Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
as others have said, you're in a great position. there's no need to rush. and i would strongly encourage you not to use hard money or something else non-conventional on your first deal.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
3y
For properties that you intend on occupying you can expect to pay 3.5-10% for government sponsored loans. Non-occupied investment properties are typically 20-25% down.
A strategy I would consider in your position is to use a GS loan to buy a multi with a low down payment, occupy one of the units and rent the others. Hook up with a contractor and field the issues from the tenant(s) yourself rather than a hiring property management company. You could hire an agent to help you lease, they will typically charge 1-months rent to lease up. This will avoid having to pay a property manager every month and help learn the basics of managing a rental property.
For properties that you intend on occupying you can expect to pay 3.5-10% for government sponsored loans. Non-occupied investment properties are typically 20-25% down.
A strategy I would consider in your position is to use a GS loan to buy a multi with a low down payment, occupy one of the units and rent the others. Hook up with a contractor and field the issues from the tenant(s) yourself rather than a hiring property management company. You could hire an agent to help you lease, they will typically charge 1-months rent to lease up. This will avoid having to pay a property manager every month and help learn the basics of managing a rental property.
Thanks, Justin. I've thought about going that route, but I wouldn't be able to start for another year as I'm locked into an apartment lease currently. Do you think there are other strategies that are relatively as feasible as this that are non-occupied - related? Or, in order to afford non-occupied investment properties, would I be running into trouble having to get my hands on hard money with poor rates?
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
Thanks, Jack. I think I'll see what I can do in regards to the non-occupied route. Any suggestions on how to start? I'd assume the first thing to do would be to find a lender, since I'm probably looking to have between $10k-$20k to play with at the start.
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
3y
I think starting out getting something close to where you work is a great idea. Getting a multi unit in DC is going to be expensive as will housing in general.
Property management is something a lot of people start out doing themselves. It is a good idea as it gives you an understanding of the amount of work it entails. Realistically its going to cost you a little over 100 per month for the management fee with leasing and maintenance coordination being separate. Usually I would allocate over 10-12% per month for the entire job. It might be cheaper if rents are really high. In terms of time its going to be more than an hour a week when everything is considered unless you want to delegate things. Leasing is usually around 1 month of rent. That will be the biggest time crunch. Thats usually when a lot of maintenance is done as well and that will be more to it. If you invest in buildings with a lot of deffered maintenance and lower asset classes you will spend a lot more time as well.
One thing a lot of new investors think is ok so why don't I invest in lower asset classes and dump the work on the pm then sit back and collect the checks while the pm gladly works for a lesser rate in lower asset classes. This usually ends poorly for the investor. If you buy a primary residence and eventually move away and delegate it if its a good asset class it will not be a problem. Most quality pms see this and avoid lower asset classes as a result. Thus at that point the successful investors self manage low income areas. So if you don't want to manage it yourself keep that in mind when making a purchase. Additionally heavy Capex will eat into time and especially if you don't want contractors to take advantage of you. It shouldn't be too much but maybe more than an hour a week until things stabilize.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
Thanks, Jack. I think I'll see what I can do in regards to the non-occupied route. Any suggestions on how to start? I'd assume the first thing to do would be to find a lender, since I'm probably looking to have between $10k-$20k to play with at the start.
I have a bunch of great lenders! But if you do want to go the non-occupied route the absolute lowest price points I’d consider investing in the dc/Baltimore area end up being about 300kish so you’d definitely have to save up around 60k min.
I think starting out getting something close to where you work is a great idea. Getting a multi unit in DC is going to be expensive as will housing in general.
Property management is something a lot of people start out doing themselves. It is a good idea as it gives you an understanding of the amount of work it entails. Realistically its going to cost you a little over 100 per month for the management fee with leasing and maintenance coordination being separate. Usually I would allocate over 10-12% per month for the entire job. It might be cheaper if rents are really high. In terms of time its going to be more than an hour a week when everything is considered unless you want to delegate things. Leasing is usually around 1 month of rent. That will be the biggest time crunch. Thats usually when a lot of maintenance is done as well and that will be more to it. If you invest in buildings with a lot of deffered maintenance and lower asset classes you will spend a lot more time as well.
One thing a lot of new investors think is ok so why don't I invest in lower asset classes and dump the work on the pm then sit back and collect the checks while the pm gladly works for a lesser rate in lower asset classes. This usually ends poorly for the investor. If you buy a primary residence and eventually move away and delegate it if its a good asset class it will not be a problem. Most quality pms see this and avoid lower asset classes as a result. Thus at that point the successful investors self manage low income areas. So if you don't want to manage it yourself keep that in mind when making a purchase. Additionally heavy Capex will eat into time and especially if you don't want contractors to take advantage of you. It shouldn't be too much but maybe more than an hour a week until things stabilize.
Thanks for the insight, Tim. What would things typically look like in terms of expenses if I were to handle the administrative/management tasks, but were to outsource property maintenance? Would this still justify not going with a pm?
Location-wise I've also thought about Arlington, VA or Rockville, MD, but haven't looked too much into those yet. DC seems to be pretty benign from the impression I get via these forums.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
Thanks, Jack. I think I'll see what I can do in regards to the non-occupied route. Any suggestions on how to start? I'd assume the first thing to do would be to find a lender, since I'm probably looking to have between $10k-$20k to play with at the start.
I have a bunch of great lenders! But if you do want to go the non-occupied route the absolute lowest price points I’d consider investing in the dc/Baltimore area end up being about 300kish so you’d definitely have to save up around 60k min.
Hmm, good to know. Appreciate the help. DC seems like a tough place to play as a beginner in that case. I'll have to do some more research on where else to look around in VA and MD.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
Thanks, Jack. I think I'll see what I can do in regards to the non-occupied route. Any suggestions on how to start? I'd assume the first thing to do would be to find a lender, since I'm probably looking to have between $10k-$20k to play with at the start.
I have a bunch of great lenders! But if you do want to go the non-occupied route the absolute lowest price points I’d consider investing in the dc/Baltimore area end up being about 300kish so you’d definitely have to save up around 60k min.
Hmm, good to know. Appreciate the help. DC seems like a tough place to play as a beginner in that case. I'll have to do some more research on where else to look around in VA and MD.
Yeah the whole metro is quite expensive, I’ve had some success on the eastern shore of Maryland, but even there your at 250k+
Real Estate Agent · Springfield VA · Member since 2018 · 479 posts · 400 votes
3y
Hey Matthew,
I househack in Springfield VA and I believe is the best way to go. It is a great strategy to off set as much as possible from your mortgage payments while getting appreciation over the years, that's how it usually works in our area.
You can also purchase a condo that will typically be cashflow neutral after two or three years from purchase time. It depends on the level of management you'd like to do.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
Welcome to BP. Outsourcing property management has pluses and minuses. The plus, you wont screw anything up. The minus, you wont learn what you need to do and the process for things.
Many different niches work in the DC area. I generally recommend house hacking to get started. We all need to live some place, so you might as well start building equity, and reducing your housing cost to start.
Some strategies to househack include....
1) Multifamily
2) Rent by the Room
3) ADU - Accessory Dwelling Unit.
Each of these 3 strategies will have prime and non-prime locations in the metro area. You ,mention Arlington and Rockville as possible locations. I have rentals in Rockville, and live on the Rockville/Gaithersburg line. Rockville works well for rent by the room, and ADUs. It is more moderately priced than Arlington.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
Welcome to BP. Outsourcing property management has pluses and minuses. The plus, you wont screw anything up. The minus, you wont learn what you need to do and the process for things.
Many different niches work in the DC area. I generally recommend house hacking to get started. We all need to live some place, so you might as well start building equity, and reducing your housing cost to start.
Some strategies to househack include....
1) Multifamily
2) Rent by the Room
3) ADU - Accessory Dwelling Unit.
Each of these 3 strategies will have prime and non-prime locations in the metro area. You ,mention Arlington and Rockville as possible locations. I have rentals in Rockville, and live on the Rockville/Gaithersburg line. Rockville works well for rent by the room, and ADUs. It is more moderately priced than Arlington.
Thanks, Russell. Househacking does seem convincing, but it's not something I would be able to start for another 12 months as I just signed a lease for my apartment. Given the area and the market, perhaps my best course of action is to just save up some cash over the next year. But, are there any strategies you would suggest looking into in the meantime? I'm eager to start something within the next 6 months or so, but maybe I'm better off waiting to jump in once my lease is up.
Investor · Member since 2021 · 591 posts · 695 votes
3y
@Matthew Banks if you want to be a successful real estate investor, self-managing your own properties (for a while) will give you invaluable experience--and without that experience, it will be very difficult to become a successful real estate investor (with or without PMs).
Think of it this way: trying to manage a PM (or team of PMs) without any property management experience is a bit like trying to manage a car repair shop with zero experience fixing cars, or trying to coach a team to an NBA championship with no basketball experience, or trying to manage a law firm with no legal experience.
In order to successfully manage a PM, you need to know how to manage properties yourself--and the only way to thoroughly understand property management is to manage properties. Sure, you can learn a lot from forums, books, podcasts etc., but those things cannot replace experience...you can read every book on earth about swimming, but the only way you'll learn to swim is to jump in the pool.
If you want to be "hands off", owning rental properties is probably not what you want--because even with a PM, it is NOT a "passive" investment strategy--it takes significant effort, it's a tough learning curve, and it requires a lot of hands-on involvement.
(believe me: I wish it were as simple as buying a property, handing it off to a PM, and never touching it again while the rent rolls in...but, if it were that easy, everyone would be a multimillionaire!)
Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
3y
I think self managing is possible. As has been mentioned Rockville is an option to keep things more affordable. You can probably get a townhouse there or Gaithersburg or Derwood or Silver Spring that is less than 50 years old and such should have less issues than an old house that has not been retrofitted. You still will need to change the hvac, water heater, and roof periodically along with other breakdowns. You might have a small hoa fee but as opposed to a condo the fee will most likely not void any future cash flow. Project managing reputable contractors is not hard. I would say if you get something where the plan is not do a huge rehab and project managing contractors will be possible. The premium you pay will not be too bad for that amount of stuff and especially with their finance options. Finding them with Google reviews and Angie's list should be fine. Where the work is over whelming is getting finish contractors on a larger rehab. There will still be work to the smaller Capex stuff along with leasing that will be more time. It is possible just have a good maintenance plan when you buy.
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
You don't and won't have enough money to get too luxurious with this if you're strictly funding it yourself. 30% above median prices is whatever, that doesn't really say much. Your downpayment will be small, your mortgage will be costly, your overhead costs need to be kept to a minimum.
I'd totally set aside aggressively. After contributing to your retirement accounts(incl 6.5k roth next year), I'd spend 50% income, save 15% of income for personal savings, 15% for equity investing, 20% for real estate. I know it sounds aggressive, but you can manage it your first 2-3 years outside of college. After your apartment lease is up, definitely house hack but this 3.5-5% downpayment will leave you with a huge monthly mortgage. You'll be OTM even if you rent it out, which is fine depending to what degree, but manage it yourself. Get 2-3 good handymen, screen your tenants, and get good quality tenants. Maybe stagger their rents from 12 months to 24 months to keep vacancies lower. Do that every 18-36 months.
But right now you're young and you have nothing, don't go and leverage everything.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
Welcome to BP. Outsourcing property management has pluses and minuses. The plus, you wont screw anything up. The minus, you wont learn what you need to do and the process for things.
Many different niches work in the DC area. I generally recommend house hacking to get started. We all need to live some place, so you might as well start building equity, and reducing your housing cost to start.
Some strategies to househack include....
1) Multifamily
2) Rent by the Room
3) ADU - Accessory Dwelling Unit.
Each of these 3 strategies will have prime and non-prime locations in the metro area. You ,mention Arlington and Rockville as possible locations. I have rentals in Rockville, and live on the Rockville/Gaithersburg line. Rockville works well for rent by the room, and ADUs. It is more moderately priced than Arlington.
Thanks, Russell. Househacking does seem convincing, but it's not something I would be able to start for another 12 months as I just signed a lease for my apartment. Given the area and the market, perhaps my best course of action is to just save up some cash over the next year. But, are there any strategies you would suggest looking into in the meantime? I'm eager to start something within the next 6 months or so, but maybe I'm better off waiting to jump in once my lease is up.
I think self managing is possible. As has been mentioned Rockville is an option to keep things more affordable. You can probably get a townhouse there or Gaithersburg or Derwood or Silver Spring that is less than 50 years old and such should have less issues than an old house that has not been retrofitted. You still will need to change the hvac, water heater, and roof periodically along with other breakdowns. You might have a small hoa fee but as opposed to a condo the fee will most likely not void any future cash flow. Project managing reputable contractors is not hard. I would say if you get something where the plan is not do a huge rehab and project managing contractors will be possible. The premium you pay will not be too bad for that amount of stuff and especially with their finance options. Finding them with Google reviews and Angie's list should be fine. Where the work is over whelming is getting finish contractors on a larger rehab. There will still be work to the smaller Capex stuff along with leasing that will be more time. It is possible just have a good maintenance plan when you buy.
@Matthew Banks if you want to be a successful real estate investor, self-managing your own properties (for a while) will give you invaluable experience--and without that experience, it will be very difficult to become a successful real estate investor (with or without PMs).
Think of it this way: trying to manage a PM (or team of PMs) without any property management experience is a bit like trying to manage a car repair shop with zero experience fixing cars, or trying to coach a team to an NBA championship with no basketball experience, or trying to manage a law firm with no legal experience.
In order to successfully manage a PM, you need to know how to manage properties yourself--and the only way to thoroughly understand property management is to manage properties. Sure, you can learn a lot from forums, books, podcasts etc., but those things cannot replace experience...you can read every book on earth about swimming, but the only way you'll learn to swim is to jump in the pool.
If you want to be "hands off", owning rental properties is probably not what you want--because even with a PM, it is NOT a "passive" investment strategy--it takes significant effort, it's a tough learning curve, and it requires a lot of hands-on involvement.
(believe me: I wish it were as simple as buying a property, handing it off to a PM, and never touching it again while the rent rolls in...but, if it were that easy, everyone would be a multimillionaire!)
You don't and won't have enough money to get too luxurious with this if you're strictly funding it yourself. 30% above median prices is whatever, that doesn't really say much. Your downpayment will be small, your mortgage will be costly, your overhead costs need to be kept to a minimum.
I'd totally set aside aggressively. After contributing to your retirement accounts(incl 6.5k roth next year), I'd spend 50% income, save 15% of income for personal savings, 15% for equity investing, 20% for real estate. I know it sounds aggressive, but you can manage it your first 2-3 years outside of college. After your apartment lease is up, definitely house hack but this 3.5-5% downpayment will leave you with a huge monthly mortgage. You'll be OTM even if you rent it out, which is fine depending to what degree, but manage it yourself. Get 2-3 good handymen, screen your tenants, and get good quality tenants. Maybe stagger their rents from 12 months to 24 months to keep vacancies lower. Do that every 18-36 months.
But right now you're young and you have nothing, don't go and leverage everything.
Good points, thanks for the game plan. Is it typical to repeat this cycle a few times before moving onto bigger projects?
Realtor · Arlington, VA · Member since 2021 · 42 posts · 35 votes
3y
Totally agree- it's a tough area to get started even with a higher salary, but you've got a few options. The ideal situation would be to do a low downpayment househack (huge advocate of this and I rent by the room in arlington!) but since you're locked into a lease for 12 months, it sounds like that route will have to wait. If you are itching to get started and determined to lock something in during the next couple months, I'd look a little further out (but simultaneously do your best to save for that future primary residence). Perhaps in the meantime you can pick up a traditional rental at 15% down within a reasonable driving distance, or alternatively, some lenders have been offering a 10% down vacation loan option-perfect for an Airbnb. (But that may cause some debt to income ratio issues for that future primary...just something to keep in mind!)
as others have said, you're in a great position. there's no need to rush. and i would strongly encourage you not to use hard money or something else non-conventional on your first deal.
Hi everyone - I'm about to start my first job after college (in the DC area) and have recently started to learn about real estate investing as a side project. I'm curious as to what % of my income I should look to set aside for a down payment. I'll be making ~$30k above median income for my city next year and would really like to pull the trigger on something within the next 12 months once I learn more. I'm looking into buy and hold properties but not sure what niche is most appropriate yet for my area and situation.
In addition, is it typically common for newbies to outsource property management? Or is this something that's not really affordable until later on in the game? Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out? Thanks a bunch and I'd really appreciate any advice/tidbits.
The down payment percentage really depends on your lifestyle/wants. On owner occupied residences you can put down as little as 3.5% (sometimes will seller subsidy’s and certain loan programs it can be effectively less than that.) however with rates above 6 generally I recommend people try to put around 10% down to keep their payment reasonable. As far as property management I manage all my own properties and it takes me literally less than an hour a month, almost all property management is calling people to fix things when the break. One time I even made a service call from my bed lol. Feel free to reach out if you have any another questions!
I would be lying if I said I haven’t done the same thing with making a service call from my bed lol…I also self manage and although I do agree that a big part of property management is service call related…but a great PM will go the extra mile when placing tenants, upkeep of the property, organization with financials ect…
as others have said, you're in a great position. there's no need to rush. and i would strongly encourage you not to use hard money or something else non-conventional on your first deal.
Real Estate Coach · LandlordSkool.com · Member since 2017 · 110 posts · 88 votes
3y
Hi Matthew,
You probably won't like what I'm about to say, but I promise I will try and be helpful. I sense you're not fully committed, and it seems you might give up if things get hard. Please don't; if you can go through the learning curve without giving up, you will succeed and love REI more and more!
I get a sense of your hesitation because of these things you said/how you said them:
"...first job after college" --- Did you want to get into REI earlier and why did you wait until now to start learning about REI?
"...real estate investing as a side project" --- Why did you word it that way, and how much time do people really devote to learning about side projects...what will you devote?
"...like to pull the trigger on something within the next 12 months once I learn more" --- If a perfect deal showed up tomorrow, would you not do whatever it takes to make it happen, and why do you think it takes 12 months to learn more?
"...I'm looking into buy and hold properties but not sure what niche is most appropriate yet." --- What is holding you back, I can already tell you that buy and hold is probably the best bet for you (I can already tell you don't want another job flipping, short-term rentals, old-school landlord, etc.), but why haven't you figured this out on your own yet?
"...is it typically common for newbies to outsource property management" --- What makes you hesitant of property management, especially as a newbie when most people learn best by doing, and how do you know if your property manager is doing a good job/how can you catch them BS-ing you?
"Ideally I would like to be as hands off as possible, is this unrealistic for someone just starting out?" --- If you want to be 100% hands off why not just buy mutual funds, index funds, or bitcoin, why REI?
My tidbits (but don't listen to me; I could be wrong):
I often feel that everyone wants to be a real estate investor, but no one wants to be a self-managing landlord master. You can be as hands-off as you design your rental business to be, BUT you need to know what you're doing first. Note the word "business." Commit fully. I call this the Forever Difference...if you are going to do something and you commit fully as if you are going to do it FOREVER...you will behave and act differently in everything you do. You will probably design every aspect of your rental business to give you Real Freedom.
On the other hand, if you are not fully committed and you treat this like a hobby, everything you do will be shortsighted, or you'll try to cheap out on everything. That's where I see many investors get into trouble... they either try to rush things or cut corners.
Embrace the suck, as we say in the military. lean in and tackle things head-on. Convince yourself you are doing this forever and you will learn everything and design your rental business to run without you one day...but in the beginning, you will have to get your hands dirty.
If you don't like being a landlord, you will never last long-term. In the back of your mind, you'll want to escape if you keep your eyes on the exit. Do not even think about one day selling all your rental properties and retiring! Quit trying to take the easy way out! Don't let the thought cross your mind!
I highly recommend doing your own property management before outsourcing, especially if you only have one rental.
Oh, my advice, set aside as much money as you can and devote as much time as possible to become a landlord master... better yet, a supreme cyborg landlord master—half human, half machine!
Congratulations on graduating college and your first job! Merry Christmas and Happy New Year!
YES! One thing a lot of new investors think is ok so why don't I invest in lower asset classes and dump the work on the pm then sit back and collect the checks while the pm gladly works for a lesser rate in lower asset classes. This usually ends poorly for the investor.
YES! Most quality pms see this and avoid lower asset classes as a result. Thus at that point the successful investors self manage low income areas. So if you don't want to manage it yourself keep that in mind when making a purchase.
