Rental Property Investor · Carolina Beach, NC · Member since 2017 · 441 posts · 462 votes
Hi friends,
Ok so I'm a new investor, I've read most of the bigger pockets books and I'm working on all the podcasts. I'm curious what you would do In my situation.
I believe that there is money to be made in any market (someone's making money right?) but all I see right now are people talking about this crazy sellers market here in North Carolina.
I've got access to some money and I enjoy my current job. Is it time to network as hard as possible and study my area/ put systems in place while I look for a killer first deal or is there another option? Ive considered using this time to get my realtors license and really learn the market.
I'm 24 so what would you tell your 24 year old self?
Thanks,
JP
Had I known, I'd have told myself, "Nevermind the factory job - start learning about real estate investing, raising capital and building business entity structures!"
Those are probably the most valuable lessons I've learned in the past six years.
I don't know your market but I would stockpile cash as you learn more. I was your age and had a realtor discourage my REI aspirations. I bought a primary home that later was my first rental but I let that non-investor discourage me. In retrospect I would say to save cash and make moves that only 24 year olds can make. Use that to your advantage. Maybe a house hack. If you feel market is overheated then wait, but those with more experience than me generally don't advise trying to time the market. Overall I just say "stay the course" and don't be distracted. Real estate works if done wisely. Plug away and learn more every day. Networking is always good as well.
Joe Prillaman I'm 24 as well and my wife and I just bought a triplex in Minneapolis to house hack. I would absolutely say get started. Will Pritchett is right about getting the right people to help you. Our REA is an investor as well and I cannot tell you how much that helped. Get started bro we are all here for you.
@Joe PrillamanMy advice to myself would be to house hack sooner. We house hacked a fouprlex in 2013(I was 28), and then a triplex a little over a year later and I have been an active investor since then(bought two more this year). I only wish I would have started sooner.
I responded to another guy yesterday about the "seller's market". Here was my post because I think its applicable to you as well.
"I am going to spend another 5 minutes typing a post trying to change your perspective a bit.
Here is an example. 250K duplex, 25% down($62,500), 15% Cash on Cash Return(Cash flow of $781 monthly). You can wait 3 years and save 108k and be ready to jump in for the perfect deal. Or, in that same time frame you could have cash flowed $28,116, and paid down $8,918 on your loan.
Starting Net Worth $62,500 in cash
Net Worth Doing nothing = $170,500
$62,500 in the bank, plus $108,000 in new savings
Net Worth Doing a Good not Great Deal = $207,534 $28,116 in cashflow, $108,000 in traditional savings,and $71,418 in equity
Now you can wait for a down cycle, pick up assets and potentially catch up net worth. The key word there is could. You are gambling and making assumptions on things you have no control over like interest rates, employment, etc..
Overall you are saving money and it sounds like you are on the right path. Good hunting!"
Had I known, I'd have told myself, "Nevermind the factory job - start learning about real estate investing, raising capital and building business entity structures!"
Those are probably the most valuable lessons I've learned in the past six years.
I'm just about in the same boat as you. I'm 25, have a stable W-2 job, and my market in SE Michigan is a booming seller's market, too. I'm reading books, listening to podcasts, and going to my local REIA monthly meetings while saving ~20-30% of my paycheck to eventually jump start my investments.
I'm torn between the two options of getting into the market NOW, or waiting to see when the bubble pops and deals become more plentiful, as they are currently very scarce. My primary concerns for the time being are to network locally, find a mentor, and continuing to educate myself. Ideally, finding a mentor will come naturally while networking, but that will come with time.
I'd encourage you to get to know the players in your market. Continue saving money and increasing your knowledge through books, podcasts, and networking so you're ready when the time comes to actually jump in. Best of luck when you decide to take the plunge!
Get that "bubble" thing out of your head and keep it out.
We're in a housing shortage right now. Some 80% of developers / builders went under in the crash and stayed down for a good five years or more. That means there's five years of catch-up to make up before things get back on track. Most economists estimate this could take until the middle of the next decade or later.
Housing prices right now are driven by supply-and-demand, as they always are. There's no artificial escalation in demand like there was back in the days of predatory lending. If anything, demand is being dampened by the dearth of lending resulting from Dodd-Frank.
Saving is a good idea, investing for income is better. A better idea for funding deals is to learn about how to attract and engage private lenders. You'll have more funding available than you can find deals for.
My local REIA recently presented real estate numbers over the last decade or so showing how numbers in 2016 compared with ~2006, such as inventory, average home value, sales price to buyers' income ratio, etc. All in all, the conclusion was that the situation now is a lot different than it was 11 or 12 years ago, so as you say there is no "bubble" to pop. The explanation you gave as to why inventory is so low right now makes a lot of sense, though. Thank you very much for that!
So with a 5 year loss of demand the market could stay this hot for 5+ years? Would it be possible/profitable to invest in new construction with a group of partners? or is that to risky?
@Joe Prillaman I was in the same boat as you not too long ago. I bought my first property when I was 20 back in 2005. I followed the advice that @Andrew LeBaron gave you and partnered with someone on my first rental property and learned everything I could. Fast forward 12 years and I now have 41 properties across my personal rental portfolio. I would take the time to learn as much as you can, but I also would not delay taking action. There is never a "right" time - if you keep waiting for it, it will never come. Go to as many networking events as you can, and meet as many people as you possibly can, because one thing is for sure - you can't do it on your own. Surround yourself with people smarter than you, learn from then, and take action. You will definitely make mistakes, as many (including myself) have, but those were the best learning experiences I have had in real estate investing (way better than you can learn in any class). Best of luck!
If I could rewind and step back to my early 20s, I would tell myself the following:
1. Don't waste your money on consumer goods. That new car and TV is going to set you back from having cash to invest in real estate and you don't really need it anyway.
2. Pay off all non real estate debt ASAP.
3. Look for a small multifamily to house hack. Its not going to be your forever home (is there such a thing?).
4. Find a good mentor and learn as much from possible.
Another thing I didn't take fully advantage of was my role as an apartment manager. We were onsite managers for 3 - 10 unit buildings for about a year. Our goal was to live rent free until we have enough money for our 1st house. I had a big multifamily owner that liked to talk plus a friendly management company, but I had no interest besides what was right in front of me and missed out on some valuable lessons and networking.
Joe, I am in the same boat as you. I am 25 and just starting out. All the real estate investing options sound attractive but you think you can't do all at once. You want to be strategic. I appreciate the advice given in this thread!
@Joe Prillaman I would tell my 24 year old self to house hack a small multi-family and figure out if being a landlord is something you want to pursue long term. From there your real estate investing journey will unfold.
@Joe Prillaman You have gotten some great advice here. I agree with @Andrew LeBaron to find someone who knows a lot about what you want to learn and ask how you can add value to what they are doing and then go do that. Even if you don't know how, just ask them. If they say go raise money, say "sounds great! Where is a good place to start." and then go do that. if they say bring me a deal, then respond the same way. Working for little to nothing in monetary compensation in exchange for knowledge and experience can be worth much much more than the amounts that some people feel they should earn at the start.
I think that house hacking is also a great place to start.
Learn to manage the money you do have right now. If you are a poor manager of money, it won't matter how much you make, you will still feel that there is never enough.
The best investment I have seen so far is to invest in yourself and invest in other human beings. I call that "human capital". Contact me offline if you want to know more exactly how to invest in yourself and in other people around you.
I give you, and everyone else who is investing in their early 20's to get into real estate! I was so scared, and overwhelmed, and as others have pointed out, non-investors are quick to discourage!
First-- Find a good mentor, someone who can guide you and help you throughout the process... a mentor will help you with connections, hold your hand and tell you if it's a good deal or not, and why. A good mentor is worth their weight in gold!!
Second-- I'd say go for it! At first, it's really scary, overwhelming, and the amount of financial risk you'll be on, is crazy! After the first, you get experience, you know what's happening, you know the budget, all the fear turns into excitement! Experience is the only thing that will really helps!
@Joe Prillaman I'd like to add a vote to the house hack strategy. I feel it's low risk for a lot of reasons (lower cost of entry, great first hand learning, multiple exit strategies, reduces your cost of living for faster savings for the next deal, etc). Also take this time to network and stockpile cash.
Finally, if you've done proper analysis on a deal and feel confident, don't worry about making the wrong move. Nothing you do will be perfect, and there will always be ways to have done anything better. Learn to analyze risk, plan to mitigate that risk, and keep moving forward.
On a personal note, I always say if I go could back in time I'd see all the concerts that I can't anymore. So make sure you're also enjoying the things that add value to your life, which are ultimately the reason for REI/financial independence.