How should I go about my start to investing for the long term?

Question

So I have done a lot of research as well as been to a few seminars but I haven't be able to find any real estate investors in my local area. So next week I'm going to make the 2 hour drive to the closest REIA. Hopefully I will meet someone there who will be will into show me a few things in return for me adding value to them whatever that may be, such as a free intern, free tech support (in the last yea of getting a computer science degree) or just free labor worker for there properties. But the one question I have is that I'm only 21 and want to do buy and hold investing for the long term because I love my current IT job but I also love real estate as well. Should I go out and buy my first house and live in it for a year then try to rent it out? Or should I buy it, rent it out then continue to live in my condo I live in now?

Dan H. · Answer

I'm a fan of leveraging your money and therefore recommend the smallest down payment that provides decent interest rate.  I have properties that I put 25% down because it resulted in significantly lower rates but if the rate was marginally better than less down I would have gone with the smaller down payment.

I agree with @Alexander Ball that multiplex house hack is very attractive for young investors (I wish I had gone that route in my 20s or 30s).

Good luck

Alexander Ball · Answer

Hi Justin,

I'll tell you my short term goals, as they may line up with something you'd like to do.

In a sentence: FHA financing (possibly 203k) on a multifamily property.

In a paragraph:  You should be eligible for a 3.5% down FHA loan, and if the property needs repairs you can do a 203k loan that will allow you to borrow whatever you need to get the property repaired.  It's not quite 100% financing, but it is close.  The issue comes with the time it takes to close.  If you're competing for properties with investors that can offer cash and close in a week, you may have to pay a premium for the property to make it worth the seller.  You live in that property, you have your 1-3 tenants pay your mortgage, and when you move out of that property it cash flows at $100 a door at least and you can do it all over again!  That strategy alone could get you 4 properties, at that point the financing changes and you'll have to get more creative.  But, 4 good solid quadplex deals could be $1600 a month of income!

Travis Beal · Answer

@Adam Schneider has a great monthly meet up and I've also heard good things about TREIA if you're looking to network locally.

Zachary Betters · Answer

For many reasons I wouldn't get caught up in trying to find 100% financing. Also don't set a deal that only works based on appreciation. (counting on appreciation is a set up for failure, no matter what market you are in). Wait to find deals that give you a much better margin and thus multiple exit strategies. This may require you to be more patient looking for a deal, or perhaps getting more aggressive finding deals. Many beginner books and podcasts focus on how to find good deals; from bandit signs, to flyers, to driving for dollars just to name a few.

depending on your debt to income ratio ect, you may still qualify for a conventional loan for investment purposes. We are currently working a deal now with New Dominion for 15% down and very attractive interest rate.

Under BP tools, there is a rental investment calculator. This tool may revolutionize the way you are thinking about the numbers on a flip deal. thinking ahead for property management fees, cap ex, repairs, vacancies ect can make a huge influence on whether a deal is 'good' or not.

Be patient, keep looking for REI groups and utilize the bp podcast, forums and webinars to continue to grow. Good luck

Justin Dixon · Answer

@Alexander Ball I agree with you that the multiplex could be a great option but the thing is they have high turnover rates where I'm located and they also aren't in the best neighborhoods were I live as well. However I do like how you financed that deal. But from my market research I have done it would 1 be there difficulty to find a multiplex home in even a decent area, 2 would be even harder to find decent renters at best.

Justin Dixon · Answer

thanks Travis I will look into going to that, have you started your investing journey and if so what's type of property do you buy?

Justin Dixon · Answer

I can put 15% down on a home that has the purchase price of $100,000. But instead I Ben thinking about doing 100%  financing instead since my long term goal is to hold on to it as a rental property. And if for whatever reason whatever reason that doesn't work NC  appreciation will cause the home value to increase anyway so I would just sell it for a profit of my original plan doesn't work out. Any thoughts about this?

Hattie Dizmond · Answer

What kind of capital do you have available?

How should I go about my start to investing for the long term?

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