Best way to start

21 Replies

Hello BP!

My name is Derek Parsons, I am a soldier with the North Carolina National Guard currently serving in a deployment overseas. I am completely new to real estate investing and have no idea where to begin, so my question to you all is what would be the best starting move? In order to help with the answer, here is a little about my current situation:

I'm 25 years old, with about 6k in student loans (being paid off by the military), no car payments, no credit card debt, and a credit score of about 650. Currently, since I have no bills while on deployment (other then a phone bill and storage unit) I am saving every paycheck I get. I hope to have a little over 30k saved up by the time I get home (sometime in April). I already own a car, but it is almost 16 years old and needs a few minor repairs, all of which I can do myself, but the temptation to get a new or "newer" vehicle is high. I do have family I can live with once I am back but will need to start finding a place of my own sooner rather then later. 

It's definitely not the worst position to be in, but I would like to get things started on the right foot and avoid making "rookie" mistakes and maximize my return with the money I have now. I hope the information I gave helps, and thank you all in advance for your time and help!

Originally posted by @Derek Parsons :

Hello BP!

My name is Derek Parsons, I am a soldier with the North Carolina National Guard currently serving in a deployment overseas. I am completely new to real estate investing and have no idea where to begin, so my question to you all is what would be the best starting move? In order to help with the answer, here is a little about my current situation:

I'm 25 years old, with about 6k in student loans (being paid off by the military), no car payments, no credit card debt, and a credit score of about 650. Currently, since I have no bills while on deployment (other then a phone bill and storage unit) I am saving every paycheck I get. I hope to have a little over 30k saved up by the time I get home (sometime in April). I already own a car, but it is almost 16 years old and needs a few minor repairs, all of which I can do myself, but the temptation to get a new or "newer" vehicle is high. I do have family I can live with once I am back but will need to start finding a place of my own sooner rather then later. 

It's definitely not the worst position to be in, but I would like to get things started on the right foot and avoid making "rookie" mistakes and maximize my return with the money I have now. I hope the information I gave helps, and thank you all in advance for your time and help!

Hi Derek!

When I first got started, I admit - it was a bit overwhelming. 

I've been in business several years, but real estate presented a whole set of new challenges. I like you, am also overseas, so it wasn't like I could join the local REIA.

From my experience, it's good to be very focused with your time. It might be unavoidable to feel yourself pulled in many different directions - wholesaling, buy and hold, flipping, notes, etc. I admittedly looked at all of them before I decided SFR under $100K would be my target for my first investment.

To make progress, I'd say get a good organizational system in place. Otherwise, you'll be reading so much and networking and then forgetting who you met, what you learned. And you might get tired and frustrated. I use Scrum methodology for organization and a program like Wunderlist or Trello to keep track of my daily tasks, weekly goals. 

I also take notes and store them from most every contact I meet. 

Having that basic org system then allows me to be more deliberate and focused. 

Then I'd say - create a goal - a tangible goal of what type of investment you'd like to do. The more specific the better. 

Ex:

A SFR ranch style 3/2 under $150,000 that rents for $1,200 /month.

This will depend a lot on your farm area and networks you build. 

In the beginning your goal might be to set a goal. You can give yourself time to do that by focusing on reading, listening to BP podcasts, and buying a few books. 

Each week review your progress. Write up a report to yourself. Think of yourself as consulting for you. What was your deliverable for this week on Project Getting Started in REI.

Make sure you make networking with other investors at least once a week part of your routines. 

I've got more I could say but I gotta run now - dinner ^^

Anyways, I wrote about how I found a market to invest in while living in Korea for my BP Blog:

https://www.biggerpockets.com/blogs/6526/blog_post...

I hope it helps. The process I used worked out well - our house has gone up over 50% in 6 months. 

I have a few other posts that might help as well on the blog or the website in my signature. 

Good luck and reach out anytime. 

(& yes, I do use this process myself. It landed me two partnerships and a few real estate related business opportunities- all while living out here in Korea) 

And if you'd like to join our FB group of overseas investors, let me know and I'll send you a link. 

Originally posted by @Derek Parsons :

Hello BP!

My name is Derek Parsons, I am a soldier with the North Carolina National Guard currently serving in a deployment overseas. I am completely new to real estate investing and have no idea where to begin, so my question to you all is what would be the best starting move? In order to help with the answer, here is a little about my current situation:

I'm 25 years old, with about 6k in student loans (being paid off by the military), no car payments, no credit card debt, and a credit score of about 650. Currently, since I have no bills while on deployment (other then a phone bill and storage unit) I am saving every paycheck I get. I hope to have a little over 30k saved up by the time I get home (sometime in April). I already own a car, but it is almost 16 years old and needs a few minor repairs, all of which I can do myself, but the temptation to get a new or "newer" vehicle is high. I do have family I can live with once I am back but will need to start finding a place of my own sooner rather then later. 

It's definitely not the worst position to be in, but I would like to get things started on the right foot and avoid making "rookie" mistakes and maximize my return with the money I have now. I hope the information I gave helps, and thank you all in advance for your time and help!

 Education, Education, Education. Check out the learn section of this website. Lots of free material. Learn as much as you can before you get back. Thanks for serving.

Thank you @Derek Parsons For asking this question. I am in the states however I am just getting started and this site has a lot of great resources and great people asking and answers questions. I have learned something from your post about how to get focused. Thank you for serving.

Hi @Derek Parsons

(Going to also add- thank you for your service!)

Now, I would start small and build a property portfolio and not take on any debt. With little $ you can get a website going (to sell what you buy), find motivated sellers, and start flipping property. Vacant land is a great place because no big issues and you can buy and sell all over the country fairly easily.

And since no debt, it is okay if a property takes a few weeks to sell. The key is really learning how to buy it right. I have been in this business for a number of years now and I still look at property the same way. Not emotional - just as an investment. If I cannot buy it so inexpensively that I can easily double my money tomorrow, I don't buy it. I just move on to the next deal. 

Easy to get your phone ringing with motivated sellers once you learn how to reach them.

Hope this helps!

Jill

Originally posted by @Jill DeWit :

Hi @Derek Parsons

(Going to also add- thank you for your service!)

Now, I would start small and build a property portfolio and not take on any debt. With little $ you can get a website going (to sell what you buy), find motivated sellers, and start flipping property. Vacant land is a great place because no big issues and you can buy and sell all over the country fairly easily.

And since no debt, it is okay if a property takes a few weeks to sell. The key is really learning how to buy it right. I have been in this business for a number of years now and I still look at property the same way. Not emotional - just as an investment. If I cannot buy it so inexpensively that I can easily double my money tomorrow, I don't buy it. I just move on to the next deal. 

Easy to get your phone ringing with motivated sellers once you learn how to reach them.

Hope this helps!

Jill

I disagree with this advice.  I don't think its appropriate in the Charlotte market.  Flips at the likely price point in our market usually don't carry a big enough profit margin to justify the risk when there are better options out there.  With the amount of cash Derek has on hand he will not be able to buy an easy rental property or flip in our market.  He'd also be limiting his options for the future. By expending most, if not all of his cash, it would make more difficult for him to do a deal in the future without selling his first property, which he may or may not want to or be in a position to do.  What if there is a drop of in the market?  Would you want to have to sell to keep going in real estate investing.  

Buying with cash would be fails to recognize the resource his has in his decent credit score. 

I think a better strategy would be to be to hedge your bets.  Find an easy rental property or flip to ease your way into the business and build some confidence.  If you qualify for conventional financing, you can lock a historically low interest rate and generate a benefit on a large asset, but with less immediate constraints on cash management.  Early on conserving cash is king, generating positive cash flow is great.  Never put all of your eggs in one basket in anticipate of a future sale.  The market has an upward bias but is generally cyclical.  With a long term loan you're cost to carry the property will be relatively low, so even if everything goes wrong, you have time to recover.  With rents in Charlotte as high as they are, rentals usually do well, and if you have a flip that goes south you may be able to rent it and still do well if you have good financing terms.  Also, having mortgage credit included in your credit type split may improve your credit score.

I agree with @Jill Dewitt .

Saving 30K while deployed is a great accomplishment and should be applauded, but that amount of cash can evaporate very quickly if you aren't careful.

While it's true that you can learn a lot on this site (and you should), and you can buy houses with little or no money down if you learn enough, you'll still need cash. And being new to this, one mistake could wipe out your reserves.

You could easily get your feet wet by buying and selling CHEAP land as Jill suggests. I am doing this and it is easier and more lucrative than most people realize. 

I am not affiliated with Jill in any way, but I have the Land Academy course that she is involved with and it is a great resource for how to do this. 

Here is a typical deal I do... very small, very cheap, but easily replicated so you can scale up and do more and more as you have more money. 

1) Buy a piece of land for around $1000 (I do this by sending direct mail to owners and find the ones that no longer want the property) Other people do this with even cheaper land.

2) Double or triple the price and list it on Craigslist, Zillow, my websites, etc

3) Sell it for quick cash...OR... sell it on terms via a land contract at a healthy interest rate, generating cash flow without tenants, toilets, termites, etc. The land stays in my name until the contract is paid off and the buyer pays the property taxes as well. If they stop paying, I just resell it to someone else. 

The terms part may not work like this in every state, but in mine it does just fine. You would need to check with an attorney to be sure.

The best part about this is that it can be done remotely. You DO NOT have to limit yourself to North Carolina. You do not have to physically visit the property yourself. That's a tough one for most people to wrap their minds around, but it's true. 

Every bit of this business model can be done via the internet and the mail. 

Technically, you could find a way to start right now if you wanted to.

That being said, the most important thing is that you dig into Bigger Pockets and learn as much as you can. Also, you should not take my advice or anyone else's advice as orders of what to do. Figure out what aspect of real estate excites you and would seem enjoyable to you and follow your passion.

For me, rehabbing a house would seem like a miserable punishment, while other people LOVE it. There are people who would find what I do with land to be boring or just plain ridiculous. everyone has their own preferences and opinions. Read, learn, and take time to figure out what is best for you and when you are ready, go out there and rock!

Thank you all for all the advice! I am digging through the podcasts/blogs to try find the best way to go about it. I am interested in the househacking idea, as I do not have anywhere to live currently. @Mike F. your suggestion is also intriguing as I wouldn't really just be limited to what is in my direct area, and I actually could do some of that while on deployment, but I need to do some more research. You mentioned a land academy course, do you have a link for me to look at that?

Derek, 

There is a link on @Jill DeWitt 's signature in her post above. Again, to be clear, I am not affiliated with her or that course, just a happy customer. I know they do have some free info to get you started, which may be enough to let you know if it is a good fit for you. Also be sure to check put @Seth Williams on here and his Retipster blog.

Derek, 

I think the most important piece of advice is in the post from @Daniel Ryu - get your goal. Unless one knows where you are going, how does one know when you have arrived? Once you have that goal,  dream about it, think how you will feel once you have it achieved  Write it down on a piece of paper, and imagine it every morning and every evening.

Take some time to see what you got going for you - the $30k nest egg is a good one. See if you will qualify for a VA, FHA or 203(k) loan. With an FHA, I bought a $190k property for less than $15k. That would leave you with another $15k to $20k as a cushion for repairs, or another deal once the first is bedded down.

Do not rush into making your first deal - remember, the deal of the year only arrives once a year! On the other hand, also don't just do nothing

Derek, I think your in a great situation to get started in Real Estate. In your particular situation and taking into account what you have for cash on hand, I would suggest you look to purchase a small multi-family (2, 3 or 4 unit) in a desirable rental area. As an owner-occupant you can purchase with a low down payment (3.5% down payment with FHA loan) and you can live in 1 unit and rent out the remaining units. The rents should take care of the majority, if not all of the mortgage and will allow you to continue to save more money for your next project. You can also look to apply for a 203k loan as part of the FHA program and incorporate any rehab costs into the loan which will essentially help you increase the value of the property and increase your equity right away (you can search BP or google FHA loans and 203k loans for more information etc). Going this route will also give you the opportunity to experience landlording first hand. If you are able to find a nice multi family house for the right price then this approach will open a lot of doors for your next project. Also, buying a home for yourself will also greatly increase your Credit Score.

Derek - 

I 100% agree with Nick on house hacking. If you can find a 2-4 unit multifamily in a solid area and get a low-down FHA loan, the advantages of this strategy will be hard to beat:

1) Have your living costs mostly or entirely covered by paying tenants in other units.  This will allow you to save significant cash for your next investment.

2) Learn how to landlord and fix property, which will help get your feet wet with relevant experience for buy-and-hold and flipping strategies.

3) Control a significant amount of property for your dollar. Assuming a $15k down payment, a 3.5% FHA loan would allow you to control over $400k in property while still maintaining a good chunk of cash for reserves/repairs.

4) Options.  Most people won't want to house hack forever, but if the numbers make sense, you can move out, lease your unit and hold onto the property with great financing in place, or sell if the market makes sense and roll the proceeds into another property(ies).

While I never house hacked myself, if I I knew what I know now back in my early 20s, I would have done this straight out of college in lieu of renting for the first 5 years and would be a lot wealthier as a result...

Good luck with whichever strategy you choose!

Hey @Derek Parsons

Thanks for your service!

I'd suggest trying to stay away from the shiny new object temptation of upgrading your car. If it's really important to you, then wait until you get into real estate first.

I'd certainly suggest looking into an FHA loan with just 3.5% down on up to a 4 unit home. The more units you have under 1 roof the better returns typically.

A

I appreciate all the responses! After a lot of consideration, I have decided that the "house-hacking" technique is likely my best option, and a good way to learn how to properly landlord. I am looking at properties when I can, and looking at different financing options such as the VA loans or FHA. I am grateful to everyone who has given input on this topic, it has been very helpful!

House hack with a 3.5% FHA loan on a 4-plex. I wish I would have done this in my 20's. I would be so much further along now. Here is a good article on the BP blog that talks about the concept.

https://www.biggerpockets.com/renewsblog/2013/11/0...

Then join your local REIA, network, and read the forum, blog, and listen to the Podcasts on BP.

Good luck. 

P.S. Thanks for your service. 

That's awesome you are going to have cash saved up, that's more then 99% of the folks who join this site start off with (not trying to offend anyone, I started that way too, but it's true.)

You need to decide if you want this to be your FT job, or passive income, etc.  What is your end goal?  What is your risk tolerance?  How active do you want to be?

These are all questions that should help guide your journey.

Hello Derek,

I'm in the Raleigh/Durham area if you are looking for properties in this area I will more than happy to work with you. Also thank you for your service for your country!

Hi Derek,

Just saw this forum. I have a recent, short blog post on the "Classics of Landlord Lit" (all books you may get at the library for free or for a song used). I am recommending some of these for folks with an interest in landlording just starting out... Thanks for your service...

@Derek Parsons Hi Derek and welcome to BP. Starting out is a challenge and is best done by doing some joint ventures with experienced operators who can guide you and teach you whilst keeping you out of trouble. There are many experienced investors here on BP who will do a joint venture with you. They would be the best place to start learning.

One of the main reasons for doing this is to help you learn the business with a minimum of risk. That does not mean no risk, but if you select a joint venture partner who has a record of success who is prepared to help teach you along the way you get the best of it all. You get to invest in better quality deals, because they will  be more valuable, or at least they should be, you get to learn in real time from a professional and you get to make money in the process.

You mentioned you had student loans that were being paid off. That is great for you, but imagine being a student and getting paid! If you choose the right partner you can in effect get paid to learn. At least you will mitigate some of the risks associated with investing in property and all along the way you can keep learning from all the great content here on BP.

Lots of newbies make the mistake of thinking that just because they can read a book or watch a video or podcast that they can comprehend what is really involved in property investing. The better solution is to partner up on individual deals with people who know what they are doing.

Good luck on your journey and happy investing!