Real Estate Rookie: Questions about breaking in

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Real Estate Rookie: Questions about breaking in

Connor Milligan
Member since 2021 · 2 posts · 2 votes

Hi everyone,

Been listening to the BP podcasts and reading the blog but this is my first post! I'm trying to break into real estate investing and am looking to do my first deal. I live in the SF Bay Area, where property values are pretty expensive.

Because of this, I have a couple of questions that I'm unsure about.

1) What are ways I can get creative with my financing if it's my first deal? I've learned about seller financing and getting a partner and such, but what would you recommend for a first time investor? If I want to scale my portfolio, traditional 20% down mortgages aren't going to be possible because of the property value here, so wanted to see what other popular methods are possible.

2) How can a rookie investor get comfortable with buying out-of-state? My biggest concern is really around buying a property without ever seeing it. Who do you have to hire or partner with to make sure the house is ready for purchase and ready to start marketing to tenants?

Happy to give any further details that would be helpful and I really appreciate any help!

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  • Buddy Holmes
    Investor · Daytona/Ormond Beach Fl, Charleston/Summerville SC · Member since 2017 · 156 posts · 73 votes
    4y

    @Connor Milligan

    Connor, It is good that your are asking for help.  Go through some of the BP podcast/videos on evaluating deals.

    Your comment about SF being to expensive for 20% down buys, tells me that you have not evaluated any possible deals.

    First you want a deal that has cash flow.  The very first look is how much rent for the unit and how much the cost of the unit.

    SF rents might look high but the property prices are even higher.  This is the problem, not that you could not afford 20% down.

    There was a 2% rule to quickly eliminate possible deals and choose markets. i.e $1000/mo rent for a $50K purchase.  Good luck finding one of these now, but even a 1% rule is had to find and can be hard to show a reasonable cash flow.   Once you spend time n learning how to make money on a "cash flowing Investment in RE" then worry about how to finance you purchase.

    House hack a duplex for a possible 3.5% down deal.   Buy in a "rural" area with a low down Payment Dept of Ag loan to live in a year and a day then rent and move on.   If you don't understand the deal evaluation process, your venture into RE can be devastating.    Take it slow, learn much, save your money for down payment, take small solid cash flow investments and you will have good luck in RE Investing.

    Cheers

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  • Connor Milligan
    OP
    Member since 2021 · 2 posts · 2 votes
    4y

    Thanks @Buddy Holmes . My background is in finance (investment banking and private equity) and I've definitely done evaluation of some deals. I'm comfortable running the numbers and understand how to tell if a deal will cash flow or not.

    As far as affording a 20% down payment, the average property in my zip code is >$1M and I don't have $200k to put down. That's what I meant by not being able to afford it. Not sure if I'm misunderstanding something, but I wasn't talking about anything regarding the monthly cash flow.

    But what you said is helpful, i'll look into a 3.5% down payment with the DoA loan you mentioned.

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  • Jordan Fulmer
    Investor · Huntsville, AL · Member since 2021 · 41 posts · 15 votes
    4y

    Creative financing can definitely be a good option. We ran into the same issue you're talking about. We bought our first rental and put down about 25%. While the cash flow on it was decent, it would take a while to save up for another down payment. We bought our next handful of properties using creative financing, which allowed us to buy a lot more than going the traditional route. There's always the BRRRR method as well, but most of the properties we purchased didn't really fall under that category.

    I wouldn't go out of state until I had some experience under my belt. You need to get used to walking through and evaluating properties before even thinking about buying them without seeing them. At least that's my opinion. We've bought several properties, but everything is usually so involved I couldn't imagine being remote without having an awesome team.

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