Newbie investor looking for rental investing advice

[Karen Guo]

Hi everyone, my name is Karen and I am a new investor. I’ve been interested in real estate investing since 2019 and have been watching videos, listening to podcasts, and reading books like Brandon Turner’s book on Rental Investing. I’m 22 and would like to start investing this year but would like advice on location and strategy. Currently, I live in the RTP area but am moving to Redmond WA in October to start full time at Microsoft. I’ve been struggling between deciding to invest here in a 3Bed/3Bath and rent out the entire thing and hold it even after I move to Redmond, or do something like a house hack around Redmond in October when I move there. Would love any advice or a phone call to walk through my thought process. 

[Nicholas L.]

@Karen Guo

house hack when you move. spend all the time between now and then saving, learning and getting ready. make some trips out there to get to know the market. go to REIA meetings. talk to agents. network.

[Nathan Murith]

@Karen Guo welcome to BiggerPockets and congratulations on reaching out and doing the work.

This is very personal to you and depends on a lot of things like what your goals are, would the 3bed/3bath cashflow, etc?

House hacking is often referred to as the cheat code to wealth. That says a lot and is true. If you are comfortable with that and can find one that makes financial sense, it might work.

As you mentioned, it might make more sense to talk through you thoughts and concerns. Happy to hop on a call if you want. Do not hesitate to reach out, connect, and DM me.

[Kyle Baker]

Here is my .02.... House hack that first home. Let others pay for your mortgage while you live essentially for free. Bank all of that money and after 12 months go buy another property and do it again. Turn the first property into a LTR and house hack the second property. After another 12 months do it again. Rinse and repeat for as long as you can/want. I bought my first 3 properties this way minus the house hacking ( I really should have). When you buy as an owner occupied you get better financing terms as well as lower down payments. Make sure the numbers make sense but this was the easiest way for me to acquire properties with little money down. Best of luck!

[Eliott Elias]

What are you contemplating? Look at which market has more long term growth, which you have connections at (handymen, property managers, realtors). 

[Account Closed]

Hi Karen, glad to see that you're starting out in real estate. Since it looks like you did a lot of learning about rental property investing, but are new to investing, I would definitely recommend house hacking in Redmond. Buying a house in RTP and holding on to it will become a long-distance investment, which isn't usually recommended. Although there will be property managers, a lot of things can go wrong with them. Since they get more commission when there is a tenant turnover, they may have no incentive to look for good quality tenants, might not communicate with you, or take time to make sure you get the best ROI. Hence, although long-distance investing can be done, it's not recommended.

House hacking in Redmond sounds much better. Not only will it jumpstart your real estate journey, but help you cash flow. In doing so, you will gain more experience in real estate investing and exponentially grow your wealth. Just be sure to research the market and do some due diligence before you purchase your property. I'm sure you already know, but Brandon Turner's books are extremely helpful when starting out in real estate.

One more thing, if you don't plan on staying at Reymond forever, a 'Live and Flip' can also be an attractive option. It's where you essentially flip the house you will live in. If I read correctly, I read this in Josh Dorkin and Brandon Turner's book: How to Invest in Real Estate. When you flip your own house, live in it for 2 years, and sell, you wouldn't have to pay taxes when you sell the house. This is another incredibly attractive strategy that I would recommend especially if you don't plan on living in Redmond for a long time. You can do this again and again by just living in your house for 2 years. Just look out for getting attached to the property, as it's easy to go over budget when one decides to live in the house themself.

Lastly, good luck on your journey, and keep us updated! 

[Karen Guo]

Quote from @Nathan Murith:

@Karen Guo welcome to BiggerPockets and congratulations on reaching out and doing the work.

This is very personal to you and depends on a lot of things like what your goals are, would the 3bed/3bath cashflow, etc?

House hacking is often referred to as the cheat code to wealth. That says a lot and is true. If you are comfortable with that and can find one that makes financial sense, it might work.

As you mentioned, it might make more sense to talk through you thoughts and concerns. Happy to hop on a call if you want. Do not hesitate to reach out, connect, and DM me.

Thank you for the advice Nathan! I've been looking at deals and doing some calculations. With the current market conditions in RTP (low rent, high house values) and the high interest rate environment, I'll be cash flow negative ~$300-$400 monthly until I can refinance at a lower rate. My goal is to buy and hold for the long term, build equity and hopefully appreciation in the home value. I see a lot of potential here (Apple announced & bought land for a new campus, Epic Games is also building a new campus here). 

However, I've also looked at deals and done the math for house hacking in Seattle metro area--the market there is around 12-15% down so this might be a good time to enter BUT the monthly payments will be incredibly high (high interest rate, low down payment due to high cost of real estate there) and I'll definitely be very cash flow negative ~$1000.

I'd love to hop on a call and get your advice on my thoughts. I'll DM you.

[Karen Guo]

Quote from @Eliott Elias:

What are you contemplating? Look at which market has more long term growth, which you have connections at (handymen, property managers, realtors). 

I'd say RTP has more long term growth. Apple, Epic Games are all building new campuses here, and the schools in the southern suburbs of RTP draw a lot of parents. Hence Apex/Morrisville/Cary/Holly Springs are growing in construction & home values.

However, Seattle-metro area's market is down 12-15% now and I believe it'll go back up. There's just too many big tech firms there and there will always be people looking to rent there.

As for connections, I know more people in RTP, but am close to one agent in Seattle metro.

My goal is to put my money where there is most potential. However, if I put my money here in RTP I'll have to rent for a couple months in Redmond, save up for a down payment, and then house hack there. However, renting to me is throwing money away, so I'm stuck.

[Karen Guo]

Quote from @Kyle Baker:

Here is my .02.... House hack that first home. Let others pay for your mortgage while you live essentially for free. Bank all of that money and after 12 months go buy another property and do it again. Turn the first property into a LTR and house hack the second property. After another 12 months do it again. Rinse and repeat for as long as you can/want. I bought my first 3 properties this way minus the house hacking ( I really should have). When you buy as an owner occupied you get better financing terms as well as lower down payments. Make sure the numbers make sense but this was the easiest way for me to acquire properties with little money down. Best of luck!

Thank you for the advice. Could you give some advice on evaluating house hacks financially? The Seattle-metro multi-unit real estate (houses/condos) 3Bed3Bath or similar are at least $800k with monthly HOAs ranging from $200-$600. Financially I just don't know how to approach an area with numbers like these.

[Kyle Baker]

Quote from @Karen Guo:

Quote from @Kyle Baker:

Here is my .02.... House hack that first home. Let others pay for your mortgage while you live essentially for free. Bank all of that money and after 12 months go buy another property and do it again. Turn the first property into a LTR and house hack the second property. After another 12 months do it again. Rinse and repeat for as long as you can/want. I bought my first 3 properties this way minus the house hacking ( I really should have). When you buy as an owner occupied you get better financing terms as well as lower down payments. Make sure the numbers make sense but this was the easiest way for me to acquire properties with little money down. Best of luck!

Thank you for the advice. Could you give some advice on evaluating house hacks financially? The Seattle-metro multi-unit real estate (houses/condos) 3Bed3Bath or similar are at least $800k with monthly HOAs ranging from $200-$600. Financially I just don't know how to approach an area with numbers like these.

 My best piece of advice would be to get in connection with a local real estate expert in that market. I can only give so much advice as I don’t know that market. What I can say is although the home prices and cost of living are drastically more there I have a feeling the incomes are substantially higher as well. An 800k homes is much different in WA than it would be in NC. My question would be how much could I charge to rent the other units/rooms to make it financially make sense. 

Lastly don’t think you have to buy multi to be able to house hack. Obviously it’s your personal preference as safety has to be a concern, but when I house hacked my single family house I was able to rent a single bedroom out. I bought my 3bed 2 bath single family house in early 2020 in Charleston SC for 223k with 5% down. My mortgage was around $1,100 and I was able to rent that room for $700 a month. That was a huge savings for me and I was able to bank that money to save for another. If I had decided to rent out the 3rd bedroom I could have easily got $600 per room which would have allowed me to live for close to nothing. I understand these numbers are significantly lower than what you are looking at, but again the cost of living in SC is much lower than somewhere like WA. Mortgage is higher but so are the rental rates I’d bet. The math still works the same. 

Maybe you could find a 2-3 bedroom single family house, condo or townhouse and house hack that way to get into the game at a lower cost. Be sure to check  that you can rent it out once you are ready to leave if going with a townhouse or condo route though. My first two properties were both townhouses. 

I hope this helped a little. Feel free to shoot me a PM if you’d like more explanation. 

[Lindsey Johnson]

@Karen Guo You are at a great age and stage of life to get started. Wish I would have back then! I shot you a DM. I am from the Raleigh area. Great place with massive growth happening! Give me a call if you want to chat.

[Cory J Thornton]

@Karen Guo - 

First and foremost, I seriously wish I discovered REI at 22 years old ... Well done on getting started early.

- If you plan to self manage, I would not try to self manage your first property long distance, and would seek to invest where you live. 

- As everyone else has already indicated, house hacking is an incredible springboard to wealth building through real estate. 

- If you have a strong W2 Income, then once you decide where to invest, I would shop some local banks to see what kind of debt they can offer. The past few months I have had better quotes on commercial debt for investment property than anyone offering a traditional 30 yr fixed (downpayment may be higher with commercial debt ... everything has a trade off). 

- Your post reads like you do not currently own a home in Raleigh, but are considering buying one. If I read that correctly, and you want to leverage the growth of the Raleigh market, then you may be better served shopping in an area in commuting distance to RTP rather than in city limits. 

- I have not done my research on WA, but compared to the rest of the country, I am very optimistic about the Raleigh area. Our corporate tax rate paired with our university system, and population growth are drawing big businesses to NC. Nothing goes up in a straight line, but the Raleigh market should continue to experience appreciation in home value and rent rates, especially over the long term. 

Best of luck on your investing and learning journey! If there is anything I can do to help, feel free to give me a shout. 

[Dave Skow]

@Karen Guo- thanks for the psot and welcome to PNW ....if the plan is to buy ...get  a loan pre approval  completed  asap ...this will help you het  organized and  also  become  aware of the process / requirement and all the numbers involved  ...this process is free and easy too

[V.G Jason]

Quote from @Kyle Baker:

Here is my .02.... House hack that first home. Let others pay for your mortgage while you live essentially for free. Bank all of that money and after 12 months go buy another property and do it again. Turn the first property into a LTR and house hack the second property. After another 12 months do it again. Rinse and repeat for as long as you can/want. I bought my first 3 properties this way minus the house hacking ( I really should have). When you buy as an owner occupied you get better financing terms as well as lower down payments. Make sure the numbers make sense but this was the easiest way for me to acquire properties with little money down. Best of luck!

I see this advice over and over, and that just doesn't work in todays economy.

This advice of re-doing it won't work every 12 months, unless you're putting 30%+ down. Most of these house-hackers are doing 3.5-5% down, for FHA. Go look at the RTP & Redmond, go find a duplex or triplex or quadplex that would cash flow on 5% down being tenant occupied. Go see if the cash flow is sufficient to get them to do another downpayment for another house within 12 months, then again, 12 months later. You did this years ago, it's a different ball game. You're not playing within the same rules.

It doesn't apply. This old retread advice has got to move on.

My recommendation if you're just starting out and are on tight on funds is to save as much as you can before going to Redmond, then once you're there figure out what area you like and buy a house that suits you. A house hack is fine, a SFR is fine, but make sure you're able to afford it. If you're in a better situation, and have excess capital, I would do both. I'd buy one & rent it out in RTP and look at doing the same in Redmond. That's only if you have excess capital to allocate.

[Alfath Ahmed]

Hi Karen, 

I've been in your spot. I'm a 24-year old college grad. I started investing in rental properties last February and have scaled my way up to 7-doors in under 6 months. Obviously, you are familiar with bigger pockets and have also read their books. I started out by doing the same thing and read David Greene's BRRRR book.

I started my journey house-hacking a duplex in a really good part of town. Once I was comfortable with the concept of real estate investing and had my first tenant. I took on a BRRRR that a wholesaler brought me. I made sure that there was enough "meat on the bone" so that I could profit. Then, I went on-to a larger 4-unit deal and raised private money.

The first step is to "Just Start". You are smart, you will get this figured out. One thing I would say is to invest in the mid-west. If you are looking to invest in the west coast. It will be very hard to hit your Cap rates and ROI's. Also, the barrier of entry is simply just a lot higher.

My out-of-state buyers that I have worked with have made a ton of money with off-market deals in the mid-west that I found for them. Cheaper properties with crazy appreciation and rent growth. 

Always happy to have a phone call to answer your questions that you have for any market!

[Alli Breighner]

Hi Karen, welcome to BP!

I'd love to schedule a phone call with you and get the ball rolling. Feel free to shoot me a DM if you're interested. 

[Kunal Mishra]

@Karen Guo House hack when you move to Redmond WA, use all that knowledge you have gained from podcasts and reading books into work. If Redmond is costly then do it in RTP or any of the neighborhoods outside of RTP as that's too not cheap anymore. 

Start talking to local realtors who have knowledge of the area, at this point you should be analyzing deals and running numbers and see which return suits you the best

Good Luck!

[Dennis Nguyen]

@Karen Guo great job taking the first step by posting on BP and asking for feedback. Redmond is on the more expensive side so I would definitely recommend the house-hacking strategy. You might not be able to get paid while house-hacking like other areas but if you break-even or even pay a few hundred a month that is a huge win. I have done a few house-hacks myself here in the Seattle area which is not too far from Redmond. Feel free to reach out with any questions :)