I am new and want advice

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I am new and want advice

Trent Stevens
Lockwood. CA · Member since 2024 · 13 posts · 6 votes

Hey everyone I am brand new to investing. I want to get into single family buy and hold. I have been listening to B.P podcast and others for about 6 months, I am really excited to start my hand in it. 
A little about me I am in my late 30’s happily married with two wonderful kids. We live on my family ranch that is paid for just have to pay property tax and insurance in California. So house hacking is not a thing for us. One of my cons. is I have poor credit and am a little embarrassed to talk about it online. I have been working on paying down my debit but the damage Has been done and all I can do is keep working on it.

I have been focusing my time at looking at Alabama. I really like the landlord friendly and low property tax and price but can’t decide between Montgomery and Birmingham. I have been leaning more Montgomery because of the military base and would like to rent to military with the better up keep and responsibilities they have. I also have been looking at brick houses because I heard Insurance companies insure lower on brick homes and I really like how they look. I know I’m not going to live in it, I just prefer it. I am looking at investing for my future not right now but I am wanting to make around 250 in cash flow. My goal is 20 homes in my portfolio before I retire at 55. If anyone has any advice or strategies I should be looking at I would greatly appreciate it. 

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y

20 homes in less than 20 years is ambitious.  Rather than focusing on the number of homes, I'd suggest focusing on how much cash flow you want.

Take the time to get your credit in order and look at why you have the debt and problems with your credit score. While you are doing that, do your research.  Think about duplexes, don't just focus on cash flow (because some houses that look good on paper are anything but in reality), focus on areas that you are familiar with.  

If your house is paid off, you are in a good position; but the last thing you want is to grow your RE portfolio too quickly and not have the reserves needed if you have an unexpected repair or vacancy.  With rentals, sometimes everything happens at the same time (vacancy, fridge breaks, furnace problems-all happened to me in the last 6 months in different properties).

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  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    2y

    @Trent Stevens - new investors should not be looking at C/D properties in Montgomery in my opinion.  Those will be rough areas, and very high risk for bad outcomes with tenants and/or property damage.  

    Just curious - have you been to Montgomery before?  You might want to visit it first, and make sure anything you invest in there is a solid cash flow play;  appreciation there tends to be limited, especially with the lack of growth there.  

    SFH in Huntsville/Madison does not cash flow right now unless you have a high down payment, go C/D class neighborhood, or you find a fabulous off market deal. Appreciation has slowed given how rapid everything went up over the past 3 years.

    I think Birmingham may be your best option for what you're looking for if you want to invest in Alabama, but I do not have any investments there, so I can't be of much help there.  

    Good luck in your real estate journey.   

    1Reply
  • Trent Stevens
    OP
    Lockwood. CA · Member since 2024 · 13 posts · 6 votes
    2y

    Thank you @Michael S. 

    No I have never been to Alabama I have just been doing some research on it. A lot of the podcast I listen to have recommended investing out there that’s what sparked my interest. The homes here in Monterey county California are priced extremely high. there is almost no way to make any cash flow and the renter rights are all stacked against the landlord. Thank you for the advice I really appreciate you taking the time the give me your input. I am thinking about Birmingham and you are helping me make my decision.

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  • Emily Anderson
    Member since 2023 · 32 posts · 21 votes
    2y

    Hi, 

    Well, you need to nail down every single home in terms of location and property type. My advice for you is to test out the STR reports from Onera Group. I found them more insightful than AirDNA, and their price is significantly lower, as you are only paying for the city that you want to analyze.

    I purchased the data for Phoenix, and I was able to nail down the exact neighbourhood and type of property to invest in. 

    Anyways, that report helped me cut down the "analysis paralisis" phase. Hope it helps. 
    Their site is: onera-group.com

    Best, 
    Emily

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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    2y

    Following - I'm based in California

    [email protected]628-241-0888
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  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
    2y
    Quote from @Michael S.:

    @Trent Stevens - new investors should not be looking at C/D properties in Montgomery in my opinion.  Those will be rough areas, and very high risk for bad outcomes with tenants and/or property damage.  

    Just curious - have you been to Montgomery before?  You might want to visit it first, and make sure anything you invest in there is a solid cash flow play;  appreciation there tends to be limited, especially with the lack of growth there.  

    SFH in Huntsville/Madison does not cash flow right now unless you have a high down payment, go C/D class neighborhood, or you find a fabulous off market deal. Appreciation has slowed given how rapid everything went up over the past 3 years.

    I think Birmingham may be your best option for what you're looking for if you want to invest in Alabama, but I do not have any investments there, so I can't be of much help there.  

    Good luck in your real estate journey.   


     @michael s  Have "YOU" ever been to Montgomery before?  Your information is not correct.  We have been experiencing 1% yearly population growth for years.  Property values in solid B areas have seen 40% appreciation in the last 5-6 years.  Maxwell AFB and 10 colleges/universities give us a great rental market.

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  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    2y

    @Greg Parker - not frequently at all, but I've been to Montgomery probably 10 times over the past 5 to 7 years.  

    I will freely admit whenever I am wrong, because the amount of incorrect information that shows up about North Alabama on BP is incredible.  So I stand corrected on appreciation for B areas in Montgomery - however, Huntsville, by comparison, has seen a higher appreciation rate for B areas, so relatively speaking, the appreciation perhaps is still not as robust as other areas of Alabama.  I also think every area of the US appreciated by a similar metric in the past 5 years.  But I stand corrected on the absolute appreciation amounts for Montgomery, apologize for my incorrect statement, and I will certainly defer to your knowledge on this area.  

    However, the population data you quoted is contrary to the US census data.  I pulled this from the US Census government website for the City (not county) of Montgomery.

    population      -       year

    205,764                  2010

    200,603                  2020

    196,986                  2022 

    I believe 2022 is projected, so I wouldn't take it as absolute fact.  But my comments were based on US Census data, not my personal guesses.  

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  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
    2y

    Understood.  The article I got the info from was considering the entire metro area, not just the city.

    The current metro area population of Montgomery in 2023 is 374,000, a 1.91% increase from 2022. The metro area population of Montgomery in 2022 was 367,000, a 1.94% increase

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  • Michael S.
    Huntsville, AL · Member since 2018 · 577 posts · 864 votes
    2y

    @Greg Parker - appreciate the feedback.  Population data seems to have ample variance to it.  There have been articles published recently talking about how Huntsville has a bigger metro population than Birmingham.  I laughed at that - perhaps the manner in which the data was collected allowed for this calculation to be true.  But let's be honest - anyone who's been to Huntsville and Birmingham knows which city is bigger and has a larger populous overall (Birmingham) regardless of the manner the data was collected.  Maybe they should use rush hour traffic as an adjunct metric for this - ha ha.  

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  • Lindsay DavisBusiness Member
    Real Estate Broker · Birmingham, AL · Member since 2019 · 326 posts · 201 votes
    2y

    @Trent Stevens,

    Birmingham and Montgomery are both great places to start out. Maxwell AFB’s presence in Montgomery is definitely an important factor, though keep in mind that just 12,500 people (out of roughly 386,000 people in metro Montgomery) work for the Air Force.

    As for the difference between the two cities, I’d say that there’s slightly higher appreciation potential in Birmingham. However, Montgomery takes the lead in terms of affordability or cash flow.

    As for your credit, there are definitely workarounds. While I'm not a lender, you may be able to get a debt service coverage ratio (DSCR) loan with a less-than-stellar credit score, as long as you can demonstrate that the cash flow generated from the property provides a wide margin of safety for the lender. In a similar vein, making a larger down payment (and thus lowering your monthly debt burden) may also compensate for a lower credit score.

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  • Tanner Lewis
    Lender · Austin, TX · Member since 2021 · 447 posts · 441 votes
    2y

    Hey Trent, regarding your credit, you still may be able to acquire financing depending on what your score is. Most DSCR lenders have a minimum of 660, but there are a few that can go down to 620. I suggest going through the BiggerPockets "Find a lender" to get you matched up with a lender you can qualify with.

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