I have 7 questions. How do I ...?

Question

I made a list of questions. Please give me your opinion. I greatly appreciate any help.

How do I decide:

What state, county, or city to invest in?
Which would be better, 2-4 units or 5+ units?
How do I find brokers?
How do I choose lenders?
What is a "good" loan?
How do I choose a good property manager?
IN WHICH ORDER DO I ANSWER THESE??? (Should I decide the # of units first, the loan details last???)

Some background:

I own no property and never have. I live in Southern California so Out of State investing is what I'm looking at. Strategy would be Buy and Hold. End goal is semi-passive income for life. I need roughly 10K a month to retire. I'd like that to be in 7 years. I make 100K a year and have 80K for a downpayment. Ask me anything.

Thank you in advance.

Caleb Heimsoth · Answer

@Jacob Abuata well just realize this isn’t a fast game or get rich quick scheme. To reach 10k a month in cash flow will take substantial capital. I’ve crunched the numbers and to conservatively reach that I’ve estimated would take 1.5M in equity at least.

Jeffrey Holst · Answer

@Brie Schmidt is completely correct that your ( @Jacob Abuata) questions are far too broad for any one person to answer and be sure to get what you want correct but I will say this. It is possible to to get to 10K a month in the 7-10 years your are talking about but it is also very possible you wont ever get there. The best thing you can do is find something that works for you that makes some cash flow and study the crap out of it. If it still works then buy it cause you wont ever get to 10K a month or even 1K a month if you dont get in the game. All that being said if you question was what would Jeffrey Holst (me) do if he was me had 80K to put down and wanted to get 10K a month as fast as possible. Then the answer is he would buy a 80K duplex in a market like Chattanooga with no leverage in a better area (class B or high C) that rents of 600 or more per side, and would hire a local manager after interviewing several. This play would not get me anywhere near the 10K I want but it would get me $700 of it pretty quickly which means I would 7% of the way there. I would definitely fly to that market and meet local investors and most importantly local bankers. I would after I had my duplex fully rented and cash flowing for a period of a half a year or so start looking for another one in the same market. I would go to my bankers I met and get one of them to loan me 75% of the equity on the first duplex and I'd add that 60K (it might be more if you raised rents and bought right) to the 4-5K I already had from the cash flows. After this loan my cash flows would go down to about 250 per month but I'd be in a position to start looking for the next one, Id have more than 20% to put down on it and a local banker who liked my business. I'd then start looking and repeat. By doing this you should be able to get to about 5-6 duplexes with 20-30% equity cash flowing about 100-1250 total per month in about 2 years. Then if rents keep going up even a little (which they typically do) you will be at cash flows about 1500 or so within 4-5 years.No I realize thats only 15% of your goal but this is where it starts to really take off. You have your job income so you have been piling up this 1500 a month for awhile and have like 20K in the bank or more and you get to buy duplex number 6 or 7 and then you have 1750 a month coming in and 10 months later you get another one then 8 month for the next and then 7 then 6 and sometime around year 10 you have about 15 duplexes all cash flowing 300-350 and you are about 1/2 to your goal. But wait theres more. You have on your first duplex for 10 years now and the values have gone up a little so you sell it and use the proceeds to pay off duplex 2 and possibly 3. Which causes you to lose the 350/ month on duplex one but gain about $1000 by having 2 free and clear duplexes. And then if you can handle working another year you can pay all the extra cash down on duplex number 4 and get that one paid off. At which point about 12 years after today you have 4-5 free and clear duplexes cash flowing around 5-6K a month another 4-5 with loans cash flowing another 2-3K a month and you can rest easy. Of course you are not me and I am not you so you might have a completely different strategy. Or you might buy that first duplex and happen to run across a sweet deal on a quadplex and might sell that 2 years later and buy a 20 unit. There are so many possibilities. Any the main point is you need to figure out what you want to invest in and make sure you learn as much as possible about those assets. Best of luck

Brie Schmidt · Answer

@Jacob Abuata - right now your questions is "I want a car, what car do I buy?"Nobody here can answer that question, only you can answer that. You need to do research and pick a market. the rest of your questions will follow. What type of property, what agent, lender, PM will all depend on the market you choose

Andrew Johnson · Answer

Jacob Abuata Pick your market first. You’ll be “stuck” there (for better or worse) for 30+ years. That’s assuming you’re younger and a buy-and-holder. I’d rather have a quad in a market that I believe in than a 5-unit in a market I like less. You could make the 4 vs. 5 argument many different ways (forced appreciation vs. 30 year fixed rate mortgages) but it’s not like 3 SFRs vs. 30 units would get me to invest in Detroit. Not to pick on Detroit...but...well...you know. So if you “believe in Detroit” or “believe in Akron” then go for it. Just figure out what market to believe on first. By the way, plenty of people disagree with my view on this so it’s just one opinion. Once you pick your market you can call the community/local/regional banks that would carry your commercial paper. There are national commerical lenders but calling locals is a good place to start. You can figure out pretty quick if “standard” terms are a 15 year amortization or 25. It makes a huge difference in your monthly payment and ability to cash-flow. It doesn’t hurt to have a property you’re interested in to speak about so you don’t just have hypotheticals. So do a little legwork in advance. And it doesn’t hurt if the realtor you’re working with can refer you to a commerical lender. Anyway, so goes my advice. The rest of it kinda works itself out.

Caleb Heimsoth · Answer

Jacob Abuata a lot of what you’re asking is subjective and depends on the situation. If you go commercial (5 plus units) your Loan terms wont be as friendly and they have higher net worth and downpayment requirements. I would start with residential and make sure you actually enjoy being a landlord first before buying a larger building

James Lohse · Answer

I ask myself those same questions. May I ask you, would you consider a partnership to invest out of state or are you seeking to go it alone?

John Daly · Answer

The first lesson you need to learn from this discussion is the sooner you jump into REI the sooner you will start to grow financially. Education and financial literacy are very important, but we all take a gamble when we buy our first property. Just remember, there are plenty of people on here and elsewhere who have been down this road and are willing to help you.

Jacob Prelle · Answer

@Caleb Heimsoth .. haha. 2-3K EACH property. The 10K a month is a goal. If I fall short by a little, it'd be fine.

Caleb Heimsoth · Answer

wrong about what? 2-3k a month is much different than 10k a month.

Jacob Prelle · Answer

Yeah .. I've heard that before. What about this. I buy 2 or 3 properties over the next several years. Little cash flow at first, but after 15 years (i would seek this type of loan), when the properties are paid off, it nets me 2 to 3K each/month.The only capital I would need is the (probably) 20% downpayment. I'm looking at properties that cost $300-$400K. And of course any upgrades, repairs and whatnot.Am I wrong?