REI Adventure: Introduction | Goals | Strategy

[Bhavin P.]

Hello BP Family!

I am a new member here on BP and have been voraciously reading everything about beginning my RE journey towards financial independence. I am almost done reading 2 books written by Josh and Brandon, and hoping to read a few more in the next month. I have also listened to about 15 BP podcasts (which were fantastic!). This community is fantastic and much more that I could have asked to begin my journey, learn from others around me and provide value myself.  I wish I has learned about RE many years ago, but I am happy to begin my journey sooner than later. 

My Background 
I am 29, single (living with roommates in a 4 bed, 2bath SFH) working and living around San Jose CA (bay area). I have been working in the tech industry for the last 5 years. I have lived in Bloomington IN, NYC and Charlotte NC during this time. I love my job and I am looking to invest in real estate with a portion of my $ savings till date (and keep adding more in the years forward with additional savings and built up equity). I am getting married next year and hoping to buy my first ever home with my to-be wife as well around San Jose, California.

Goals and Why invest in RE:

My ultimate goal is to replace my current W-2 income with passive cash flow from real estate. Timeline to achieve this is 10 to 15 years,  conservatively. Once we achieve financial independence, I would love to travel the world, work as a freelancer if needed and spend time with family and work on my hobbies. Possibly expand my real estate footprint on the side as well. My initial preference/focus would mostly be in the single-family homes and/or small multi-family homes niche. In terms of financing my deals, I am open to different options but would prefer the traditional/conventional 30 yr fixed loan with 20% down the route. I want to do that for the first 2 or 3 deals, and get my feet wet, before engaging in other strategies. I would ideally love to partner up alongside experienced investors ideally for my first one or two deals. If not, I might consider turnkey investing companies. 

Approach:

It has been hard to find anything a decent enough deal in my area (CA market) and within 1-hour driving distance based on my initial assessment. I have some family in Raleigh NC, so I am considering investing OOS as a long-distance investor there and learning about the market, but the market there has been pretty hot in the last 3-5 years too and initial calculations using the BP calculator have resulted in poor numbers - mostly less than 1% rent income/price and negative (or at best breakeven) cash flow. The Cash on Cash return has been poor (mostly less than 8%). I could with moderate certainty invest in the stock market and get a 10+% return over the long term. Hence I am going to be very selective in investing in deals that are as good or significantly better than investing in the stock market.

I am working on my LEAPS framework : Leads, Analyze, Pursue, Success. I am mostly using MLS currently, but will soon start adding inputs from real estate agents, other investors, forums, Craiglist, etc. I do not plan to do anything too fancy for my first few deals. The goal is to familiarize myself with the whole process and get to know my target market and build relationships with MY TEAM (to be identified).

My questions:

I have a few initial questions for everyone to start with. I'll post more questions later after doing some more research.

Q1) Since I am getting married next year, I want to get my own home (possibly a condo or SFH) - 2B/1B or 2B/2B in or around San Jose CA. Assuming average home prices of 550K, I will need to put down ~$110K on a 20% down 30 yr fixed mortgage. I believe PITI (Principal, Interest, Taxes, and Insurance) may come up to ~3000$ a month for this. If I had to rent a similar home, I would end up paying 2700-3000$ every month. At a high level, buying a home makes much more sense to me and building equity (that is $3K * 12 = 36K every year) than pushing rent money down the toilet using this simple logic.

I would love to find and buy a multi-family home that I could live in and rent out the other unit(s) around my area, but those have been hard and mostly non- existant. If anyone has suggestions or input into what I should do, please let me know. 

How easy would it be for me to use HELOC to fund my RE investments after I decide to buy my primary home in San Jose, CA? I am just trying to gauge the opportunity cost of putting down 20% down payment on a $500K+ home versus just continuing to rent and invest that money into OOS investment properties. Thoughts?

Q2) From my assessment, most of the deals right now are in the mid-west, southeast and non-coastal areas. Right now with limited knowledge of OOS markets, I am most comfortable with the Nort Carolina (NC) market -Charlotte, Raleigh (RTP area), Greensboro, etc since I am a little familiar with the area and I can visit those easily if needed. Additionally, I feel there are long term tailwinds in terms of population growth/migration, good universities, companies and jobs growth in NC. I feel over time, appreciation of properties might be much more here versus other midwest cities. Thoughts? If there are others who know this market well enough or would like to partner up, I would ask you to connect directly with me. Also if you know of successful investors in the NC or SC area, I would love to know and connect with them. That would be fantastic. 

Q4)In terms of OOS investing, what should be my optimal strategy? I heard in one of the BP podcasts that I should find a connection with the location/region. This is what led me to NC (Raleigh and Charlotte areas). Should I also research other areas including midwest and other southeast cities? How much is too much and where should I stop? I don't want to spread myself too thin here. 

Q3) I would love to also connect with local RE investments in the bay area. If you are reading this and/or know of good people to connect with from the CA market, please let me know. 

Thank you and I look forward to interacting with this community. 

Regards,

Bhavin

[Thomas Page]

Bhavin, 

A lot of people get real excited about real estate investing and the glamour of it all, but I want to encourage you not to jump in too quick. Renting is usually more expensive than a mortgage, but that does not mean it is cheaper. When you buy you will have maintenance, upgrades and repairs to work on. This is extremely hard OOS, and is not your responsibility as a renter....I just want to make sure you keep that in mind. 

Do not jump into anything without your wife/finance on board. Make sure you two are on the same page with the same dreams. 

If you want passive, I would suggest you start saving your money in REITs or other high dividend investments while you save up your money. This is a good holding tool while you get started. I personally like the Vanguard REIT funds.