Getting my first rental property

[Gregory Halliday]

I'm 21 and have 45k cash. I'd like to get into real estate with a rental. Only thing is I live on Long Island so local real estate is pretty much out of the picture. I can get approved for a 180k house. I like the Charlotte NC and Orlando FL areas so far. I am split between 2 plans. My first plan is to buy a home that doesn't need much reno out of state, rent it out for 5 years or so and then sell it after the 5 year appreciation. Then I would have the money saved during that 5 years, plus the equity from the house in cash and would be able to upgrade. My other plan is to find something in my area in Shirley NY that needs some reno (nothing crazy) that has a finished basement that I could live in while the tenant rents the top that way I could qualify for an FHA loan and use the rest of my cash for renovations. Which is a better plan? I feel like out of state, while it has more obstacles will be better in the end because of higher appreciation. Any opinions? I am open to other markets as well. The main thing holding me back from The out of state RE is not knowing the area as well and not knowing people. I am nervous about getting the right team. My main goal is to have a good portfolio of 10+ properties by the time I'm 30.

[Ronan Donnelly]

Hi @Gregory Halliday, congrats on getting ready to take the first step towards building yourself a second stream of income! My advice would be to go for the house hack option, here's why:

1) You can never count on market appreciation and in a world of historically low financing rates I would suggest that asset prices are sensitive to a downturn

2) You can much more reliably force appreciation by by improving an asset

3) If you focus on assets that need improving you are much more likely to get a below market deal where you will have instant equity at closing

4) You can get much better financing terms for a property that you buy personally rather than an investment

5) You will ultimately be a better investor if you have some hands on experience

6) You will get better returns on the house hack because you can avoid paying property management fees

etc.

Good luck!