New investor from Ohio

[Bryson Elder]

hi, my names Bryson I’m 21 and looking to expand my business portfolio focusing mainly on the real estate and rental market though I’m new to the game. Currently I like the idea of brrrr, but the idea of loans and debt still scare me though I’m not in a position to cover costs entirely on my own. I know debt isn’t necessarily bad as long as you’re making enough from the investment to cover payments. I’d love to hear from people that have had skin in the game for a while. Any advice for a newbie is welcomed.

[Kevin Sobilo]

@Bryson Elder, debt is not something to be afraid of nor is it something to use willy nilly. Here are some things to consider.

1. Buy 1 house for $100k cash, it goes up 10%, you have $10k profit.

Now use the same $100k to buy a $500k house with a loan, it goes up 10%, you have $50k!!! That's 5x the profit with the same investment. This is why loans/credit in business is referred to as "leverage" it allows you to accomplish MORE with less.

2. Debt reduces certain kinds of risk. If you own a property outright and get sued that property can be foreclosed on to pay that judgement debt, but if it is fully leveraged with a loan it isn't worth them trying to foreclose on because there isn't enough equity to make it worth the effort and expense.

3. With regard to doing BRRRs and wanting to cash-flow after the refi. Rates are higher right now but the old adage is "Marry the property but date the rate". You will likely be able to refi again later lowering the rate and improving cash-flow. So, a decent deal is likely to get better over the long run.

[Bryson Elder]

Quote from @Kevin Sobilo:

@Bryson Elder, debt is not something to be afraid of nor is it something to use willy nilly. Here are some things to consider.

1. Buy 1 house for $100k cash, it goes up 10%, you have $10k profit.

Now use the same $100k to buy a $500k house with a loan, it goes up 10%, you have $50k!!! That's 5x the profit with the same investment. This is why loans/credit in business is referred to as "leverage" it allows you to accomplish MORE with less.

2. Debt reduces certain kinds of risk. If you own a property outright and get sued that property can be foreclosed on to pay that judgement debt, but if it is fully leveraged with a loan it isn't worth them trying to foreclose on because there isn't enough equity to make it worth the effort and expense.

3. With regard to doing BRRRs and wanting to cash-flow after the refi. Rates are higher right now but the old adage is "Marry the property but date the rate". You will likely be able to refi again later lowering the rate and improving cash-flow. So, a decent deal is likely to get better over the long run.

given the high amount of cash needed for brrrr do you feel it would be better to start with a long term rental as an initial investment that has less risk involved 

[Kevin Sobilo]

Quote from @Bryson Elder:

Quote from @Kevin Sobilo:

@Bryson Elder, debt is not something to be afraid of nor is it something to use willy nilly. Here are some things to consider.

1. Buy 1 house for $100k cash, it goes up 10%, you have $10k profit.

Now use the same $100k to buy a $500k house with a loan, it goes up 10%, you have $50k!!! That's 5x the profit with the same investment. This is why loans/credit in business is referred to as "leverage" it allows you to accomplish MORE with less.

2. Debt reduces certain kinds of risk. If you own a property outright and get sued that property can be foreclosed on to pay that judgement debt, but if it is fully leveraged with a loan it isn't worth them trying to foreclose on because there isn't enough equity to make it worth the effort and expense.

3. With regard to doing BRRRs and wanting to cash-flow after the refi. Rates are higher right now but the old adage is "Marry the property but date the rate". You will likely be able to refi again later lowering the rate and improving cash-flow. So, a decent deal is likely to get better over the long run.

given the high amount of cash needed for brrrr do you feel it would be better to start with a long term rental as an initial investment that has less risk involved 

The money needed to complete a BRRRR varies WIDELY from market to market. I don't think Ohio is considered to be an expensive market. So, I would be looking for ways to make BRRRR work for me.

Many people use hard money loans to do the initial purchase and rehab, but I believe those lenders typically want to lend to investors with experience because part of the criteria is evaluating the deal itself and the investors ability to execute.

In my experience a really good BRRRR can get you MORE money back upon a refi. So, if you can manage to find the money for even a SMALL BRRRR and execute it well your capital can increase to do slightly larger and larger projects as you complete each deal.

[Bryson Elder]

Quote from @Kevin Sobilo:

Quote from @Bryson Elder:

Quote from @Kevin Sobilo:

@Bryson Elder, debt is not something to be afraid of nor is it something to use willy nilly. Here are some things to consider.

1. Buy 1 house for $100k cash, it goes up 10%, you have $10k profit.

Now use the same $100k to buy a $500k house with a loan, it goes up 10%, you have $50k!!! That's 5x the profit with the same investment. This is why loans/credit in business is referred to as "leverage" it allows you to accomplish MORE with less.

2. Debt reduces certain kinds of risk. If you own a property outright and get sued that property can be foreclosed on to pay that judgement debt, but if it is fully leveraged with a loan it isn't worth them trying to foreclose on because there isn't enough equity to make it worth the effort and expense.

3. With regard to doing BRRRs and wanting to cash-flow after the refi. Rates are higher right now but the old adage is "Marry the property but date the rate". You will likely be able to refi again later lowering the rate and improving cash-flow. So, a decent deal is likely to get better over the long run.

given the high amount of cash needed for brrrr do you feel it would be better to start with a long term rental as an initial investment that has less risk involved 

The money needed to complete a BRRRR varies WIDELY from market to market. I don't think Ohio is considered to be an expensive market. So, I would be looking for ways to make BRRRR work for me.

Many people use hard money loans to do the initial purchase and rehab, but I believe those lenders typically want to lend to investors with experience because part of the criteria is evaluating the deal itself and the investors ability to execute.

In my experience a really good BRRRR can get you MORE money back upon a refi. So, if you can manage to find the money for even a SMALL BRRRR and execute it well your capital can increase to do slightly larger and larger projects as you complete each deal.

So instead of starting with a quad/tri look for a single/duplex that way it’ll be more cost effective. That is unless I can find someone to go in on a deal with me? 

[Brittany Minocchi]

Whats up Bryson! 

I'm also in Ohio. I've worked with many folks who choose to house-hack as their first step into the investing world, and that's what I'd suggest to you. Buy a duplex, live in one side, rent out the other, and use that rent to cover a chunk of your mortgage. When you're ready, you can move into a new place and rent out the unit you were living in. Doing it this way allows you to ease your way in and costs you less up front - down payment for an owner-occupied property is much lower than an investment property, you may qualify for down payment assistance and can even use funds as a gift from a family member if that's an option. 

[Min Zhang]

Hey Bryson! Welcome to BiggerPockets! If you are going to invest locally I would recommend house hacking. That is what I did here in Columbus, Ohio when I started investing in 2020.

Here is an article with more information on what a house hack is - https://www.rocketmortgage.com/learn/house-hacking

Let me know if you need assistance!

[Bryson Elder]

Quote from @Brittany Minocchi:

Whats up Bryson! 

I'm also in Ohio. I've worked with many folks who choose to house-hack as their first step into the investing world, and that's what I'd suggest to you. Buy a duplex, live in one side, rent out the other, and use that rent to cover a chunk of your mortgage. When you're ready, you can move into a new place and rent out the unit you were living in. Doing it this way allows you to ease your way in and costs you less up front - down payment for an owner-occupied property is much lower than an investment property, you may qualify for down payment assistance and can even use funds as a gift from a family member if that's an option. 

 I’ve heard of house hacking and haven’t done much research. I greatly appreciate the advice you have given me an area to move my focus to when it comes to studying. 

[Remington Lyman]

Quote from @Bryson Elder:

hi, my names Bryson I’m 21 and looking to expand my business portfolio focusing mainly on the real estate and rental market though I’m new to the game. Currently I like the idea of brrrr, but the idea of loans and debt still scare me though I’m not in a position to cover costs entirely on my own. I know debt isn’t necessarily bad as long as you’re making enough from the investment to cover payments. I’d love to hear from people that have had skin in the game for a while. Any advice for a newbie is welcomed.

BiggerPockets has a great community! Welcome! This place has helped me grow my real estate portfolio in Ohio

[Samuel Diouf]

Buy something that's turnkey with value-add potential. Use this experience to work out the kinks and build a strong boots on the ground team. The first purchase is always a huge learning experience so it's smart to buy something you can't lose your shirt on. Once you're ready for the next purchase you will have experience, solid systems, and the confidence to tackle a bigger project like a BRRRR.

[Jimmy Lieu]

Quote from @Bryson Elder:

hi, my names Bryson I’m 21 and looking to expand my business portfolio focusing mainly on the real estate and rental market though I’m new to the game. Currently I like the idea of brrrr, but the idea of loans and debt still scare me though I’m not in a position to cover costs entirely on my own. I know debt isn’t necessarily bad as long as you’re making enough from the investment to cover payments. I’d love to hear from people that have had skin in the game for a while. Any advice for a newbie is welcomed.

Hey Bryson, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

[Wale Lawal]

@Bryson Elder

If you want to be a success in real estate investments, you should keep studying the BRRRR style, financial analyses, property management market trends and risk management too. So it is better so that beginning at low levels; one could begin by investing in the small countryside houses while renting them out or letting someone else run them on behalf of the owner. Get in touch with some accomplished landlords and ask for advice from those who are prospering in the field. Find ways of financing your project in addition to evaluating its relevance based on what you earn.

Be aware of the dangers involved in investing in the real estate industry. Try reducing them. Build some professionals around you who will support the work that are ahead of you. Come up with a strong financial strategy linked up with investment goals, budget expected returns and exit strategies. Always know what is happening in the market and the correct way things are done in this industry. Move on, and avoid letting fear stop you from looking at opportunities to implement your plans. Generally speaking, property investment calls for patience, perseverance, and constant learning.

Good luck!

[Nadeem Alamgir]

Hey Bryson, it would be smarter to start off with a long-term rental as an initial investment. You can start with a turnkey that can use a light rehab to help you build a team and establish a foundation to then get into bigger projects.

With the proper guidance, you can grow a successful portfolio with the right team.