What is the best way to start investing w/o breaking the bank?

Question

Just joining the forum and I would like to start out by asking, what is the easiest way to break in to real estate investment w/o breaking the bank? I'm a veteran and I live in California if that helps.

Mindy Jensen · Answer

Account Closed , the best way to protect yourself in a partnership is to spell out everything you want. Have an attorney draw up an agreement with whomever you choose to invest.Do you know anyone who would be interested in investing with you? Start out small - on one house, and make sure you're both on the same page before you put down money.(PS: I grew up in Turlock! It was nice to see someone from my old city posting here.)

Aaron Koski · Answer

Jason Scott you could always syndicate the deal with multiple investor contributions if you can't come up with the down payment you would need for an investment loan (typically 20-25%). Talk with multiple lenders and find out if they have seasoning requirements for the down payment first, but this could be a good strategy to get into multiple deals faster than you may be able to on 100% of your own dime. Another option would be to buy the property using hard money, fix it up, and refinance into a long term loan using the equity created as your down payment for the refinance. Just make sure you know how long your lender requires you to own the property before they will refinance it for you, as it can vary greatly between lenders and this can greatly affect your holding costs to do the deal. Search the "BRRR" strategy on the forums, there is a ton of good info on BiggerPockets about it. Good luck!

Franklin Romine · Answer

@Jason ScottBreak the bank and jump in. I took a hammer and smashed the piggy years ago. Start raising capital and credit, jump out of the plane and go all in....Even though your median home prices are $280K, you should be able to find cheaper properties to buy and hold. Where I live the in Visalia Fresno area the median home prices are around $180K. The median home prices for homes I personally buy and hold are around $70k per house or $50-60K per door. Hope that helps....Franklin

Rahul Bhatt · Answer

Account Closed · Answer

Thanks Aaron Koski ! My biggest concerns with bringing in someone else is getting scammed and/or getting involved with someone whom I will have to exhibit a great deal of trust in without knowing too well. I had a friend once that started out with another guy based on common interests, but as time went on the other investor changed his philosophy. He wouldn't agree to liquidate the properties they were holding, which ended up being very costly long-term. What are some good warning signs to tell the difference between a solid investor and a potential scam?

Account Closed · Answer

Frank Romine I have a family, so a house hack isn't really in the cards for me. Also, I have a steady income, so I would be more interested in Flips or a Buy & Hold purchase. Just not sure how much risk in hard money loans is worth taking on. I'm fine with building debt to build up a steady stream of income, but I don't want to spend too much money up front. I guess I'm more interested in what kind of negotiating strategies people use when borrowing to prevent putting too much down up front.

Account Closed · Answer

@Richard Duong, with median home prices at $280,000 here in the Central Valley, I would be more than comfortable investing here. Also, I've tried being a landlord across state lines in the past, and I didn't particularly care for it. I want to be able to manage my own properties, and be in a close enough proximity that I can handle issues, if they should arise.

Account Closed · Answer

Define your goals and look for the best return for your skills, interests, and cash. Best of luck in your investing career.

Joshua D. · Answer

@Frank RomineTake the plunge! Have you thought about a House Hack?? (you can search the term here on BP) Buy a small multifamily property and live in one unit while you rent out the others. Cool thing is after a year or so you can move out and do it again! if you did this every 2 years for 10 years you could have 5 great multi-families and prolly have enough cash-flow to cover all your basic expenses. you could use a VA loan to finance this since you are a veteran. total cost to you could be less than 50k over the years and you would have a killer portfolio. it would require moving 5 times of course but if not having much cash is your concern the you may be willing to give it a go.

Richard Duong · Answer

True. I agree with you about staying within your area if your are self managing. Sounds like you have been in the business but are now coming back into it?