable I'm ready for something more and ready to evaluate off-market properties in order to get higher ROI.

So, now the question - does anyone think if the platform that analyzes open markets in terms of identifying good potential investment properties would be useful for new investors who don't want to worry about handling contractors and just want to safely invest with good numbers into real estate and having all the benefits of owning it? The platform that would allow connecting with agents and property managers. The platform that would eliminate all the hustle and just left all the benefits of owning RE. Do you think it could have a lot of clients? For some reason I feel that my experience can be very useful to those who are just starting and scary to death like I was two years ago…

PS

The market I identified for myself was the Oklahoma City metropolitan area. First SFH that I bought there was new construction purchased for $165K with 20% down and rented out in couple of weeks for $1395