Looking to get started in Real Estate investing

[Leandro Bongiovanni]

Hello everybody this is my first post and I sincerely appreciate any feedback. I am 24 years old working a (mostly) cash job so my income on paper is insufficient for a loan and my credit isn't great. I recently came into a fairly significant lump sum of money totaling around 150k. I've always been dead set on real estate but don't really know where to start. I know this is plenty of money to get started and eventually catapult me to financial freedom. I am looking for some suggestions, ideas, tips, or anything that might lead me in the right direction. Again, I sincerely appreciate all feedback. Also, id like to mention if anyone is interested in a partnership or is in need of financing id look to go in that direction as well. 

[Jewel B.]

Welcome Leandro,

I am self employed and file taxes, but I also expect this to make lending more difficult for me. I will find out in a few months after filing my 2022 taxes and seeking preapprovals and lending.

In any case, I'm currently researching markets and getting started myself, though I have been interested in real estate for over a year now and am an avid reader and listener of BP content.

It's my understanding that it depends on your goals and style and that you should work backwards from there to choose a or a few strategies and markets and to create a buy box. For example, buy and hold? Flip? LTR? STR? Cash flow? Appreciation? More passive? More active? It really depends! Of course, you can give yourself a few options or adapt to what you find and pivot later.

I just researched and organized states by landlord friendly or not and tax friendly or not.

Furthermore, do your due diligence but don't get FOMO or analysis paralysis - turning education into action is key!

After you create a buy box and choose a few markets and strategies based on your goals and personal style, build your Core 4 and network in that area. Find a deal, make sure the #s and details work, and boom!

Signed,

Your next door neighbor in PA :)

[Garrett Crosby]

Hi @Leandro Bongiovanni - for that type of cash you have in hand - and without a W2 job, it may be a good idea to look into some cash deals that are similar to the BRRRR method. While I can't point you to an area here in LA - I can point you to a good friend I invest with in Fayetteville, NC. My properties all cash flow really nicely there and I spent a very long time researching when first looking for a place to invest.

With 150K in cash - you could easily pick up some BRRRR (mostly) type properties and start building up your portfolio somewhat quickly. I love the guy I work with and the team that comes with him. If you're interested, I'd be happy to introduce you both. Just DM me. :)

Cheers!

[David Mathews]

You're definitely starting out on the right foot. Meaning that you are seeking out education on the subject before just blowing your windfall. A couple of things that I'll mention is that you can never have too much education. You don't need some guru's course or $20K secret to making millions overnight. BiggerPockets is a great resource to start. I found it in 2015 when I was trying to figure out if I wanted to be a landlord or not. There are so many books out there on the subject as well. In this atmosphere it wouldn't hurt to sit on that money for a few months and immerse yourself in learning about whatever the area of real estate that you're interested in. If you're commuting to work, spend that time listening to an audio book. If you're walking or exercising do the same. Or listen to a podcast each day or every-other-day. Once you get comfortable (or even if you're not) start analyzing deals. You learn so much from that alone. You build confidence as well. When the right deal comes along you'll be ready. As for the credit aspect, there are still sellers out there who are willing to carry the note. I've purchased properties with sellers who were willing to offer a favorable amortization but with a balloon payment after so many years. That allowed me to get established. You will eventually have to start showing income in order to scale up with traditional lending but that will come together with time. Cash is king and in this atmosphere deals are going to be available soon. As each month passes the tides are slowly turning into more favorable buying conditions. Remember, you marry the property but only date the mortgage. It can be refinanced in the future if conditions are favorable to do so.

[Nathan Gesner]

Quote from @Leandro Bongiovanni:

Welcome to the BiggerPockets forums!

The first thing I would do: acknowledge that you came into this money by good fortune, not by skill, and that you can just as easily squander it, as so many do.

A good investor will have control of their personal finances before investing. This means no debt, a good budget, responsible spending. If you can get personal finances mastered, then you can invest from a position of strength.

As for investing, I would start with a house hack. Buy a four-unit building with as little as 5% down. That gives you a place to live and three rentals to manage. Continue reading books, becoming a better Landlord, and really learning if real estate is the right method of investment for you. If it is, start looking for the next deal. With $150,000 and the right market, you should be able to purchase a fourplex to househack and another to manage. That's seven rentals and a place to live in one year. Within 1-2 years you should have enough saved up to househack a third fourplex and rent out your first apartment. Now you'll have 11 rentals and a place to live. After 1-2 years, you should have enough saved up to purchase a single-family home and the cashflow from your rentals will pay for all of it.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

[Jake Handler]

I would take plenty advantage of house hacking.  I will go ahead and assume that as a 24 year old, your lifestyle may support some more "spatial sacrifices" than it would if you were older with a spouse, kids, etc.  At your age I got into single family house hacking for that exact reason.  And because many people in their 20s are renters, I was able to rent to really good friends of mine (and still do).  I don't believe I'm going to be sharing walls in a single family house later in my life... but at the moment I'm willing; so I am definitely pursuing that opportunity and advise the same to as many people that will listen.

[John Mathew]

Hey there Leandro! 

Here are some basic principles that you need to understand in order to succeed in real estate investing to help you started out!

• Keep your mind open to new ideas. The most successful real estate investors see profit opportunities everywhere. The ability to see creative financing is critical, even more so in today's market.
• It's important to know all of your options. By definition, real estate investing is a high-stakes game. Never make an investment that you are unsure of. It is critical to understand what you are doing in order to succeed.
• Investing in your education will pay off in the long run. It is common for real estate investors to invest in properties that generate multiples of their initial investment. Consider your own education in this light as well. The ability to employ a strategy correctly can result in substantial returns. Naturally, if you do not utilize critical resources, you risk experiencing loss.

[River Sava]

Hi Leandro- welcome to BP! Have you looked into different strategies/ property types? Also, have you considered where you're going to invest, instate/out? 

[Kyle Baker]

Hey Leandro! So many great suggestions here. You definitely came to the right place for information and advice. The strategy I used was the live in each property. I would buy a property with a small downpayment 3.5-5% and live in the property for a year. After that I would find a second property and do the same thing and move into it. When I would move I would make that first property a rental. You could do this with single family or mutli family. I did it with single family but decided to rent out a bedroom to supplement my income even more. If you are handy you can purchase something that needs some cosmetic work which will allow you to add some sweat equity during that year of living in the property. Good luck and you are in good hands with the BiggerPockets community on your side. 

[Aj Parikh]

HI Leandro, One of the easiest ways of scaling in real estate today is to invest in turnkey properties out of state. If you have a busy 9-5 routine but have the money to get started and don't have enough time, turnkey companies provide some of the best resources to scale your portfolio. I have used that strategy so feel free to reach out if you want to discuss.

[Sebastian Hernandez]

@Leandro Bongiovanni Welcome to BiggerPockets!

I would recommend you look into house-hacking to start your investing journey.

I would also suggest that you reach out to a couple of lenders, explain your situation and see the solutions and feedback they provide you. You have the down payment which is usually the hardest portion, now start working with a lender and planning what needs to be done in order to get approved. 

Best of luck!

[Andres Ospina]

Quote from @Leandro Bongiovanni:

Hello everybody this is my first post and I sincerely appreciate any feedback. I am 24 years old working a (mostly) cash job so my income on paper is insufficient for a loan and my credit isn't great. I recently came into a fairly significant lump sum of money totaling around 150k. I've always been dead set on real estate but don't really know where to start. I know this is plenty of money to get started and eventually catapult me to financial freedom. I am looking for some suggestions, ideas, tips, or anything that might lead me in the right direction. Again, I sincerely appreciate all feedback. Also, id like to mention if anyone is interested in a partnership or is in need of financing id look to go in that direction as well. 

 Hey Leandro.

I do 1 on 1 with people to help them create a plan and get started in real estate. I’ve been investing in real estate for a little over 9 years now. And have been a real estate agent for about 10 years now. sent you a request so we can connect.

[Steven Foster Wilson]

Quote from @Leandro Bongiovanni:

Hello everybody this is my first post and I sincerely appreciate any feedback. I am 24 years old working a (mostly) cash job so my income on paper is insufficient for a loan and my credit isn't great. I recently came into a fairly significant lump sum of money totaling around 150k. I've always been dead set on real estate but don't really know where to start. I know this is plenty of money to get started and eventually catapult me to financial freedom. I am looking for some suggestions, ideas, tips, or anything that might lead me in the right direction. Again, I sincerely appreciate all feedback. Also, id like to mention if anyone is interested in a partnership or is in need of financing id look to go in that direction as well. 

 Welcome, Leandro! Well now that you are on to starting your real estate journey, the first thing that you should do is surround yourself with a good team. 

I recommend you read this article on OOS investing. This explains who you need on your bus! You will need to get a local, Realtor, contractor, lender, and property manager. All the pieces to making a successful business.

https://www.biggerpockets.com/...

[Leo R.]

@Leandro Bongiovanni in my opinion, house hacking is the single best way for people to get started in real estate investing.

Why? Because, house hacking can produce great financial returns, it teaches you essential RE investing skills, but (compared to more advanced strategies like BRRR'ing or wholesaling), it is comparatively lower risk, simple and beginner-friendly (and therefore has the highest likelihood of success).

More specifically:

1. A HH can produce great financial returns. A HH can substantially lower your living expenses, while creating cashflow, appreciation, mortgage pay down, and tax benefits. A HH can also involve opportunities to force appreciation and/or rent (e.g.; by adding an extra bedroom in a previously under-utilized space). When executed correctly and repeatedly, house hacking can be very lucrative, and there are multi-millionaires who built their fortunes on repetitive house hacking! Although it's a strategy that's good for beginners, there are plenty of very experienced RE investors who continue to HH, because it's such a powerful strategy.

2. A house hack will teach you the essential skills you'll need to succeed in RE investing. With a HH, you can learn how to analyze properties & markets, how to find an investor-friendly agent, how to spot value-add opportunities at properties, how to engage in a strong due diligence process, how to screen tenants, how to manage the property, how to build a network of contractors, plumbers, electricians and other pros, how to manage the book keeping of the property, etc., etc., etc. If you want to succeed in RE investing, getting this experience will be critical! In my experience, a HH can provide incredibly valuable lessons that no mentor, real estate course, book or podcast could ever teach (though, I'd still highly recommend reading up on relevant RE resources, listening to podcasts, etc.).

Plus, if you decide to do one of the other strategies in the future (such as BRRR'ing or out of state investing), you'll be much more prepared to do it if you have a few HH's under your belt--a ton of the lessons you'll learn from a HH can be used to succeed in other areas of real estate ...in fact, I'd say that a HH should be a necessary prerequisite to the more advanced strategies (like flipping) for most folks!

3. Compared to other strategies (like flipping, wholesaling, etc.), HH is relatively simple and lower-risk, and therefore has a higher chance of success. I always use this analogy: would you tell a beginner skier who has zero experience to ski a double black diamond (the most advanced terrain) for their first run? (obviously, no; a beginner could easily get themselves killed on double black diamond terrain!). Beginners should start off on beginner terrain, where they actually have a chance to learn and succeed. A house hack is like that beginner run (but BRRR'ing, wholesaling, and out-of-state investing are more like double black diamonds).

The fact of the matter is: real estate is often a high-stakes endeavor, and the more advanced strategies (like BRRR'ing, wholesaling, flipping, out of state investing, etc.) can easily bankrupt a beginner when they're executed poorly.

Now, having said all that, house hacking is not necessarily easy (if it were, everyone would do it!)...it's just easier than the more advanced strategies...House hacking still takes significant due diligence, skill in analyzing the market and the property, time and effort to learn about tenant screening and property management, the ability to anticipate appreciation/depreciation trends, etc., etc., etc....and even with lots of skill and preparation, things will still go wrong (vacancy, plumbing leaks, bad tenants, etc.)--but that's the nature of the game. As James Brown sang: you gotta pay the cost to be the boss.

...and lastly, if you want to continue investing in RE, you'll need to educate yourself on lending, and you'll probably need to get your income on taxes--so that you can access loans.  There may be other ways of accessing leverage without a good DTI and having your income on taxes, but the terms will be much poorer.  Talk to a mortgage broker asap, and learn about what you need to do to qualify for various mortgage products.

Good luck out there!

[Patrick Drury]

@Leandro Bongiovanni
I would look at buying a house hack to start building the portfolio first, and if that's not feasible, then look at investing out of state. Check out the resources on House hacking here in the forums.