Newbie looking to buy a rental propery
Investor · El Dorado Hills, CA · Member since 2016 · 75 posts · 24 votes
Dear BP,
I started reading about REI, and there are so many ways to Invest in Real Estate, I listened to several of the podcasts, and people have succeeded in different ways of Investing, Multi home, Single home, Commercial etc.,
I want to get started and I feel I have to start somewhere and I will never be totally ready, so looking forward to veteran Investors for some advice and help.
I want to Invest in a Single Family Property in a good neighborhood near Sacramento, which I can rent it out to start off. I am willing to partner with seasoned Investor, I have set aside approximately ~40K to Invest.
Please let me know, looking forward to getting my first Investment home.
Regards,
Suresh
Hi @Suresh Kannan! Welcome to Bigger Pockets! You're in the right place!
Fundamentally, there are two types of real estate investing strategies for beginners:
Fix and Flip is a short term strategy that can make you a lot of quick profit, but is also much riskier as so many things can go wrong with the rehab or resell. Incorrectly estimate the after-repair-value of the property even just a little, and it can cost you tens of thousands.
Buy and Hold is a long term strategy that's more about wealth building. 30 years from now you'll have a property paid off by someone else that you can sell at any time, and until you do you get a nice rent check showing up every month to put towards retirement, invest in other properties, or simply just enjoy. Usually the worst thing that can happen is the occasional bad tenant, but there's a lot you can do to decrease the chances of that happening.
It will be tough to find a property for a low enough purchase price that you can rent for high enough to cover the mortgage payment. Most of the time you're going to be negative a few hundred bucks and have to come out of pocket every month just to meet the mortgage obligation. Go vacant for a month or two, and this becomes a serious problem. I would highly suggest you avoid this strategy for now. It may work in other markets, like those out of state, but for now there are much better deals to be had in the Sacramento area.
For example, you could always purchase what's called a "Multifamily" property that has multiple units for tenants to live in and rent from you. These are more commonly called a duplex, triplex, or fourplex. The benefit of this strategy is that you can have multiple renters in the property, and usually see enough monthly rent to cover the mortgage payment and even pocket a couple hundred dollars in cash every month. Overall, a much better investment opportunity that a single family residential home.
I'm currently working with several other clients who are pursuing the same investing strategy as you, and I've analyzed the current multifamily market here in the area enough to tell you there are cash-flow positive deals to be had whether you put 5% down and live in one of the units or put 20% down and rent it out completely.
For now, the best things to do would be:
I know it's a lot to handle, and you may feel a little overwhelmed a some points, but just take it one day at a time and don't feel like you have to purchase any time soon. Don't rush this decision, as it could cost you thousands.
Read the forums here, and ask any questions you have, and before you know it you'll feel confident and ready to buy your first investment property! Best of luck!
@Suresh Kannan
You have come to the right place to connect with the wide array of real estate professionals and investors. Make sure to view the Bigger Pockets book store: https://www.biggerpockets.com/store
Good luck. Cash flow in a good neighborhood with a sfr is tough in Sacramento now and there is plenty of competition from owner occupied. For non-owner occupied you'll need 20% down so if you partnered up and the other investor put in $40k you'd be looking at $80k down so roughly a 375k home. You may find better returns in mfr or out of state.
@Mark
@Mark Nolan = Thanks for the Information, will checkout the books for sure.
Hi @Suresh Kannan! Welcome to Bigger Pockets! You're in the right place!
Fundamentally, there are two types of real estate investing strategies for beginners:
Fix and Flip is a short term strategy that can make you a lot of quick profit, but is also much riskier as so many things can go wrong with the rehab or resell. Incorrectly estimate the after-repair-value of the property even just a little, and it can cost you tens of thousands.
Buy and Hold is a long term strategy that's more about wealth building. 30 years from now you'll have a property paid off by someone else that you can sell at any time, and until you do you get a nice rent check showing up every month to put towards retirement, invest in other properties, or simply just enjoy. Usually the worst thing that can happen is the occasional bad tenant, but there's a lot you can do to decrease the chances of that happening.
It will be tough to find a property for a low enough purchase price that you can rent for high enough to cover the mortgage payment. Most of the time you're going to be negative a few hundred bucks and have to come out of pocket every month just to meet the mortgage obligation. Go vacant for a month or two, and this becomes a serious problem. I would highly suggest you avoid this strategy for now. It may work in other markets, like those out of state, but for now there are much better deals to be had in the Sacramento area.
For example, you could always purchase what's called a "Multifamily" property that has multiple units for tenants to live in and rent from you. These are more commonly called a duplex, triplex, or fourplex. The benefit of this strategy is that you can have multiple renters in the property, and usually see enough monthly rent to cover the mortgage payment and even pocket a couple hundred dollars in cash every month. Overall, a much better investment opportunity that a single family residential home.
I'm currently working with several other clients who are pursuing the same investing strategy as you, and I've analyzed the current multifamily market here in the area enough to tell you there are cash-flow positive deals to be had whether you put 5% down and live in one of the units or put 20% down and rent it out completely.
For now, the best things to do would be:
I know it's a lot to handle, and you may feel a little overwhelmed a some points, but just take it one day at a time and don't feel like you have to purchase any time soon. Don't rush this decision, as it could cost you thousands.
Read the forums here, and ask any questions you have, and before you know it you'll feel confident and ready to buy your first investment property! Best of luck!
@Derek Jones - Thanks any suggestions on where I can look for MFR ?
@Suresh Kannanyou can find mfr right on the multiple listing service. You can also browse loopnet to find mfr and get an idea on current prices. I would suggest get pre approved for a loan to see how much you qualify for and how much the payment is with taxes and insurance. If you ever have questions on financing send me a email.
@Wes Blackwell, Excellent Info, Thank you for the detailed, thought out response, appreciate it. I took your advice and I ordered the 2 books you suggested, will go from there. Have a Nice day Wes!!!