New to investing. What type of property to buy?

Question

Hello everyone,

I am brand new to investing and so I need help. This is a great site and Im lucky to have found it. Due to me being laid off of my job I am forced to look at another way to make a living. I have ALWAYS been fascinated with real estate and figured this is my time to "put up or shut up." I have about 6 months of savings in my account and about 75k to work with as seed money to get into real estate. My question is this. What is the best way to get into investing under my conditions? Is flipping the way to go for me as a noob with limited funds? Please keep in mind that I am very handy. My father was a carpenter and I pretty much know how to do most of the work. I know I would rely on a contractor, but I can definitely step up to do as much work as possible.

If flipping is the best option, then what type of property should I look for? Auction, REI or some other type? I appreciate any and all answers and comments.

If it makes a difference I live in the Atlanta area, but I can also invest in the Chattanooga or Orlando areas. I know sometimes the area could make a big difference. Thank you so very much in advance...   Len

Jonathan R. · Answer

@Len Parks Welcome to BP. My biggest piece of advice is to find another job and then get into buy and hold investing. I too would like to quit my day job and be a full time investor one day but you need enough passive income coming in from investment properties or a large pile of cash to do it. I read in Rich Dad Poor Dad to think of myself like this- my profession is customer service (I work in customer service for a utility company) and my business is real estate. My first buy and hold deal I spent $32k all in and it rents for $675 a month (18k purchase price and 14k in renovations) . If you had that rental income times two that still wouldn't likely support you monthly to live. There is big money in flipping but typically you break even on your first one or lose a little bit to learn the ropes. If you get a rental first the deal is much more forgiving. Perhaps the property doesn't look as immaculate as you would like it to to flip it but it will certainly still rent. You also have cheap cost on materials. You'll gain contacts as you go and then can become a powerful flipper. Look in C class neighborhoods. Good luck!

Len Parks · Answer

Thank you guys for the feedback. Could you tell me from your experiences, and if you were in my shoes as a first timer, what type of property would you look at for my greatest success. SFH is the consensus but would you go with a Bank Owned, Foreclosed, Auction etc.?

@Adam Meadows Hey neighbor! Its great to hear from someone local. Im not sure Ill be able to make it tomorrow seeing that its my anniversary. The wife would never forgive me, but I'd love to connect with you at some point. Who knows, maybe we can end up in a deal together in the beginning to minimize and lost.

Thanks again

Andrew Ashby · Answer

@Len Parks, welcome to BP! You're in the right place. I agree with @April Crossley about flipping probably being your best bet if you need fast cash. However, this entire conversation needs to revolve around your goals. Your handy skills will be useful in this business whether you're flipping or holding rentals long term. As a buy and hold investor, I've "flipped and rented" but never "flipped and sold". Long term rentals are going to be more forgiving of newbie mistakes like overpaying, over-rehabbing, under-rehabbing, and so forth. If you end up overpaying, over-rehabbing, and overpricing your first flip, it may be your last. It's quite common to simply break even or lose a little money on your first flip...and that's fine to chalk it up to education, but can you recover from the lost time and/or lost money? It's also very important to remember that if you go into real estate full time as a flipper, buy-and-hold investor, or even an agent you're going to be self employed and that means you're going to have to pay for your own health insurance out-of-pocket as well unless your age 26 or less and still on your parents' plan (or pay the tax penalties). Flipping is also further complicated by the constant need for repetition most notably in finding deals and most importantly financing them. You'll have to build a network of cash investors who can front you the cash for these deals so that you can act with speed and efficiency. I recommend reading J Scott's books on flipping houses and estimating rehab costs. You may want to consider finding full time employment and investing part-time initially. My move from pharmaceutical sales to full time agent and investor was only made possible by substantial cash reserves (like yours), but also monthly cash flow from my 4 rental units (if I need it). As for markets to invest in, I own in Chattanooga, Jacksonville, and soon to be in Orlando as well. Isn't Atlanta red hot with investor activity right now? Might be time to look elsewhere...

Adam Meadows · Answer

@Len Parks happy anniversary! No worries about the meeting - I'm sure there will be others. Would love to connect either way and share a deal as well!

Adam Meadows · Answer

Hi @Len Parks,

I'm new to the Atlanta REI scene as well. There's a GA REIA meeting tomorrow night at the Wyndham Atlanta Galleria. It should be a good place to network and learn with other newbies and seasoned investors. I'll be there and hope to meet you as well.

Len Parks · Answer

Thank you so very much. Sound advice for sure. What do you think about buying at Auction or REO's? Would this make sense or do you think my focus should be elsewhere on my first flip?

April Crossley · Answer

Flipping should be your focus. If you are short of funds, buying a rental cash with PML or HML and then doing a cash out refinance likely won't happen with the recent layoff as you might not get pre-qualified for the cash out refi. I would focus on finding off market deals and teaming up with cash buyers in those markets to get them done. I usually like to tell people to focus on one market and interview some agents and property managers to find out what is the most desirable type of home in that market (price range, sqft, location, etc) and really narrow down and focus on that type of property/neighborhood.. whatever the case may be.  I would start as a newbie in the market you are MOST familiar with and the market where it is easiest for you to build and manage your team- contractors,etc).

New to investing. What type of property to buy?

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