All Forum Posts by: Matthew Banks

You don't and won't have enough money to get too luxurious with this if you're strictly funding it yourself. 30% above median prices is whatever, that doesn't really say much. Your downpayment will be small, your mortgage will be costly, your overhead costs need to be kept to a minimum.

I'd totally set aside aggressively. After contributing to your retirement accounts(incl 6.5k roth next year), I'd spend 50% income, save 15% of income for personal savings, 15% for equity investing, 20% for real estate. I know it sounds aggressive, but you can manage it your first 2-3 years outside of college. After your apartment lease is up, definitely house hack but this 3.5-5% downpayment will leave you with a huge monthly mortgage. You'll be OTM even if you rent it out, which is fine depending to what degree, but manage it yourself. Get 2-3 good handymen, screen your tenants, and get good quality tenants. Maybe stagger their rents from 12 months to 24 months to keep vacancies lower. Do that every 18-36 months. 

But right now you're young and you have nothing, don't go and leverage everything. 

@Matthew Banks  if you want to be a successful real estate investor, self-managing your own properties (for a while) will give you invaluable experience--and without that experience, it will be very difficult to become a successful real estate investor (with or without PMs).

Think of it this way: trying to manage a PM (or team of PMs) without any property management experience is a bit like trying to manage a car repair shop with zero experience fixing cars, or trying to coach a team to an NBA championship with no basketball experience, or trying to manage a law firm with no legal experience. 

In order to successfully manage a PM, you need to know how to manage properties yourself--and the only way to thoroughly understand property management is to manage properties. Sure, you can learn a lot from forums, books, podcasts etc., but those things cannot replace experience...you can read every book on earth about swimming, but the only way you'll learn to swim is to jump in the pool.

If you want to be "hands off", owning rental properties is probably not what you want--because even with a PM, it is NOT a "passive" investment strategy--it takes significant effort, it's a tough learning curve, and it requires a lot of hands-on involvement.

(believe me: I wish it were as simple as buying a property, handing it off to a PM, and never touching it again while the rent rolls in...but, if it were that easy, everyone would be a multimillionaire!)

Good luck out there!

I think self managing is possible. As has been mentioned Rockville is an option to keep things more affordable. You can probably get a townhouse there or Gaithersburg or Derwood or Silver Spring that is less than 50 years old and such should have less issues than an old house that has not been retrofitted. You still will need to change the hvac, water heater, and roof periodically along with other breakdowns. You might have a small hoa fee but as opposed to a condo the fee will most likely not void any future cash flow. Project managing reputable contractors is not hard. I would say if you get something where the plan is not do a huge rehab and project managing contractors will be possible. The premium you pay will not be too bad for that amount of stuff and especially with their finance options. Finding them with Google reviews and Angie's list should be fine. Where the work is over whelming is getting finish contractors on a larger rehab. There will still be work to the smaller Capex stuff along with leasing that will be more time. It is possible just have a good maintenance plan when you buy.

 Welcome to BP.  Outsourcing property management has pluses and minuses. The plus, you wont screw anything up. The minus, you wont learn what you need to do and the process for things. 

Many different niches work in the DC area. I generally recommend house hacking to get started. We all need to live some place, so you might as well start building equity, and reducing your housing cost to start.

Some strategies to househack include....

1) Multifamily 

2) Rent by the Room

3) ADU - Accessory Dwelling Unit.

Each of these 3 strategies will have prime and non-prime locations in the metro area. You ,mention Arlington and Rockville as possible locations. I have rentals in Rockville, and live on the Rockville/Gaithersburg line.  Rockville works well for rent by the room, and ADUs. It is more moderately priced than Arlington. 

I think starting out getting something close to where you work is a great idea.  Getting a multi unit in DC is going to be expensive as will housing in general. 

Property management is something a lot of people start out doing themselves.  It is a good idea as it gives you an understanding of the amount of work it entails.  Realistically its going to cost you a little over 100 per month for the management fee with leasing and maintenance coordination being separate.   Usually I would allocate over 10-12% per month for the entire job.  It might be cheaper if rents are really high. In terms of time its going to be more than an hour a week when everything is considered unless you want to delegate things.  Leasing is usually around 1 month of rent.  That will be the biggest time crunch.  Thats usually when a lot of maintenance is done as well and that will be more to it.  If you invest in buildings with a lot of deffered maintenance and lower asset classes you will spend a lot more time as well.  

One thing a lot of new investors think is ok so why don't I invest in lower asset classes and dump the work on the pm then sit back and collect the checks while the pm gladly works for a lesser rate in lower asset classes. This usually ends poorly for the investor. If you buy a primary residence and eventually move away and delegate it if its a good asset class it will not be a problem. Most quality pms see this and avoid lower asset classes as a result. Thus at that point the successful investors self manage low income areas. So if you don't want to manage it yourself keep that in mind when making a purchase. Additionally heavy Capex will eat into time and especially if you don't want contractors to take advantage of you. It shouldn't be too much but maybe more than an hour a week until things stabilize.

For properties that you intend on occupying you can expect to pay 3.5-10% for government sponsored loans.  Non-occupied investment properties are typically 20-25% down. 

A strategy I would consider in your position is to use a GS loan to buy a multi with a low down payment, occupy one of the units and rent the others.  Hook up with a contractor and field the issues from the tenant(s) yourself rather than a hiring property management company.  You could hire an agent to help you lease, they will typically charge 1-months rent to lease up.  This will avoid having to pay a property manager every month and help learn the basics of managing a rental property.