I have a bunch of ideas of how I want to begin building my real estate investing portfolio and I'm having trouble choosing which option to pursue first. I think it would be appropriate to lay out my long term goals, as that influences how I begin my real estate journey.
- Replace my monthly W2 income with passive real estate income
- Pay off my parents mortgage
- Have $1,000,000 net worth (what a small minded goal right lol)
- Employ at least 3 family members with my property management firm
- Eventually retire from a W2 job and become a full time real estate investor
My options for my first property are:
1. Build and rent out a duplex on lot that my dad owns and will sign over to me whenever I'm ready
main pros: the land is free and my family grew up in the neighborhood so I'm familiar with the area
main cons: the area isn't in the best shape, with many abandoned and poorly built/maintained houses surrounding my property. I don't know how much I could charge for rent and also how attractive the property would be due to the surrounding homes
2. BRRRR a foreclosed property in the metro Atlanta area
main pros: I'm confident that I could secure financing and I'm confident that I could renovate in a short time-frame with minimal expenses (DIY with my dad and uncle for most renovations)
main cons: I've never done this before so I'm not sure if I would choose a property that would generate a satisfactory ROI
3. House hack and BRRRR a $100 down HUD home
main pros: $100 down
main cons: I would be tied to this property/location. I'm 24 and just 1 year into my IT career, I don't know where I could be in the next few years and if I would still want to be tied to the city of Atlanta
These are just pros and cons that I've identified myself with no real estate experience. If you could think of any other factors that could help influence my decision that would help a lot.
I think the first goal should be cashflow. Once you have achieved passive cashflow that exceeds your expenses then the other goals would be that much easier.
With that being said, depending on your goal timeline, I wouldn't recommend any of the options you've laid out as your first deal. Partly becuase you wouldn't see cashflow for a while dealing with building on land, renovations on the foreclosed property, etc and also partly because it's your first deal and unless you or someone willing to help you has direct experience you'll be shooting in the dark with no gauge on what is feasible and what is not which leaves lots of room for error.
I would hate for you to be scarred on your first deal only to never return to real estate.
House hacking a stabilized property (a bit of your 3rd option) could drastically reduce your taxes, eliminate your living expense entirely, and create positive cashflow from your tenants and the extra cash you would keep from not paying a living expense. You could create significant cashflow with just one deal.
From there you could set your sights on something greater and start knocking out some of your other goals.
@Joshua Fowler , i think building would be tough for a first investment, and they say location is everything. The Brrr option might be your best bet.
Or--what about using that lot that your father was going to sign over to you, buying a fairly nice manufactured/mobile home for 20-30k, and start out with renting that? That might be a good way to get your feet wet, without putting a ton of capital into the project, and it should still cash flow.
@Daray Olaleye thank you for your input. I sometimes take an idealistic approach to things and it really helped seeing realistic negative outcomes for each of my options.
@DJ Cummins honestly, this is the best advice I've received so far. There are a lot of mobile homes nearby and even a mobile home park a few miles away. I see no problem finding tenants and I have a comparable properties to look at when setting my monthly rent amount.
I think I'm going to do a combination of both, house hack my primary residence and rent out a mobile home on my dads lot.
@Joshua Fowler -great. good luck to you! Triple check your numbers and you will do great. Getting started is the biggest hurdle!
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