Taking the plunge -- uniquely positioned. WWYD?

Question

Quick background: 21 years old and Connecticut based. I have secured over $20k in just over a year in anticipation of what will be me quitting my full-time job in Market Research and pursuing Real Estate full time, January 2021. I either take the leap and fly or take the leap and fall -- but I am taking the leap.Before I get into my question, I want to preface by noting that these savings include coverage of my expenses for 6+ months and enough to pay myself $2k a month in that timeframe. Noted because I cannot simply sink this savings into a deal -- it's all I have. Question: While the long term goal is to invest, I want to know how you would secure your feet in the field as a realtor had you known what you do now in life -- in addition to assuming you too had $20k and 24 hours a day to make sh*t happen when you started. I have two goals for 2021: 1. Buy a multi-family home within the first quarter 2. Build my business and see to no less than 10 deal the first year (avg $250k) -- conservative --Let's connect! Especially if you're local! Cheers, Nate. Fairfield County, Connecticut. Soon to be Realtor and financially free by 22.

Nathan Gesner · Answer

You have $20,000 saved up to fund your day-to-day living. What money will you use to invest?How are you going to purchase a 4-plex? A quick search of Fairfield shows prices aren't cheap. I found a four-plex for $475,000. It would take 3% down ($14,250) and you'd be financing approximately $460,000 at $1939 a month. My best guess at rent for that area is $1,500 per unit and I think that's generous for a property like this. If you rent three spaces, that's $4,500 a month income. Your taxes, insurance, maintenance, capex, and other expenses will run you approximately $3000 per month and the mortgage is $2000. That's a loss of $500 a month. However, you'd be living in the fourth unit that would normally rent for $1,500 so that's technically equivalent to $1,000 cash flow or $250 per unit. That's a rough estimate but seems doable if you can qualify for the loan.Your other option is to purchase ten homes in your first year. OK...with what? I know you hear all the get-rich-quick guys talk about how easy it is to build a real estate portfolio and how you need to 10X your goals. Those guys make most of their money fast-talking you out of your money. The truth is, you can't just walk around buying real estate without putting money in, otherwise everyone would do it. I've been investing a long time, have excellent credit, am smarter than the average bear, make really good money at my day job, and I still can't buy ten houses a year unless I went to a market where houses can still be found for $75,000 (you get what you pay for).Ideas are fun, but they don't build bridges. You need a real plan. Do you even know what it will take to purchase the first property? Do you know how to analyze deals and determine if a property is a good investment or not? Have you spoken to a lender or applied for a loan? Is your credit established? Do you have funds saved up? One you buy an investment property, are you prepared to market, screen applicants, sign a lease, or enforce the terms of the lease? Do you know how much to set aside for maintenance, vacancies, or capital expenditures? Have you even glanced at the state laws or read a book on how to manage a rental?Maybe you've already done all this and I'm wasting electrons typing this message. It just sounds like you have "an idea" and no real plan on how to get there. I would guess the majority of Biggerpockets members don't have more than one investment. I would guess the overwhelming majority of them started investing after the last housing crash and probably during the last six years when the market has been on fire. Rent is up, property values are up, demand is up, rates are down, etc. It's a perfect storm where you could probably throw a dart at a map, buy whatever property it lands on, and see some measure of success. That won't last forever. You need to educate yourself on what a good investment is for the long haul, buy smart, maintain it smart, and then you'll have a good shot at success.

Jonathan R McLaughlin · Answer

@Nate Rodriguez I think you should reverse the two goals. Sell some houses, learn the trade and your market, get some cash and learn about houses. Buying in the first quarter makes no sense given what you describe.

James Wise · Answer

Do not recommend quitting your regular job right now. Work as an agent part time until you start making enough money to support yourself. Takes time and a marketing budget to get things rolling.

Kevin Hunter · Answer

@Nate Rodriguez, congratulations on making the decision to get started and good job setting goals. I do agree that those goals may be a bit light hearted at this point. 20K for salary, down payment, etc.... in Fairfield County, where I invest, is not nearly enough. However, I do think you can do what you say as long as you keep your W9 job. Have you thought about getting your real estate license, moonlighting for a real estate agency on the weekends, holidays and weeknights, while keeping your W9 for one more year. It couldn't hurt. This way you can get in to your house hack as you desire but for little down, likely 3.5% in an FHA, then you can learn how to landlord and sell houses, all while maintaining your day job for one more year. Just food for thought. Ultimately, you have to follow your heart.PM me if you want to look at a 4-family I just took off the market because I filled a vacancy. It might be an option for you if you can hold out until the next tenant moves out in the spring..... Good luck!!

Kristin Kiddy · Answer

To add on to @Nathan G. , buying an investment property to house hack is much easier when you have a w2 job. I would take care of that part first, use the 20k as a down payment and any needed repairs. Get some good renters into the other units so your rent goes down to low or none and then save up again for the major transition into real estate full time. Plus I would prepare for a whole year of backup. Of course it doesn't cost that much just to get your license. Do that now, find an understanding broker to hang your license with, and start building contacts. Maybe even sell a house or two while you are working FT (if you hustle) or better yet co-list some houses to learn the ropes.

Craig Bellot · Answer

Hey @Nate Rodriguez, the first steps I would recommend as a new investor is to get a handle on analyzing the income, expenses and ROI of these properties in Bridgeport CT. Connecticut in general is in a sellers market. You will need to be creative in negotiating to get the price / terms you need.You can use the Bigger Pockets calculators to start. Right now rents are strong, you can get $800 for a 1 bed, $1100 for 2 bed, and up to $1300 for a 3 bedroom. Use Zillow and rentometer.com to get data and analyze a few from your home to see what type if returns there are.If these meet your investment criteria then start looking in person by contacting the listing agent.Let me know if you have any questions.-Craig

Timothy Lewis · Answer

I second this. Try to find a way to take the leap without giving up your monthly income

Filipe Pereira · Answer

Hi @Nate Rodriguez, good for having the gusto. I am often reminded that a goal without a plan is just a dream. You have some lofty goals here, and I hope that you achieve them. It will be very difficult (and likely very expensive) for you to get a loan without a w-2 job. You are probably looking at income statement only loans, and those can get pretty pricey. Most lenders will want to see two years of self-employment income before riding alone to you. Do you have a cosigner? If so then that issue might be alleviated. Only having $20,000 to pay your monthly expenses as well as fund a deal, you will be left with very limited opportunities. At 10 deals in the first year, you're at less than one deal per month. If you get one half of the commission you generate, you will gross around 3K per deal you close, or 40K +/- at the end of the year. Not bad, but far from great and likely not enough to be financially free. Have you calculated what your number is in order to be financially free? Admittedly everybody seems to have a slightly different definition of what financially free means. For me it was generating enough income from my rental properties that I did not have to go to work in the morning for someone else. I hit that in my early twenties, but it was after a couple of Investments and definitely more than 20,000. I got my salesperson license but never really set out to be the highest volume agent - I use my license to be able to be a property manager here in CT since it's a state requirement. Any sales related business is going to depend heavily on who you know and who those you know, know. It's all about contact points, network and being able to learn what someone needs through a conversation. You need to develop a keen sense of when they are "sold" so that you can then transition the conversation away from "selling" and instead move it towards engaging them as a client. There are TONS of FREE resources about how to be a better agent online. I highly recommend Dan Wood's youtube channel. https://www.youtube.com/channe... luck out there!