22, New to REI and looking to network and ask for advice

[John Lee]

Hi all,

My name is John and I'm a recent college grad about to start a Masters (SF/San Jose Area home base in California). My education background is in computer science, mathematics and some corporate finance, as well as have some internship experience in the quantitative finance space. Fascination in one type of market has led me to another, real estate investing, and now I'm looking to leverage my ability with numbers in the REI space as well. I am, admittedly, a complete novice but I consider myself an astute student! *As a side note, I think maybe it would be fun also to try and identify where new technology or machine-learning driven approaches could increase efficiency in the space

As for my financial situation, personally, I have around 50k saved but 20k of it is tied up in assets I don't want to pay capital gains tax on. This doesn't give me too much to work with, and as a student, I still have 0 income :(. From what I read and understand, this means I'm likely going to struggle with getting a loan, not even considering the inability to pay any down payment.
On the other hand, my parents have significant liquid assets, (think on the order of > 500k), that they are potentially looking to diversify into real estate. Additionally, they have another property which has appreciated in value, carries low interest rates, but has negative cashflow and essentially feels like it just locks money away. From what I can tell, the extra equity on the house could be utilized to provide better ROI. Provided I can establish a solid investment plan tailored to their financial needs/comforts such as debt ratios and income, they would be more than happy to offer me some financial control.

Additionally, If I wanted to, for the sake of building my own personal wealth, I admittedly have the luxury of taking a loan from my parents. However, I typically like to make a distinction between my parents assets and my own, simply because doing so provides me more satisfaction when I succeed. That being said, if it provides me a significant advantage or a starting point, I think it would be foolish not to utilize it.

Therefore, given these two different perspectives/starting points, I'd love to hear any potential advice on which strategies/niches to focus on first, and for which starting point. Other advice, especially that pertaining to tax benefits, is also highly appreciated!

As a starting point, I have been heavily considering the Sub30k category of REI. First of all, I love the morality component of it. I like that, unlike with say trading for a hedge fund, I can create opportunities for others rather than solely line the pockets of someone richer (that being said I still intend to make money). Additionally, it feels the most appropriate approach for both profiles I described above and allows me to focus on learning one strategy. The lower barrier to entry would be excellent for my personally smaller net worth. Additionally, since my parents are nearing the retirement age, I'd like to prioritize low-debt, high-cashflow deals. Sub30k seems to fit this bill, although I recognize there is also substantial risk associated with it when done improperly. If I'm correct in my analysis, then I'd guess I'm also looking for a mentor if anyone is willing!

All in all, I'd like to worm my way into the REI space and preemptively thank everyone who has taken the time to read my long introduction and offers their advice.

Thank you,

John

To keyword farm: rehabbing, fix and flip, house flipping, BRRRR, multi-family, apartment, long-term rentals

[Nicholas L.]

@John Lee

definitely lots to think about.  i would:

-get the highest paying W2 job you can

-save up enough to buy a house hack

-house hack

while you continue to learn and consider the other possibilities you mentioned.

[John Lee]

Quote from @Nicholas L.:

@John Lee

definitely lots to think about.  i would:

-get the highest paying W2 job you can

-save up enough to buy a house hack

-house hack

while you continue to learn and consider the other possibilities you mentioned.

Thanks for your advice Nicholas! 

The one thing I’m really picky about is where I live (aka my goal is NYC) and it doesn’t seem reasonable to use this strategy there due to costs of living. It might also be unavoidable to live in a high cost of living area due to my career choices. 

Also, from what I’m reading house hacking doesn’t really seem to be scalable since you have to reside in the location? Is it primarily just a way to jumpstart REI given the loan/tax benefits?

[Nathan Gesner]

You typically need up to two years of stable employment before a bank will loan to you. I would look for investments with owner financing to skip past that requirement.

Maybe you can partner with your parents on the first property? Buy a house using your parents' money, then manage it for them while living there. After two years, they can sell the property to you as your first solo investment. Or you can sell it, split the equity, and go separate ways.

I'm not a fan of borrowing from family/friends unless all parties are honest and everything is documented in a written contract.