How to scale in expensive market?

Question

Hello,

HELP NEEDED -- My name is Harry James and I am a new real estate investor. I have the real estate "bug" and I have spent the last 3 months evaluating my local market and learning everything I can about real estate investing.

Here is my challenge: I live in Massachusetts and a large majority of the properties I have found (zillow) are between 200-300k. My challenge is scaling a real estate business when you have to shell out 25% on an investment property. I have spent the last 3/4 years saving to get the 80k needed for a down payment but I don't see how this approach is scale-able if I have to wait another 3 years to save up for another purchase.

Soooo what I am considering is... Do I invest 300k into a turn key duplex in Worchester that cashflows $800 a month as my first investment or do I try and find a BRRR property with no experience in demo's/construction where I can recoup my down payment and do it again.

I am sure y'all real estate wizards have some awesome advice.

I appreciate this community and I am all ears.

Thanks you.

Debbie Consalvo · Answer

Hi Harry!

Welcome!!

My husband and I are both RE investors & agents in Fitchburg area with over 26 units.  We were just able to leave our W2 jobs to become full time investors.  With our free time we have been able to mentor new investors in the Central MA area in reaching their goals.  We have over 20 years of experience and enjoy meeting new people whom have the same mindset and goals!!

We would be happy to help you with any questions in buying or learning about investing!!

Reach out anytime!!

Deb

Jason Regan · Answer

I saw leominster come up on here.  That is my home town so I know that and Fitchburg well.  Leominster will not make the 1% rule when it comes to rent, but will appreciate well.  Fitchburg on the other hand offers very good cash flow, but appreciation is low.  The lowest price points in the area that have the highest CAP I have seen is either Fitchburg or Southbridge.  They will get you cash in your pocket, but you wont be selling for much more when you decide to offload it.  Id be glad to talk to you about these areas

Carol Zeroual · Answer

You can find better multi-families in places like Leominster and Fitchburg and get  a higher rent. get a multi family that needs minor work, fix it up a bit, and rent it out. Where do you see yourself in 3 years? in 5 years? And how will you get there?

Kyle Koziol · Answer

@Harry James you should consider house hacking. By owner occupying you’re able to lower your down payment to as little as 3.5%, and banks will consider rental income from your other units to increase the value of property you can afford. A bank might say you can only afford a 300k single family, but adding income from other units could give you a chance to by a 2,3,4 family for under 50k down pmt. lot of people start scaling their rental portfolios this way around Boston.

Harry James · Answer

I greatly appreciate everyone's input and perspective. It sounds like to me the best strategy to me is find an investment partner and mentor to help coach me through this initial phase of my investment career.

Final few questions:

If I don't have an immediate friend/family connection is the BP community my next best bet for a mentor or are their alternatives?

Any advice for selling a partner to work with you?

Is wholesaling in Massachusetts allowed?

Aaron W. · Answer

I agree with partnering. I always believe that if you find a great deal, then the money will always be there. Financing is no reason to not get started or scale. The bigger challenge is finding the great deals in this current market.

Have you considered going out-of-state or out of your immediate area for properties?

Andrew Zimmermann · Answer

@Harry James I will vouch for house hacking a multi and following the BRRRR approach. If you can recycle your $80K down payment every 2-3 years and be left with a cash flowing asset every time then I'd say you are on the right track. If you are slow and steady in this approach you'll be able to scale up deal size each time. By the 3rd or 4th deal you'll probably need to go commercial on your loan because of Debt to Income restrictions. But that means you're in the game and have options.

Accelerating that time line either requires equity partners or the churn and burn of doing flips, which then gives you capital for new deals. There are tons of ways to skin the cat. Just pick one and go!

Darina Pogodina · Answer

If you are looking for a cash flowing properties, you would want to go to Gateway cities, such as Fall River, New Bedford.

There are deals and both of these cities are getting direct train/commuter rail to Boston, nice right!

Earlier in May, I posted an article about investing for cash flow in a secondary market. Click here

On the other hand, you can hold properties for appreciation in more expensive cities, such as Boston, Watertown, Cambridge, Waltham if you are patient enough and plan to build wealth over the long run.

Cheers!

Paul Carrier · Answer

@Harry James - @Debbie Consalvo and her husband Dan have been super helpful in my journey to purchasing my first property. I highly recommend connecting.

One chat with them and I had a property under contract a week and a half later! Sometimes you just need to speak to a seasoned vet to break down blockers and get after your investing goals!

Best of luck!

Carol Zeroual · Answer

Harry, check out Max Maxwell on YouTube  and Chris Jefferson. They both are excellent coaches. I just recently joined  Chris Jefferson group, Charged Up u. There is a cost of between 100to 300 to join and then 97$ a month thereafter. He has a step by step course, and is verinvolved in his program. He has a session where he answers any questions you may have  and every week we roll play calls and he offers suggestions on how to improve.  Well worth the money! He also has a student area called Band where we post questions or discuss things and he often chimes in. He is also easily reached by email. I like him because he's down to earth, straightforward and responsive.

How to scale in expensive market?

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