All Forum Posts by: Steve Kenney

Hey Elizabeth,

The biggest question I have is if you are willing to live in one of the units. As others have said, this is the best way to get started because you can get much better financing when the property is owner occupied. A lot of the owner occupy loans require you to live there for at least a year, so it's not forever. 

If you choose not to owner occupy you'll need to put more money down (like 25% vs 3.5%), so just keep that in mind. 

It also sounds like you may be stuck in analysis paralysis, or you are just looking for that perfect property. I've found that there is no such thing as a perfect property. There is always going to be something that you don't like. 

My advice would be to find a mentor (the right investor-focused agent can be great at this), continue analyzing deals, run them by your mentor, and then make offers when a deal meets your buy criteria. Local investor meetups are also a great place to find a mentor and just talk to other investors in your market.

It can be pretty scary buying your first deal, but at some point you need to pull the trigger if investing is truly what you want to do. It took me over a year of learning and analyzing deals before I got my first multi-family, but I eventually did it and I'm very glad I did. The next deals came much easier as my confidence grew. 

Best of luck!

Hey Drue,

While I'm not in LA, I'd highly recommend attending real estate investor meetups in your area. If you look under Forum Categories -> Real Estate Classifieds -> Real Estate Events & Meetups and search for Los Angeles you'll find several different meetups. When I was new to real estate I started going to meetups and met a lot of great people there that I am still friends with today, so if you are looking for a mentor they are a great spot for that. 

Hey Lorenzo,

I'm up in Maine, so not too far from Boston. I went through the same dilemma when I started investing a few years ago. I'd look at properties in Portland, Maine, which is also a mature and expensive market like Boston, and wondered why people would buy at such a low cap rate. I started looking in surrounding areas and found that the markets less established or still rebuilding had much higher cap rates. On paper some of these buildings had amazing metrics, excellent cash on cash returns, cap rates, etc, but when I looked at the buildings I found the neighborhoods were rough, there was poor management in place, there was lots of deferred maintenance to address. It would take a lot of work to get them up to par. While these buildings had great cash flow, there was more risk that went along with them. That's when it clicked for me - that cap rates are more just a measure of risk. The higher the cap rate, the more risk involved in the building. 

Another important thing to keep in mind is that markets with strong cashflow won't typically have as much appreciation. And markets with strong appreciation typically won't have much cashflow. A property in Boston will appreciate well, but with minimal cashflow. I've found that there are markets that have a balance of decent cashflow and decent appreciation and that's the type of market I eventually decided to invest in.

I'm not too familiar with the different markets down there but I'd highly recommend looking into Candor Realty. They are a group of investors and investor focused agents and put on several meetups a month. I'd personally recommend @Andrew Freed.

I think this will all start making more sense once you start analyzing deals and working with an agent that can provide some insight. 

Best of luck!

Hey William, what about adding another partner that has experience doing larger deals? I'm sure there must be someone in your network that is successful in this. You could try reaching out to ask questions and maybe that would turn into a sort of mentorship type relationship if adding a partner is not on the table. 

 @Drew Sygit, Last November Fannie Mae began accepting 5% down payments for owner-occupied 2-, 3-, and 4-unit homes.

Hey Nicholas,

As Jason said, I think the 5% down Fannie Mae multi-family loan will be your best option for financing. Your first step will be to talk to several lenders to find out what you qualify for. Once you've been preapproved, you can find an investor-focused agent in your market that will set you up with an email list of properties that match your criteria. 

I'd recommend getting a 3-4 unit property for your first deal, living in one of the units for at least a year. Focus on a market that has a good balance of cashflow and appreciation (some markets have great cash flow but very little appreciation or vice versa). 

For now, I would just focus on getting your first deal before getting the second and third. It's good to plan ahead but I'd focus on that first property, get it stabilized, learn the rental business, then move onto the next property once you've got your feet under you. 

I wouldn't consider a SFR to be a mistake if the rent can cover the expenses. It may be a good option for someone that has a house already and is considering renting it out vs selling.

I do think the ideal first-time rental is a four unit that you can live in and rent the other three units out, but those can be harder to find. That was my initial plan when I first started investing, but I was having a hard time finding a four unit. I eventually gave up on the four unit and ended up buying a six unit for my first deal. 

I think renting out a single family can be a viable option for some people as long as they understand it's not going to cashflow like a multi. 

Hey Rae,

I'd highly recommend you find investor meetups in the market you are looking in and start going to them. If there isn't a meetup currently, you can start your own one. That is going to be the best way to meet others in the industry from that market. 

I'd also recommend finding an investor-focused agent in that market, sharing with them your buy criteria, and then having them set you up with an email list for properties that get listed. 

If you are searching for offmarket, you can network with local wholesalers, and also use something like dealmachine to generate leads. I use dealmachine for cold calling and for sending post cards and that has worked pretty well.

Good luck!

Hey Nicholas,

Like you mentioned, I'd pay the high interest loans off as quickly as possible. If your student loans are only 3-5% interest, that's pretty good so I think it's okay to pay those off over time.

It sounds like you're making good income with your current employer and there is room to grow, so I'd plan to stay with that job until you can pay your high interest loans off and save enough for a down payment for your first property. A lot of new investors use FHA loans, which are 3.5% down. If you live below your means you should be able to save enough for this.

I think getting your real estate license is not required for investing in real estate, but is very helpful. If you want to learn more about real estate and make some additional income, becoming an agent can be a great way to do that.  

You mentioned a career change, I think going into the trades like plumbing and electrical are great and you can make good money doing those, but I think you may be taking on too much by trying to do that right now. Maybe get your debt paid down, get your first deal, get some savings built up, then reconsider the potential change. 

Reading how-to investing books, listening to investing podcasts and going to local investor meetups are great ways to learn the ropes. 

Hey Alex,

Congrats on getting started! There are a lot of different avenues in real estate and it can be overwhelming when you first start out, but my advice is to just get the first deal under your belt. You are going to learn a ton from it and also learn about things you do and don't like. Maybe you are really handy and enjoy putting in the sweat equity. That could lead to future fix and flips or BRRRRs. Maybe you hate doing the handy work but have a knack for analyzing deals and end up getting your real estate license to help other investors. There's just so many options out there but the first step is getting that first deal. 

The steps for getting your first deal are:

1. Identify the market you want to invest in (it sounds like you've already done this)

2. Identify your buy box (how many units, purchase price, etc.)

3. Talk to a few local banks and get preapproved - the best financing will be for properties you choose to occupy, so I'd recommend getting something with at least two units. One to live in and the others to rent out

4. Find an investor friendly realtor in your market that can email you listings that match your buy box. 

5. Start analyzing deals regularly. You have to analyze a bunch, so when the right one does pop up you'll be confident in making an offer. 

6. When you find a deal that interest you setup a showing. If the property is a good fit make an offer. 

Those are the basic steps to get your first deal. What also helped me was going to local meetups to meet other investors. That's how I met the realtor that mentored me and got me my first deal. You have to put yourself out there and get out of your comfort zone. 

If you could visualize a realistic first deal, what would that look like? Write those details down, then start looking for properties that match it. Try not to get too distracted on flipping, STR, MTR, etc. Just stick to one strategy for now.