In need of some guidance

[Christian Licata]

Hi, i'm 22 years old and looking to get started in real estate. Im trying to decide if flipping a home or buying a rental property is the best option for my first investment. I have a good amount in savings and I'm willing to put a down payment of up to $50,000 for a rental. The problem Im facing is that my job doesn't pay much. So I don't know if it makes much sense to buy a rental property for about 200k-250k, just to make a few extra thousand a year (based on a 5% return). Should I be looking at this as a goal to keep buying rental properties to build up my portfolio? Or should I focus on trying to make more money per year before buying a rental? 

The second option would be that I flip a home. If I decide to do this I have a private loan in place that would be for 250k at about 6%. I also have a close connection with an experienced developer and is willing to help mentor/guide me through looking at homes and answering my questions. Also, do you guys think that buying a foreclose to flip would be too risky for my first flip? Any advice will be appreciated, thank you!   

[Marc Winter]

@Christian Licata, first, congratulations on the mindset you have in wanting to invest in real estate!  

A few questions come to mind based on the info in your post: 

1) On the rental, Is the $50k just for the downpayment, or do you have additional funds available in reserve to cover cap x?

2) Re the flip, Do you have any experience in construction, or dealing with contractors, as well as your local building department?  Have you considered partnering with an experienced investor to work with you during your first flip?

3) Do you own your own home, or can you 'house hack' if necessary?

I sincerely wish you the best of luck with your real estate journey!

Keep investing and moving forward! 

[Wale Lawal]

@Christian Licata

Renting property provides steady passive income, long-term wealth building, and tax advantages, but may be low initially due to mortgage payments and maintenance. Flipping offers quick profits, learning opportunities, and higher income potential but comes with high risk and debt. Choose the right path based on risk, desire for immediate returns, and financial situation.

Good luck!

[Marcus E. Turner]

It's great to hear that you're interested in starting your journey in real estate at such a young age. Given your situation, both flipping homes and purchasing rental properties have their merits, but they also come with distinct challenges. With a down payment of up to $50,000, investing in a rental property priced between $200,000 and $250,000 could yield a modest return, especially considering your current job income. It’s essential to evaluate whether the potential rental income aligns with your financial goals and if you can manage the ongoing expenses associated with property ownership.

On the other hand, flipping a home could provide a more immediate financial return, especially with your access to a private loan and mentorship from an experienced developer. This guidance can be invaluable as you navigate your first flip. However, flipping does come with its own risks, particularly if you consider purchasing a foreclosure, which can be unpredictable. It might be wise to start with a less risky property to gain experience before tackling a foreclosure. Ultimately, consider your long-term goals and financial stability when making your decision. Good luck!