Newbie in Need of Advice on how to get started.
Bel Air, MD · Member since 2016 · 1 post · 1 vote
Hello All!
I am new to real estate and wanting to get into the rental property game. I have never owned a home and I am active duty military so I will be moving every 3 to 5 years. I have read many books and follow BP religiously. I have saved a small amount of money and want to get started in purchasing a rental property. It is a bit overwhelming when I start to consider all the numbers involved and the fact that I may need to purchase a rental property in a different state than the one I live (California). What is the best first step/ place to start looking? What advice would you give to someone new?
Welcome.
My first bit of advice to someone new is to save. Have enough for a down payment and reserves set aside for repairs or capital expenses.
We bought near the AF bases where we were stationed, as owner occupied houses, and we improved them as we lived in them. When our tour was over, we either rented or sold. That is a good way to get started, as well. Try to stay close to your housing cap, and find a house in a desirable location, to improve as you occupy. Say a brick or block house with lower end linoleum, cheap MDF cabinets or beyond-the-pale carpeting. You can add value while you improve those lower-end features.
Going back to the housing cap: this enables you to know where to start looking. Look at the cap for an E-5 or above, and start with that as a monthly payment. Then look for houses that will be priced so that, using the zillow, trulia, whatever, calculator, when you look at the rent and subtract off the calculated PITI will produce at least $200 a month. That is a ballpark number, but helps to know where to start.
Newer houses are expensive, but they are warrantied and you won't need capex for a couple of years. Older houses, may be a can of worms, with plumbing issues, old wiring, asbestos.
OK, my progression was: owner occupied fixer, to another pretty OO. Then we moved to a another fixer *and* we started buying rentals using money we made off the first 2. We were young and didn't have down payment money until we had made money on our OO houses. Deployments brought tax free, combat pay, hazardous duty pay, flight pay was added in, and we set that aside to purchase the next buy and hold.
I understand you will need to choose a place for a turnkey type of situation. A few of my houses are in San Angelo, TX. SA is right about 100,000 people. I wouldn't want to go to a smaller location, unless there is a city in close proximity. Toss out any city that only has one industry. You don't want to lose when a base/post closes, for example. What you do need is a Realtor, a title company, a property management team. Any of those folks can refer you to any other of those folks.
Post back to ask questions or firm up where we are going with this discussion.
Hello All!
I am new to real estate and wanting to get into the rental property game. I have never owned a home and I am active duty military so I will be moving every 3 to 5 years. I have read many books and follow BP religiously. I have saved a small amount of money and want to get started in purchasing a rental property. It is a bit overwhelming when I start to consider all the numbers involved and the fact that I may need to purchase a rental property in a different state than the one I live (California). What is the best first step/ place to start looking? What advice would you give to someone new?
I agree. It sounds like someone in your situation might want to look in to Turnkey properties. Since you will be traveling around a lot, thanks for your service by the way, having a reliable property management company is important. You also want to make sure the home does not require a lot of attention from you since you will not be able to do much while traveling. True turnkey providers own the homes and have does all of the renovations prior to investors coming in. Then they should stay as property manager to make sure you are earning passive income.
You want to make sure you do your research so you know they are a true provider and not one of these "middle men" who just farm the MLS and post homes as if it is their own. Also investing in turnkey allows you to look at markets that can produce a much greater ROI than you could get in CA.
If you have any more questions, feel free to send me a message.