When to start

Question

Hi, I'm Derek Price in Kingsport, Tennessee. I'm 23, currently working at a paper mill. The money is good (enough, I guess), but the hours aren't fun and I have absolutely no freedom to live life the way I want. Thus, I absolutely have a strong "why" to start investing in real estate. My question is 'when?' My wife and I recently bought our first house (30 year conventional loan) - very recently, as in we close on it in less than a month - a single family home that we plan on making home for quite some time.. So, not an investment. My question is when should I take that leap and make my first investment purchase? Is there a certain amount of cash that I should have in the bank? Ive been constantly reading, learning, studying real estate for the past couple months. Ive been through the free course on BP, and I certainly have an all in attitude. Investing in real estate is definitely what i want to do. I'm not sure which niche/strategy I want to go for yet, partially out of fear of picking the wrong one. Im not sure exactly what my next step should be. Sorry if I got a little wordy, just want to get my situation out there and hopefully get some good advice. Thanks in advance for the help!

Roger Poulin · Answer

If you make any big moves before closing on your personal home, you will put it in jeopardy.  I suggest you don't do that.  the house purchase is going to drop your credit score for serveral months afterward. so you will be limited on what you can do.

Here is what you can do for the next few months, EDUCATION and NETWORKING.  A great place to start, for free, is bigger pockets. read articles, listen to webcasts, surf the forums. learn all that you can, so when you take action you will have confidence you are doing the right thing.  Also find a way to meet other vestors. In time they will be your main supplers and purchasers of deals.  try out a real estate investor club in your area like Knox REIA or you can try out Tri Cities REIA.

Two topics you should explore first is "wholesaling" and "bird dogging".  Both allow to get started with none of your own money and let you create a network that you will use for a long time. when starting stay away from the training classes that are offered for anywhere from $500 to $20,000.  Most of these are snake oil salesmen.  Find a good coach or mentor that knows your area, and intern for them ( do the leg work). This can be very educational.

Don't get stuck in the education phase.  At some point you need to take action.  You will never find a risk free deal.  You will find a way to recognize those risks and manage them. Make an informed decision and take action.

Roger Poulin · Answer

Greg speaks the truth, and has good suggestions.  Multiplex is often a good way to start because you can live in one and rent out the other 1-3 units. They pay most or all of the mortgage and you live for free, plus the tax benefits stack up in your favor.  BP has several articles on "house hacking" so you can learn more.

Don't be to fast finding a coach.  Start with the reading and podcasts, go to some REIA meetings. Shake many hands and introduce yourself to everyone. Try to figure out who are the real investors vs the posers. Find out who has a good heart vs a shark. Build a relationship with a few key people.  When you do approach them about coaching, start by offering to assist them in their next project.  Try to offer them something first instead of looking to take.  You will gain good experience and strengthen a key relationship at the same time.

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Jill DeWit · Answer

Hello @Derek Price. BP is a great place to start when it comes to real estate investing. BP offers all sorts of information including free online education videos and courses. You have come to the right place and I wish you all the best.

Thomas S. · Answer

Option 2 would be to live frugally (not easy since you are buying a home) and save every penny until you can afford the down payment on a positive cash flow multi plex you can maintain yourself.

If you do not yet have children you can concentrate your efforts on buying a first investment property. Once you start a family saving money will be difficult to impossible for a long time on a blue collar income.

Don't even think about giving up your day job. A paycheck is what will support your investing and allow you to borrow. Assuming no children and a dedicated frugal lifestyle, a driven commitment to grow your income property investments and possibly 10 more likely  15 years will get you to the freedom you desire. Throw a young family into the mix and at your age your future would be any ones guess.

A job is simply a means to an end, you trade time for money. You do not need to love your job only the money it pays you.

Derek Price · Answer

Greg, I appreciate the feedback. I failed to mention that my wife also has a pretty good income and we don't have any kids. Pinching pennies, we could probably save up a down payment in a fair amount of time. I'm curious, why multiplex? What factors besides cashflow go into deciding multiplex vs single family? Thanks for the knowledge

Derek Price · Answer

Roger, thanks for the tips. I know that finding a mentor can be an incredibly beneficial early step in REI. At this point, I have one connection - the realtor that my wife and I used (he's not an investor). What do you suggest as a next step to making more connections and/or finding a mentor? How important is it to have strong connections before getting started on something like wholesaling?

When to start

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