BiggerPockets

Hi,

I'm a recent college graduate looking to invest in rental properties. I'm currently able to save about $400-600/month with a few thousand in the bank right now. I'd like to get started as soon as possible in purchasing rental properties. What would be my best approach to finding and financing a rental property?

I'm in the South Eastern PA region if that helps.

Thanks

Bryan makes an excellent point; patience may be your best option. Do you currently have a job that will qualify you for a loan? If you will be staying in the area you can look for a duplex or triplex. Live in one unit and rent the others to offset expenses. Only having a "few thousand" in reserve would make things pretty tight.

Right now I save about 1200 / month from my primary source of income, and I can tell you, it still doesn't feel like enough when it comes to starting out in real estate investing.

That type of area do you live in? Are there duplexes? What's the average price for housing?

But like Matt Tracy said, you could look for a duplex / triplex, live in 1 unit and rent the rest.

What about buying a duplex, if you have credit and income, you can use FHA or other govt programs such as HUD? Stay in one and rent the other one, you'll be there and learn what it takes to manage properties and take care of maintenance and other issues. If you're successful, you can save some money and start expanding bit by bit, what are you doing with your college degree?

How much longer on your lease?

$895/month - how many beds/baths is that getting you? Are you willing to move to some other place where the rent is less?

My job involves sustainable/green building. Eventually, I'd like to start rehabbing properties using sustainable building techniques and products.

The duplex idea sounds great to me. I just wish I wasn't stuck in this lease. What would be the easiest method of finding a duplex? Should I start talking to realtors?

That lease is sucking up a lot of money. Could you get a roommate to pay $300-400? I know that isn't ideal, but it will help save money. The best advice I can give to someone just starting out is to live like a college student as long as possible. Keep the old car, opt for the cheaper cell phone plan (and don't go over your minutes/data), don't eat out for every meal (good for both your wallet and your health), don't buy expensive clothes, etc. Remember, every dollar you spend on 'stuff' now could have been $20+ in future retirement years if you invested it wisely.

Some people take this to an extreme. Warren Buffet still drove an old VW Beetle even after he was a multimillionaire. He knew that spending $20,000 in current dollars meant giving up millions of future dollars. While I think there needs to be some balance between enjoying your life along the way and planning for the future, just remember what you're giving up each time you opt to splurge on something now.

As for rentals, I agree with Matt, Ben, and the other posts. If you can get out of your lease (or once the lease is up), look into buying a duplex with an FHA loan and live in one side while renting the other. That way you have one guaranteed great tenant (you!), and hopefully one more good one to help you build some equity.

Learn to wholesale. Make big chunks of cash fast. When your reserves in the 6 figures then go buy rentals.

I'm in a very similar situation as you Mike. All we have is time to build cash reserves. Right now I'm researching potential areas to invest when my reserves are large enough. It's really interesting to see how two communities less than 2 miles apart can be so vastly different. I've seen property taxes vary from 500 to 3000 in under a two mile range. I feel that this is a very daunting task being that I've never lived in the city and it's not possible nor smart to pick a spot on the map and roll with it.

So my advice is to narrow down your neighborhoods and start analyzing deals as if you are actually going to buy them. ie. calling realtors and negotiating price with them, inspecting for damages, estimating repairs, quoting insurance, calculating NOI and potential cash flows.

I get them from the estimates on MLS listings such as Howard Hanna or Coldwell Banker. It is your own due diligence to find what the true tax would be. I have not actually gotten concrete numbers for property tax yet. Maybe someone else here on the forum can help. How do you verify property tax?