HELP!! Jumping into the Multifamily / Rental Property "deep end"

[George Harris]

It's a long post, I apologize, I won't make it a habit. This is my first post and I've waited a decent amount of time to make it. The forums on this site are phenomenal and I've literally been a sponge the past few month. Signed up for PRO not too long ago as I believe that's a small investment with much more potential than the awakening - mind you I've always been intrigued by REI. I am married with an infant daughter and another on on the way (a boy). My wife is a school teach and she works so hard for so little (relative to me). I make decent money and trust me I know the struggle living in a newly purchased NJ home with these outrageous property taxes. I want to create that month cash flow to give her a break and ensure my kids enjoy their childhood in a different way than myself growing up just outside southeast DC.

Rental properties is definitely what I want to do, although I’m not opposed to rehabs since I need capital. I’m looking specifically for 2-3-4plex to start. My job has me out of country for a little more than half the year, but when I’m not working I’m OFF, meaning I have the free time to do whatever. I think this would be valuable in that I won’t have to compromise my job. However, my goal, beyond my current job is to enable myself to spend more time with my family. Time is way more important than money to me. But on the flip side I’d want to do everything in my power to make sure they have everything they need. Note that I do have full communication abilities through phone and email when away at work.

I've identified a few areas - Memphis, TN; Raleigh, NC; Charleston, SC; Atlanta, GA; not necessarily IN the heart of the cities. I am complete open to anything and everything though. My "plan of attack" comes with many questions:

1. I know you can do research online, and I've done some, but I want to fly down to the area and spend a day or two just driving around. I'm super detail oriented and the fact I'm seeking my first property I feel more comfortable doing that. 

a. Good idea or bad idea?

2. I'd like to make it more of a drive for dollars experience, but is that even possible with rental properties? I only have 15-20k cash to put down. 

a. Sub question - Does anyone think there are better areas that would be more affordable?

3. If I'm able to find something while out and about, what's the best way to approach? I've really only considered phone calls and/or walk ups to that and the neighboring properties to get info (outside of the internet of course). I figured that's how a lot of the distressed properties and the like are actually discovered (not including off market transactions, connections I don't currently have).

a. Forming a solid team would be something to start with. I'm working with the assumption that I can research and also use BP for vetting contractors, property management, etc. I could be completely off in that approach though. Thoughts?

b. I do understand that I'll need to do much more research, specifically on each area once getting a feel for things and zoning in on certain areas with potential. I do have some family/friends in each of the areas I chose that may be able to help a little.

4. $$$$ - I doubt I have enough to really do anything. I've considered my approach to getting a partner or investor. I've gone through countless forums and there are a few methods I like. I felt like the below method was a good way to atleast let investors/lendors know that I am serious, PLUS, it's a conversation starter. I'm as honest and transparent as they come so hopefully something along these lines would work. Thoughts?  https://www.biggerpockets.com/renewsblog/2013/12/23/raising-money-to-invest-in-apartment-buildings/#comment-224645

5. Not necessarily a step, but I'm still attempting to completely wrap my head around the "entity" to which all this should happen under, or is that even necessary right now? Maybe I could transfer later?

Overall, I know I'm a hard worker and I'm not short of passion on this. How can one go about seeking a mentor? (I'm not asking for a mentor, nor am I attempting to break any site rules) I just feel like I'm learning to swim. I know I'm going to jump in the pool regardless, but it's nice to have a life guard and teacher around to help me learn to swim. I don't know how to go about trying to shadow someone, whether local or somewhere else. I really just want to work, gain some experience and build relationships. In my mind, that should cost the other person nothing anyway. I'm literally only bring work ethic and positive attitude to the table so I'd be willing to work for free. Thanks for hearing me out (I know it's a lot) and I look forward to your responses.

[Jonathan Twombly]

@George Harris

The southeast is definitely an attractive place to look, but you have picked some very hot and expensive markets.  I personally invest in South Carolina, in the Upstate region (Spartanburg, Greenville), which was much more attractively priced than Charleston until investors priced out of Charleston discovered all the growth there.

What about Columbia?  It has some attractive aspects, particularly that it is anchored by state government, which is never going anywhere.  My understanding is that you need to study Columbia closely, because there are very good areas and very bad areas, but overall Columbia has never attract the investor interest that Charleston and the Upstate have because it doesn't get sexy announcements like Boeing, Volvo and BMW moving have caused for the other regions.

In terms of your plans, here are my comments.

1.a.  Absolutely go down there and drive around the markets that interest you.  You can only do so much research on line.  At some point you need to get down there, drive around, and get a feel for things.  Go on some property tours and see the kinds of assets that are available, at what price, where. See where the local drivers are - the large employers, the retail centers, and more than anything, the good schools.  You could probably make a whole investment strategy out of buying rental properties in the best school districts.  They will always stay full with the kind of tenants you want.

2. As I said, look in Columbia.  If $15-20K is your limit right now, you might also want to check out some smaller areas in the path of growth, like Rock Hill, which is in SC, but within commuting distance of Charlotte.  The Anderson market is a little iffy, but as I said above, if you find a property in the best school district in Anderson, you might be okay.  Anderson has the advantage of being cheaper than other markets.

3.  Your team is critical.  You can use BP, but you can also start building it locally once you have a market identified.  Getting good property management on board early will help, because they can refer you to contractors and brokers.  Be sure to get your local attorney, accountant and mortgage broker on board early as well.

5.  Entity.  A lot of mental energy is spent on BP on entities.  Probably because the gurus talk about entities - and for all the wrong reasons - usually some kind of tax avoidance.  The reason you want an entity is to put the property into a box that's sealed all around, with no leakage to your other assets.  The point is that, in the worst case scenario, you lose the property and that's it.  Your personal assets are not accessible by a creditor.  If you are in the real estate business, I encourage you to put the asset into an entity.  If you are going to do this, you need to do it from the start, because it will cost a lot of time and expense with the bank to do it later.  When you talk to your lawyer and your mortgage broker, tell them up front that this is what you want to do, and they will help you structure things in the right way from the start.

Hope this helps.