Looking for an experts opinion!

[Allison Zittritsch]

Hey everyone!! 👋

Long story short, I’m looking to get started in real estate investing and I have 50k to invest. 
I’ve been interested in getting started in airbnb, but with all the information available online I’ve fallen victim to analysis paralysis.
I’m open to hear others thoughts on what they would do if in my position.
 

p.s.I live in Michigan 

[Kevin Sobilo]

@Allison Zittritsch, real estate investing for most people is "active" unless you have gobs of money to deploy.

So, first I would think about what your goals are.

Then I would identify some possible investment strategies such as : Buy & hold long term rentals, Short term rentals, BRRRRR, Fix & flip, etc and see which one(s) might fit my goals and situation best and why.

Then I would do a self evaluation to determine what kind of "work" I want to do in the real estate investing process. You need to be honest, not only about what work gives you satisfaction but also what kind of value it will bring to the process. YOU are part of the investing equation as much as the money you start off with. So, knowing what value YOU bring makes a big difference in how well things will go. 

[Jonathan Greene]

50k isn't much to get into short-term rentals in reality because you need a downpayment, closing costs, and then furnishings which are the most important after part that you need. Analysis paralysis is always the product of the confidence not being there. Have you found local real estate meetups so you can meet other investors who are on the same trajectory as you? That will help you get out of analysis paralysis.

[Travis Biziorek]

Hey Allison, where in Michigan exactly?

If you're near Detroit, you have a huge opportunity to be local to what is probably the most unique market in the country today.

$50k is a tough amount though. It's enough to feel like you have a good slug of cash but not enough to be dangerous. 

If you invest in Detroit you have enough to do a $100k-$120k property with 25% down. You could then, in theory, try operating it as a STR.

I run a STR in Detroit and it does very well. I also have 11 other LTR doors in the city (also do extremely well).

If you have a high capacity to save more capital you could do BRRRR's in Detroit. We do them all the time in the $75k-$95k all in range and they are consistently appraising for $90k-$120k.

It's a great way to scale if you have the capital.

[Allison Zittritsch]

Quote from @Travis Biziorek:

Hey Allison, where in Michigan exactly?

If you're near Detroit, you have a huge opportunity to be local to what is probably the most unique market in the country today.

$50k is a tough amount though. It's enough to feel like you have a good slug of cash but not enough to be dangerous. 

If you invest in Detroit you have enough to do a $100k-$120k property with 25% down. You could then, in theory, try operating it as a STR.

I run a STR in Detroit and it does very well. I also have 11 other LTR doors in the city (also do extremely well).

If you have a high capacity to save more capital you could do BRRRR's in Detroit. We do them all the time in the $75k-$95k all in range and they are consistently appraising for $90k-$120k.

It's a great way to scale if you have the capital.

Hi Travis! 

I’m in Rochester, MI.
I do have an acquaintance that was doing flips in Detroit and is now building a portfolio of long term rentals in Detroit. 

I have heard that Detroit has a lot of potential right now.

[Travis Biziorek]

Quote from @Allison Zittritsch:

Quote from @Travis Biziorek:

Hey Allison, where in Michigan exactly?

If you're near Detroit, you have a huge opportunity to be local to what is probably the most unique market in the country today.

$50k is a tough amount though. It's enough to feel like you have a good slug of cash but not enough to be dangerous. 

If you invest in Detroit you have enough to do a $100k-$120k property with 25% down. You could then, in theory, try operating it as a STR.

I run a STR in Detroit and it does very well. I also have 11 other LTR doors in the city (also do extremely well).

If you have a high capacity to save more capital you could do BRRRR's in Detroit. We do them all the time in the $75k-$95k all in range and they are consistently appraising for $90k-$120k.

It's a great way to scale if you have the capital.

Hi Travis! 

I’m in Rochester, MI.
I do have an acquaintance that was doing flips in Detroit and is now building a portfolio of long term rentals in Detroit. 

I have heard that Detroit has a lot of potential right now.

Your acquaintance is spot on. Happy to send you some Detroit specific resources if you'd like. Your close and that's a huge advantage.

[Allison Zittritsch]

Quote from @Jonathan Greene:

50k isn't much to get into short-term rentals in reality because you need a downpayment, closing costs, and then furnishings which are the most important after part that you need. Analysis paralysis is always the product of the confidence not being there. Have you found local real estate meetups so you can meet other investors who are on the same trajectory as you? That will help you get out of analysis paralysis.

Hi Johnathan,

I do have quite a few successful investors in my area that offer community support, I could reach out to them for some meetups.
I appreciate your reply!

[Allison Zittritsch]

Quote from @Travis Biziorek:

Quote from @Allison Zittritsch:

Quote from @Travis Biziorek:

Hey Allison, where in Michigan exactly?

If you're near Detroit, you have a huge opportunity to be local to what is probably the most unique market in the country today.

$50k is a tough amount though. It's enough to feel like you have a good slug of cash but not enough to be dangerous. 

If you invest in Detroit you have enough to do a $100k-$120k property with 25% down. You could then, in theory, try operating it as a STR.

I run a STR in Detroit and it does very well. I also have 11 other LTR doors in the city (also do extremely well).

If you have a high capacity to save more capital you could do BRRRR's in Detroit. We do them all the time in the $75k-$95k all in range and they are consistently appraising for $90k-$120k.

It's a great way to scale if you have the capital.

Hi Travis! 

I’m in Rochester, MI.
I do have an acquaintance that was doing flips in Detroit and is now building a portfolio of long term rentals in Detroit. 

I have heard that Detroit has a lot of potential right now.

Your acquaintance is spot on. Happy to send you some Detroit specific resources if you'd like. You’re close and that's a huge advantage.

I would love that! Thank you 🙏🏼 
You can send to my email [email protected]

[Michael Smythe]

@Allison Zittritsch whether STR, MTR or LTR, you'll first need to figure out a target purchase price and get pre-approved by a lender.

Then you'll need to research where to buy, based upon rents versus purchase prices.

We can assist with referrals, PM us.

[Travis Timmons]

I'll second @Jonathan Greene - STRs hemorrhage cash before you earn a dime in revenue. Furnishing a place is expensive and stressful.  $50k is going to be tight...we always talk about down payments of 20% like that is all that you need. The reality is that you need money for a lot more than the down payment. The only guarantee after buying a property is that you are about to spend a pile of money (whether you furnish it or not). You also need cash reserves. 

$50k is tight, but you can probably get in the game for that if the rest of your financial house is in order. I have nothing to sell and would be happy to help if you think that I can be a resource. We (my wife and I) own and self manage short and mid term rentals. It's tough to get started but both are great strategies to generate a little more year 1 and 2 cash in a tough market. 

[Allison Zittritsch]

Quote from @Travis Timmons:

I'll second @Jonathan Greene - STRs hemorrhage cash before you earn a dime in revenue. Furnishing a place is expensive and stressful.  $50k is going to be tight...we always talk about down payments of 20% like that is all that you need. The reality is that you need money for a lot more than the down payment. The only guarantee after buying a property is that you are about to spend a pile of money (whether you furnish it or not). You also need cash reserves. 

$50k is tight, but you can probably get in the game for that if the rest of your financial house is in order. I have nothing to sell and would be happy to help if you think that I can be a resource. We (my wife and I) own and self manage short and mid term rentals. It's tough to get started but both are great strategies to generate a little more year 1 and 2 cash in a tough market. 

Hi Travis, 
I’d be grateful for any help!
What do you recommend?

[Patrick Drury]

@Allison Zittritsch
get started with a long-term rental first so you understand the moving parts of owning a rental and managing,  then branch out on the next one and get an Airbnb. 

[Nadeem Alamgir]

@Allison Zittritsch

If you're looking in Detroit, I would look into Cleveland. It's a great opportunity for BRRRR. The cost of entry is low, and cash flow is high.

You can find distressed off-market duplexes under 120k and SFH under 80k in B to C-class areas. I recommend working with an investor-friendly agent to help you figure out the market before analyzing any deals.

[Nicholas L.]

@Allison Zittritsch

could you house hack an STR?

otherwise i agree with the others - 50K just isn't enough...

[Allison Zittritsch]

Quote from @Nicholas L.:

@Allison Zittritsch

could you house hack an STR?

otherwise i agree with the others - 50K just isn't enough...

Hi Nicholas 

I’m starting to rethink my strategy and what would be the best option to get my foot in the door. I’m starting to look further into flips. You wouldn’t need to put as much of a down payment down and furnishing wouldn’t be necessary. Of course this comes with its own risks. I see you’re a flipper, don’t have any advice or tips?
Also I don’t wouldn’t be opposed to house hacking, except I already own a loft style condo in a good area that is my primary residence.

[Allison Zittritsch]

Quote from @Allison Zittritsch:

Quote from @Nicholas L.:

@Allison Zittritsch

could you house hack an STR?

otherwise i agree with the others - 50K just isn't enough...

Hi Nicholas 

I’m starting to rethink my strategy and what would be the best option to get my foot in the door. I’m starting to look further into flips. You wouldn’t need to put as much of a down payment down and furnishing wouldn’t be necessary. Of course this comes with its own risks. I see you’re a flipper, don’t have any advice or tips?
Also I don’t wouldn’t be opposed to house hacking, except I already own a loft style condo in a good area that is my primary residence.

I briefly did think of renting out my place and living in a van during the warmer months.

[Nicholas L.]

@Allison Zittritsch

yes, I've done a few flips and a few BRRRRs. and... unfortunately it actually takes money to flip. i actually just tried to BRRRR my latest deal in Pittsburgh and ended up selling it, because it wasn't going to appraise or rent for enough. so it was an accidental flip.

typically for your first few deals, you'd take out a hard money loan - and so you'd probably still need to (1) put 10-15% down, and then (2) make interest only payments during the rehab.  

there's nothing wrong with continuing to learn and save.  and it sounds like you're building equity in your primary which is great.

[Travis Timmons]

I could get behind you taking on a live in flip because the downside risk is fairly limited (it's a place for you to live if things go sideways, and you can take 2 years to slowly do all the work and reap the tax free gain).

The way that you get killed in real estate is by running out of cash and/or being a forced seller. Taking on a flip puts you at risk for both of those. I would advise you to not stack risk factors. A flip is a risk factor; being a first time investor is a risk factor; going into your first investment property with only $50k in cash is a risk factor. It kind of triples your likelihood for a deal to fail.

The truth is that, for most of us, a successful flip or BRRRR without the tailwind of appreciation during the renovation period is really hard. I'd throw the successful flip for a first time investor, which probably happened a lot in the past few years, in the "just because something worked does not mean that it was a good idea" category.

[Wale Lawal]

@Allison Zittritsch

If you want to invest in Airbnb, the first step is to look into markets in Michigan, especially in popular areas like tourist spots or city centers. Take into account factors like how often properties are rented out, how much they go for per night, and any rules or regulations you need to follow. Find properties that fit Airbnb's standards, taking into consideration what amenities they offer, where they're located, and how satisfied guests have been. Do a detailed financial analysis, including how much you'll need to invest initially, how much renovations will cost, what it'll cost to furnish the place, and what ongoing expenses you'll have. Think about potential risks that come with being an Airbnb host, such as changes in demand throughout the year, new rules that might be put in place, damage to the property, and competition from other hosts. Come up with plans on how to deal with these risks if they come up.

Connect with local real estate professionals, Airbnb hosts, property managers, and investors to gain insights from their experiences. Get to know the laws, zoning rules, and tax obligations concerning short-term rentals in Michigan. Follow all legal requirements to prevent any problems or fines. Go through the process of acquiring a property by submitting an offer, bargaining the terms, and collaborating with experts such as real estate agents, inspectors, and attorneys. Keep in mind that successful real estate investing involves thorough preparation, research, and continuous oversight.

Good luck!

[Allison Zittritsch]

@Wale Lawal @Nicholas L. @Travis Timmons

I really appreciate the advice from each of you!

[Elise Bickel Tauber]

Hey Allison!

I'll give my cents as both an investor myself and a Real Estate Broker. I had helped investors for years buy deals and also found myself in paralysis with pulling the trigger to invest about a decade ago. I was helping everyone find good deals and make good money but when it's your own money it's so much more real!! I will say, in my personal opinion, flips are much more risky. I always tell my clients not to expect to make any money the first 3 deals you do. If you get all your money back thats great! If you are open to it, brrrs, in my opinion, are the way to go! if you do it right you can get your money out (and maybe a little extra), get some cash flowing for additional income and do it again. These to me are the least risk and we've done these many times. $50k is more then enough to pick up 2-3 to start. Hope that helps!

[Wale Lawal]

Quote from @Allison Zittritsch:

@Wale Lawal @Nicholas L. @Travis Timmons

I really appreciate the advice from each of you!

 My pleasure!

Keep learning and growing.

[Blaise Peterson]

Disclosure: While I do have do have a fair amount of RE experience, I do not have STR experience.

A lot of new investors seem interested in STRs because there is potential to make good money. Keep in mind that there are two roles you play as a STR owner: that of a RE investor and that of a business owner. Most new investors are inexperienced in both.

Inexperienced investors should minimize the number of things that can go wrong. This is especially true if the property is leveraged. A new investor should either buy a turnkey STR and learn to run the business or buy a property in need of a modest rehab and learn to be a landlord.