Need advice on the best 1st investment to maximize cashflow

[Ron Thomas]

Hello all!

I'm just starting out and wanted some advice on the best first investment given my goals.

I learned the fundamentals (from analyzing deals to financing strategies etc) in a BRRR program but then realized that a traditional BRRR wasn't ideal for me since I really need to replace my paycheck and quit my day job ASAP. I've been considering options like STR vs multifamily etc. and would really like some perspective from others with more experience. I'm based in CA but definitely open to investing in other states.

Thanks a ton!

[Joseph P Finkelstein]

Hey Ron,

I'm just wanted to pop in and emphasise (not that this is what you were insinuating) not to rapidly quit your day job to jump into real estate investing. One of the first things my managing broker shared with me that he thought was a cruel joke, was that people get very excited and save up a lot of money to jump into real estate investing only to realize that they needed their job to qualify for a loan. Loans make the world go round here. 

As for what is the best first investment to replace your income, we are taught the key to income replacement is based off of two factors: Equity (or assets) and Cash on Cash return. If you need to replace $100k in income you can have $2 mill earning 5% or ~$1.5 mill earning 7%. 

If you have the capital, and you want to go immediately for income replacement, then high cap, high cash flow is probably the way you want to go, but if you need to build capital you might want to prioritize markets/strategies that focus on equity growth vs cashflow.