What path to choose for investing

Question

I am currently looking for my first deal. I have gone over the strategies for STR, MTR, LTR's and don't know where to start. My question is, how did everyone else start and decide what strategy to use? I don't know if I should just buy cheap and try it out (For the learning experience) or if I should invest more and hope it works. Any help would be greatly appreciated.

Zachary Hryczyk · Answer

I started out building a home with construction loan and gaining equity. Once i built the equity i pulled a HELOC to do my first flip. I flipped 4 homes and that gave me enough capital to do my 1st spec home because the profit margins are huge here on the Oregon Coast. After 3 spec home sales i no longer needed the HELOC anymore so i left it at 0 and used cash for 1 commercial property purchase for rental income and all my spec homes since. Im now on my 11th spec home with all cash and still rolling along. Not your typical way to do it but at least if market corrects or even crashes i have a house paid for to rent out and continue to get income. Good luck! 👍

Nathan Gesner · Answer

Without knowing exactly where you are, where you want to go, it's impossible to give you directions. It would also help to know if you are going to walk, rollerblade, bike, take the Greyhound, or drive a Ferrari.

Charlton Zang Jr · Answer

With all being said I have decent understanding of what it takes to do all the different strategies. (All I do is read forums and listen to podcasts everyday) I am starting in the Metro Detroit area suburburbs when I currently live. I have about $25K I can borrow from an old IRA to start with. I also have a primary house I owe about $120K and it's worth about $300K so I could borrow against it but I'M scared of doing that. What else can I do or if anyone Is in the area I can sit down and talk to? TIA

Hamp Lee III · Answer

If you have fears about moving forward in a particular direction, do what might be easiest. For you, it may be purchasing another owner-occupied property.

There are inherent risks in real estate investing so always do what you feel comfortable with and educate yourself on.

You have a great opportunity in front of you, but make sure you can sleep comfortably at night with those decisions.

I wish you all the best.

Bonnie Low · Answer

These strategies are not mutually exclusive. In other words, depending on your property, you may be able to do a combination. For example, if you're in an area that allows STRs and the property lends itself to that you can list it for short term stays but also be open to 30+ stays, which would make it a STR/MTR hybrid. Some people are looking for midterm stays that end up looking like long term stays when they have multiple extensions, for example insurance bookings. It's not uncommon to have insurance bookings that start as shorter stays but then get extended as the guests wait through construction delays, permitting, etc.

Benjamin Aaker · Answer

I recommend you first start by reading about each niche in which you might have an interest. Many investors got started owning a single family residence and renting it out. Many of these can be self-managed and you will gain a lot of experience by doing it. SFRs are generally easy to find and purchase and a great way to do it is to purchase a new primary residence and rent out your old one.

I started out by building a new house for my wife and purchasing a fixer-upper to live in and then planned to sell (not really knowing what flipping was) and then move into the new house. Our agent had some clients whose credit wasn't quite good enough to get a bank loan and suggested we rent to them, so we did and we haven't looked back. 3 years after that, the tenants had repaired their credit and we sold them the house and it felt so good to help them and make a few bucks as well!

Hanna Lupico · Answer

I started by learning different financial strategies that I could use to buy a modest, local LTR that needed some cosmetic updates because it was enough to learn, relatively low risk, and easier to manage.

It's a long game so I didn't want to burn out or overcommit on my first try.

Charlton Zang Jr · Answer

Thanks all of you for the information and support! I think my hardest thing when choosing a route to follow is the more I learn about them the more I feel confident in doing them. Right now I think I am gonna start trying to find some meet-ups and get to know more of the local investors and realtors in my area. This way I can get a better plan of action set a a goal.

Jason Wright · Answer

Bigger Pockets is a huge community with tons of experienced investors to draw information from. You can connect with investors and find ways to network with people local to your area.

Go to the "build my team" button at the top of the website and connect with a local real estate agent AND a lender. Ask them questions. They should be investor friendly professionals who will be happy to help.

Invest in a Bigger Pockets pro membership and use the tools they offer to analyze different deals. Start with deals in your area. Look in different neighborhoods and areas with varying entertainment or professional districts. Look at what properties would rent for short vs long term. Analyze 100 deals. Take a month of that's what it takes to understand how deals would cashflow and what your return would be.

Then go make a deal. Get some cashflow. Build momentum, learn from the first experience, dont stop networking, and then plan for your next deal.

Enjoy the journey, and happy investing.

Michael Smythe · Answer

@Charlton Zang Jr You can use the $25k to buy something around the $100k price with 20% down for rental loan.

$100k limits you to Pontiac, small 2-bed in Waterford or you'll have to go further south.

Those markets also won't support much in the way of STR.

Maybe MTR.

You should also attending in person, Oakland REIA and MREI, to further your education at a faster pace.

What path to choose for investing

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