3-4 year investment strategy (Starting out)

Real Estate Deal Analysis & Advice
10yFollow

3-4 year investment strategy (Starting out)

Ben Unger
Real Estate Agent · Houston, TX · Member since 2015 · 46 posts · 25 votes

Hello BP community,

When buying any real estate property, regarding your own to live in, do you run an analysis the same as if you were going to make it a buy and hold rental? If so what are the basic numbers you would shoot for? (i.e. 10-20% below market value, NOI, Cap Rate..ect)

That is basically my current plan/strategy. I would like to buy my 1st home to live in for 3-4 years where the numbers workout up front based on assessing the purchase as if it would become an immediate rental property. Then after a 3-4 years I would move out of the property, rent it, buy another home and do the same thing. 

All the mean time acquiring other properties during that same 3-4 year time period to build my real estate portfolio. The reason being is we are currently in an apartment plan to move out around September.

My wife and I would house hack or buy a duplex/quad to start out, but we seem to cant find those types of properties in Houston, relative to where we both work. Plus, multifamily homes in Houston,  from what I have seen are either really expensive or in a bad neighborhood and need a lot of work.

Thanks in advance for your answers!

0Reply
15 views

Most Popular Reply

Gerardo Dominguez
Real Estate Agent · Chicago, IL · Member since 2015 · 238 posts · 101 votes
10y

@Ben Unger  Welcome to BP!  If you're going to house hack you would run the same analysis but make sure to factor in that you're living in one of the units.  House hacking is a pretty prevelant topic on this site.  Make sure to take a look at that videos/ articles/ podcasts that discuss this topic in greater detail.  And look for local investors that have done this.  Good luck!

1Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Gerardo Dominguez
    Real Estate Agent · Chicago, IL · Member since 2015 · 238 posts · 101 votes
    10y

    @Ben Unger  Welcome to BP!  If you're going to house hack you would run the same analysis but make sure to factor in that you're living in one of the units.  House hacking is a pretty prevelant topic on this site.  Make sure to take a look at that videos/ articles/ podcasts that discuss this topic in greater detail.  And look for local investors that have done this.  Good luck!

    1Reply
  • Naeem Kapasi
    Investor · San Antonio, TX · Member since 2015 · 227 posts · 66 votes
    10y

    Hey and welcome to BP!  That's very similar to my strategy when I move to Houston this year! I've been looking for multifamilies to househack but am facing the same issues as you. So I decided to buy SFHs instead and do the same thing, by renting out a room or two on airbnb every now and then while living in my house. I'm still analyzing deals in the area close my future work place.. 

    1Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    @Ben Unger: Real Estate, like all investments, works on the risk:reward ratio. The more risk, the higher return (CAP).

    If you're buying to live in, you're likely buying in a place you're willing to live.  And that's likely a better area and one others consider to be better.  Thus the 'deals' will be worse as they're considered safe so their return is low as demand and driven up costs.

    Consider buying in an area that has a higher return, and using the cash flow to rent in an area that has a bad return. 

    1Reply
  • Ben Unger
    OP
    Real Estate Agent · Houston, TX · Member since 2015 · 46 posts · 25 votes
    10y

    @Cody L. : Good point. I think it would be wise also to pick a location where pricing is not as inflated due to everyone wanting to live there, hence returns would be low in those areas and costs really high.

    So, would I assess my first live in SFH as an investment property, and seek an area that is maybe up in coming, not cost inflated yet, but is still showing signs of potential growth? This way there is potential for equity growth, and better cash flow?

    We were looking around the Katy area of Houston. Any other areas that you suggest or have found could be a good starting point for research?

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    @Ben Unger:  I know nothing about Katy.  Katy might as well be the moon.  I'm one of those 'inner loop snobs'.  I don't buy, or live, or invest, or even go, outside the loop  :)

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    10y

    I would not waste time starting with SFHs they seldom cash flow and are very high risk due to the loss of 100% of income with a vacancy.

    If you plan on living in a multi you are essentially a renter and it will be necessary to live in a rental area. Aside from possibly having to make a smaller down payment there is no advantage over you simply deciding to stay renting where you presently are living. Stay renting, save your money and invest in more as you can afford to do so.

    0Reply
  • Account Closed
    Houston, TX · Member since 2016 · 21 posts · 10 votes
    10y
    Originally posted by @Cody L.:

    @Ben Unger:  I know nothing about Katy.  Katy might as well be the moon.  I'm one of those 'inner loop snobs'.  I don't buy, or live, or invest, or even go, outside the loop  :)

     Cody are there areas inside the loop that in your opinion are either "up and coming" or more established yet deals can still be found? 

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    10y

    Yeah, their up and coming.  For example, I've bought a lot of south-east inner loop -- just east of 288.  The city is building a ton of new stuff.  And there is new light rail.  It's minutes from downtown/midtown/med center.    Yet the pricing is still like it's a war zone.

    I'll buy there for $40k/door and get $750/month rents vs. buying in Montrose for $120k/door and getting $1,100/month rents.   Plus your land basis is so much lower.  Your upside is greater.  It's a slam dunk IMO

    (but I'll admit that the area/tenants in that location are not going to be the same as in montrose/heights.  They tend to be less likely to pay online.  More eviction issues, etc.  So you don't really get something-for-nothing.  But I think it's still a winner with the trade offs)

    0Reply
  • Ben Unger
    OP
    Real Estate Agent · Houston, TX · Member since 2015 · 46 posts · 25 votes
    10y

    @Thomas S. : I understand that living in a multi is the ideal situation. I will keep looking for a MFH to buy, I just don't see any that I would be able to afford in my area currently. For me, if I evaluate a SFH correctly and account for vacancies, investor discount, ect., that property should be able to be converted to a rental in 3-5 years. All the meanwhile I can utilize the extra cash I have for another down payment on other investments either MFH's or singles.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free