Building Residential Portfolio and Pivoting to Commercial Real Estate

[Timothy Lawrence]

Hello, my name is Timothy (22). I own a townhouse in Arbutus MD, and I have been house hacking since this month. I save a lot more money than I would if I was renting in Fairfax VA. I don't think I would cashflow after moving out…maybe breaking even? I am thinking about what strategy to use in the future. Here are some options I have thought of:

1. 1. Save money for a decade or so to afford a house in Montgomery County (Hyattsville, Silver Spring, Rockville, etc.) and rent out rooms. Must be cash-flow positive, so I would need to bring in one hell of a downpayment unless interest rates decrease.

1. 2. Do some more digging into Baltimore County and surrounding areas. See if there are cash-flowing properties to be acquired…. in less desirable neighborhoods I suppose (Glen Burnie, Dundalk? I don't know)

1. 3. Out of State Real Estate Investing. Pick another state where my company has an office and see if there’s an opportunity for cash-flowing properties. Opportunity to house hack again and move to get the pay raise if need be.

1. 4. Save money for a decade, build equity in house…sell house and use savings + capital from sale to purchase house in Montgomery County MD. Then I can just househack again

Bigger Picture: I like the idea of building equity in multiple investment properties and then sacrificing some to pivot into affording a down payment with a commercial real estate building. It just feels like there’s quite a bit to consider…my salary and time. I can be patient, but I like to take action quickly.

If I were to save for a decade (reserves + downpayment + closing costs), would I have been better off acquiring out of state properties or essentially being a bit of a slum lord to scale my portfolio faster to build equity?

Anyone have any thoughts on what you would do if you were in my shoes.

[Tim Jacob]

I think it's smart to house hack your residence.  You can learn things that way.  Even so I don't know if you will start learning about all the old building problems if your place is relatively new.  Also if you are dealing with lower asset classes it will be different then abhigher asset class you are house hacking.  New enough being built in the last 50 years.  Maintenance can really be costly.  

I think the montgomery county idea is decent as a lot of. That housing stock is new enough and you will probably not be dealing with a lower asset class which will increase tenant caused maintenance in the long term. 

You can also go to Baltimore County or the city.  The city isn't all horrible like many make it out to be.  Not all of it.  In both the city and county there are areas that pencil a little better. Some have been somewhat retrofitted  voiding a lot of the maintenance issues of old buildings.  

The last thing I recommend is going out too far away into things you have little to no experience and trusting people too much.  I would rather recommend being a maximum 3-4 hours drive from whatever market you decide to get into.  That way you can control things better as the only guarantee is things will come up.  

Hope this helps.