Advice on first deal

New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes

So when learning I hear that location is number 1 thing to focus on and I agree. I also hear that when you’re starting to look and get started in your hometown which is somewhere you know very well. I have found deals in my home town that will cashflow for me BUT, my hometown isn’t the nicest area anywhere other than by the park and university. So location isn’t ideal here. What should I focus on? Would be my first deal as I’m in college!

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Michael Dumler

Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes

@Devin Slone, given that you're still in college, house hacking your first deal should be your top priority. Read, "The House Hacking Strategy" by Craig Curelop to understand the concept. House hacking from one property to the next is a powerful momentum builder to scale your portfolio. Do not undermine this strategy.

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Randall AlanPro Member
Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @Devin Slone:

So when learning I hear that location is number 1 thing to focus on and I agree. I also hear that when you’re starting to look and get started in your hometown which is somewhere you know very well. I have found deals in my home town that will cashflow for me BUT, my hometown isn’t the nicest area anywhere other than by the park and university. So location isn’t ideal here. What should I focus on? Would be my first deal as I’m in college!

@Devin Slone

Buying local is so much better than out of state… if for nothing else because you can manage your rental yourself. Property management costs you 10% of your GROSS rent. You can’t emphasize enough how big a deal that is. On a financed property that likely represents an extra 33% profit per month. So $300/month instead of $200 on a $1,000 rental. That’s an extra $1,200 a year you get to keep!

We self manage 37 rentals. Granted, it’s our full time job… but even with 37 we seldom have more than 1-2 tenant interactions a week. So you can extrapolate what that would mean for 1-2 rentals.

Understand that your location is not about what it looks like. It’s about how well it rents. Almost all our rentals are C+ class rentals. Few are in stellar areas. But for where they are at, they are fine.

Your focus should be on profit, first and foremost. Obviously you don’t to be in neighborhoods that that are D class (drugs, dilapidated, dangerous, etc. but after that, it’s about profit. Profit lets you keep your unit. It lets you repair the unit. It makes you want your next unit. Without it you are spinning your wheels maybe trying to wait for appreciation. That can be a tough ask if you are barely breaking even.

So buying locally gives you a huge advantage over out of state, plus it makes you a better landlord. You can do silly repairs yourself… like figuring out the batteries in the thermostat are why the AC won’t turn on; that it was a tripped circuit breaker even though they swear they checked them. All those little things cost you hundreds of dollars in unnecessary repair costs when you own an out of state rental. It will also help you in dealing with a property manager if you ever go that direction.

Hope it helps!

Randy
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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
3y
If you can't find a deal in a good location in your hometown, then how are you going to find one OOS?
Logical Property Management4.9459 Reviews
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Michael Dumler
Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Devin Slone, given that you're still in college, house hacking your first deal should be your top priority. Read, "The House Hacking Strategy" by Craig Curelop to understand the concept. House hacking from one property to the next is a powerful momentum builder to scale your portfolio. Do not undermine this strategy.
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Devin Slone
OP
New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes
3y
Quote from @Randall Alan:

Quote from @Devin Slone:

So when learning I hear that location is number 1 thing to focus on and I agree. I also hear that when you’re starting to look and get started in your hometown which is somewhere you know very well. I have found deals in my home town that will cashflow for me BUT, my hometown isn’t the nicest area anywhere other than by the park and university. So location isn’t ideal here. What should I focus on? Would be my first deal as I’m in college!

@Devin Slone

Buying local is so much better than out of state… if for nothing else because you can manage your rental yourself. Property management costs you 10% of your GROSS rent. You can’t emphasize enough how big a deal that is. On a financed property that likely represents an extra 33% profit per month. So $300/month instead of $200 on a $1,000 rental. That’s an extra $1,200 a year you get to keep!

We self manage 37 rentals. Granted, it’s our full time job… but even with 37 we seldom have more than 1-2 tenant interactions a week. So you can extrapolate what that would mean for 1-2 rentals.

Understand that your location is not about what it looks like. It’s about how well it rents. Almost all our rentals are C+ class rentals. Few are in stellar areas. But for where they are at, they are fine.

Your focus should be on profit, first and foremost. Obviously you don’t to be in neighborhoods that that are D class (drugs, dilapidated, dangerous, etc. but after that, it’s about profit. Profit lets you keep your unit. It lets you repair the unit. It makes you want your next unit. Without it you are spinning your wheels maybe trying to wait for appreciation. That can be a tough ask if you are barely breaking even.

So buying locally gives you a huge advantage over out of state, plus it makes you a better landlord. You can do silly repairs yourself… like figuring out the batteries in the thermostat are why the AC won’t turn on; that it was a tripped circuit breaker even though they swear they checked them. All those little things cost you hundreds of dollars in unnecessary repair costs when you own an out of state rental. It will also help you in dealing with a property manager if you ever go that direction.

Hope it helps!

Randy
Hey Randy, thanks for responding! This helped a lot and cleared some stuff up for me thank you!
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Devin Slone
OP
New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes
3y
Quote from @Michael Smythe:

If you can't find a deal in a good location in your hometown, then how are you going to find one OOS?
Hey Michael, it’s not that I can’t find a good deal in a good location. I am in college and plan on househacking to get started and all of the 2-4 unit properties are in not so great locations. Most of my town is not so great here. High poverty rate and high drug use plagues my town.
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Devin Slone
OP
New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes
3y
Quote from @Michael Dumler:

@Devin Slone, given that you're still in college, house hacking your first deal should be your top priority. Read, "The House Hacking Strategy" by Craig Curelop to understand the concept. House hacking from one property to the next is a powerful momentum builder to scale your portfolio. Do not undermine this strategy.
Hey Michael, Yes I agree as that’s what I plan on doing. I found a good deal that will cashflow super well for me it’s just in a rough part of town as most of my hometown is rough. Just a high drug and poverty rate.
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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
3y
@Devin Slone you should still be able to use your network (or learn how to develop one) and knowledge to find a 2-4 unit in an area that is acceptable or improving.
Logical Property Management4.9459 Reviews
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Devin Slone
OP
New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes
3y
Quote from @Michael Smythe:

@Devin Slone you should still be able to use your network (or learn how to develop one) and knowledge to find a 2-4 unit in an area that is acceptable or improving.

I agree! I know I need to build up my network which I’m working on. There’s not any local meetups at the moment so I’m trying to find other people who invest in the area or just people who invest that live here. Just been a struggle. Thanks!

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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
3y
Find an agent that deals with 2-4 unit investment properties.
Understand 95% of agents are clueless about how to work with investors.
If you know an agent, see if they will search MKS for all 2-4 unit sales in last 12 months, with listing & selling agents, in a csv file.
Then you can sort by agents on both sides of the transactions to find the ones that have listed/sold multiple 2-4 unit properties. These are the agents you want to network with. They may be also willing to connect you with other investors they know.
If you don't know an agent willing to assist with this for free, you may need to offer a few hundred dollars as an enticement.
Logical Property Management4.9459 Reviews
Website View Page
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Devin Slone
OP
New to Real Estate · Huntington, WV · Member since 2023 · 20 posts · 4 votes
3y
Quote from @Michael Smythe:

Find an agent that deals with 2-4 unit investment properties.
Understand 95% of agents are clueless about how to work with investors.
If you know an agent, see if they will search MKS for all 2-4 unit sales in last 12 months, with listing & selling agents, in a csv file.
Then you can sort by agents on both sides of the transactions to find the ones that have listed/sold multiple 2-4 unit properties. These are the agents you want to network with. They may be also willing to connect you with other investors they know.
If you don't know an agent willing to assist with this for free, you may need to offer a few hundred dollars as an enticement.
That helps a lot thank you for the advice. I really appreciate it!
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