Home or commercial rental property?

Question

Theo Hicks · Answer

Both. Buy a 2 to 4 unit multifamily, live in one unit and rent out the others (aka House Hacking)

Nathan Gesner · Answer

I recommend you build a strong foundational understanding of real estate investing.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by @Brandon Turneror The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control your finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by @Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the biggerpockets podcasts. This will help clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. Biggerpockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up.

5. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Buckle in, keep your arms and legs in at all times, and enjoy the ride!

Nathan Gesner · Answer

There are approximately 1,432 variables in that question, making it almost impossible to answer.

If I were starting fresh and didn't have my own home, I would start by purchasing a small multi-family building with 2-4 units. Live in one, rent the others out, cut your teeth on being a Landlord, rinse and repeat.

Justin Johnson · Answer

@Ed Matson Just bought it, thank you!

Ed Matson · Answer

@Justin Johnson - The Book on Managing Rental Properties by Brandon and Heather Turner.  Available on BP, along with several other very good books.  If you are new to land lording - read this and benefit from Brandon's mistakes! It has really helped me.

Justin Johnson · Answer

@Nathan G. can you recommend any good books to read on being a a good landlord and how to find and keep good tenants in your rental homes?  I, too, am looking at house hacking in a duplex for my first investment.

Robert Shedden · Answer

Ed and Nathan, you guys are spot on! I am just getting into REI and can only imagine where we would be if my wife and I would have house-hacked our first home 12 years ago... but better late than never!

Ed Matson · Answer

Also, I don’tlook At SF homes (owner occupied) as an investment, but rather an expense.

Ed Matson · Answer

Have to agree with @Nathan G.  A triplex or quad house hack will both provide you with your own place to live and either an income stream or “free rent”.  Either way, its a great way to build wealth.  Also, interest rates are increasing, so if I had the opportunity to get a good multi now I would jump on it. Locking i long term fixed rates today will seem like a real bargain in a few years.  (My first mortgage loan was 14% fixed so today money is still on sale).  You can always buy a SF for yourself down the road and then have the multi help pay for it.

Home or commercial rental property?

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