Suggestions On Where To Begin

[Nicholas Adams]

I have a family member who recently inherited a fairly decent sum of money and wants to invest it in real estate. They are young and are just beginning to educate themselves on the general topic. I am a new investor myself trying to get into my first house hack, so I don’t have much knowledge on where to help begin. I’m thinking they have the cash so possibly looking for a partner with the knowledge in a specific market. She wants it to be as passive as possible because she is young and still wants to be able to pursue other things as well. Where does everyone suggest to begin in a situation like this? How would you begin narrowing down markets? Is long distance a good idea? Is it ideal to begin educating ourselves more and start with small apartment complexes or do you suggest to begin with smaller (4 unit or less) buildings to mitigate risk? I’d love to hear all of your feedback! Thank you!

[Jon Kelly]

@Nicholas Adams You listed 5 different potential strategies and there are countless other options. Most new investors hate this answer because they want someone to tell them what to do, but you need to start with defining your goals. You can set goals related to: cash-on-cash return or IRR per month/year, cashflow per month/year, # of properties/units, time involved, etc. From there you can narrow down the investment strategy that works best.

For example, if your family member wants it 100% passive because, "she is young and still wants to be able to pursue other things," then she can consider becoming a limited partner in a real estate syndication. She can earn 8-12% per year for the next 3-5 years and then rinse and repeat. 

If she's willing to do a little leg work she can consider buying a turn-key single family property. This property will be completely renovated and can come already rented. 

Or, you can teach her how to house-hack. Or, she can invest in your house hack... Opportunities are endless. Define your goals and pick a strategy.