Hello Biggerpockets community,
I am a delighted to have discovered Biggerpockets and I am hooked on the podcast and all of the resources. I need some real time advice on how to get started in real estate. My goal is to generate a full time income investing in multi-unit rentals and flipping over the long term.....I am not looking to get rich quick. This is a business I plan on passing down to my daughter. I have inherited a nice amount of money, which has allowed me to go down to teaching part-time (which I plan on doing forever, because I love teaching), but I do not want to continue to use my inheritance to live on.
Here is where I am looking for some advice. I am not sure which path to take to get started.
My goal is to have a full time income from my properties, with my teaching income as fun money.
Path 1: I have enough money to buy a duplex or triplex, (in an up and coming community in the SF Bay area) with cash and still have a cushion in the bank. The income from the multi-family would be enough to save, maintain, and modestly supplement my income. From this place I would slowly build my real estate business by flipping and buying and holding through the various means of financing available. Or should I take path #2?
Path 2: Put my money in a few different local banks, use my savings to modestly supplement my income, apply for a loan for my first property which could be a multifamily unit that I sit on and build from there using the BRRRR method.
As you can see my dilemma is.......use my money to start my first property or use someone else money. I think that there are advantages to both plans, but I am just not sure which one would be the most beneficial.
I would love any advice you have to give!
The BRRRR strategy is great to stretch your money further. Can you find the deals that will enable you to pull out a big chunk of money after renos? The challenge is usually finding the deals.
Also get clarity from a bank on how much they'll lend to you on rentals. I'm not clear if you're debating to buy a rental with all your own cash or getting a mortgage from a bank... but YES try to get a low rate from a bank and use the bank's money.
For many people it's a good idea to start with ONE property. There's a learning curve. But the sooner your start the the more experienced you'll be. Don't wait for the perfect deal. Buy a good one and get started.
#2 is the most practical. You'll most likely need money for renovations and probably to buy out tenants, if you're looking for a deal in the Bay Area for a BRRR strategy. So use bank financing wherever you can.
Also maybe buy a 2-4 where you can live in a unit (if you’re renting now), so you can learn first hand how to be an effective landlord.
Look for up and coming locations (Oakland, Hayward, San Leandro come to mind) so you can benefit from gentrification growth.
You’ll need to look hard though, as we’re at peak market, and good deals are few and far between. I’d do a lot of research on areas/building types that meet your needs, and proceed cautiously- first rule of investing is- don’t loose money! Good luck
Thank you Amit for taking the time to respond to my question! The more research I do the more I am realizing #2 is the way to go.
Awesome that you are hooked on the BP bug! If this is your first property, definitely try to get a 2-4 unit and take advantage of putting only 3.5% down! As Amit says, live in one and rent out the rest. You can renovate the units as they move out and re rent for higher! Use the cash flow to help you pay the mortgage and/or supplement your income. Good luck to you!
I am definitely thinking that my first property is going to be a multi unit that I live in. It is interesting to see multi units going for the same price as single family homes, but they are not selling as fast as single family homes. Many of the units I am seeing are occupied......I am wondering since many cities have favorable laws in place for renters, are buyers staying away from multi units in cities like Berkeley? It is not an easy process to evict in Berkeley.
Hey @Celeste Fikiri - I also think there could be a happy medium as well. In Bay Area, it could get quite tough to cash flow with a low downpayment (something that you have to your advantage that most don't is the cash). I think you could take a hybrid approach and do a higher downpayment than most (eg - 50%?), use some bank leverage, and save some cash for future deals!
Hello Andrew Luong,
Thank you for the advice! That is exactly what I have been thinking i should do. The more I crunch the numbers, a higher down payment is the only way I can generate a cash flow.