Rental Property Investor · Houston, TX · Member since 2018 · 40 posts · 26 votes
I’m 22 and want to start my real estate investing journey, by this time next year I’d like to atleast have 1 property under my belt. I personally won’t have much money to put into it so I’ll be using some kind of lender/loan etc and may have my dad (who also wants to start investing) invest if I need more.
My question is, being that I don’t have a whole lot to put into it- should I find a house, flip it, pay the expenses & the loan back and then use the profit to invest in rentals or should I go straight to rentals?
I would really appreciate any advice! I’m in the Houston area and will be looking for a mentor, agent, etc probably by the new year so I’m also taking recommendations on that. Thanks in advance!
I’m 22 and want to start my real estate investing journey, by this time next year I’d like to atleast have 1 property under my belt. I personally won’t have much money to put into it so I’ll be using some kind of lender/loan etc and may have my dad (who also wants to start investing) invest if I need more.
My question is, being that I don’t have a whole lot to put into it- should I find a house, flip it, pay the expenses & the loan back and then use the profit to invest in rentals or should I go straight to rentals?
I would really appreciate any advice! I’m in the Houston area and will be looking for a mentor, agent, etc probably by the new year so I’m also taking recommendations on that. Thanks in advance!
If it helps to motivate, I did what you're looking to do. I used to do flips to help fund my first rental property buys. Flips are great of income -- like a job. Where as rentals are good for building equity and growth. One will make you rich, one makes your kids rich also.
It depends on what you want to do, flipping and rentals are very different. Most flippers lose money on their first property. With rentals most people can make a positive return because they are holding over the long term even if the cash flow is negative at first. Being in Houston you should have good options for both. If you don't have anything saved up for a down payment this will be infinitely tougher though
@Aaron Klatt
My definite goal is rental properties but I assumed flipping first could get me the cash I need to finance my first rental. Thanks for the response, glad I asked because I would have thought I would make money on my first flip.
@Megan Hodges yeah it is scary how easy some TV shows make flipping look. I actually saw a listing for Flip or Flop once in Moreno Valley CA it was only 2 bedrooms and like 800 sqft which is super small for the area they listed it at like $280k and it was worth probably $230k and the city has a sale to list of like 98.5% but they get a premium because they are famous. Most people who are successful over the long term make money slowly and deliberately often at the expense of those who fail attempting to get rich quick.
@Megan Hodges...I agree with @Aaron K., unless maybe if you were to do Live and Flip but I don't think it would give you the money fast enough for what you want to do because you would have to live in the flip for at least 2 years to avoid the capital gains tax. Possibly a househack live and flip aka ("Blended Househack" by Ben Leybovich in his book "House Hacking") could be a possibility but otherwise I would just do a rental property. If you are looking to accelerate your income to be able to get a rental property I would look into a side hustle. It may not be as fast as a potential flip but it has a lot less risk. @Mindy Jensen and @Scott Trench talk about how to use side hustles to save up money in episode 9 of The Money Show podcast which is a companion to the Bigger Pockets podcast. Mindy Jensen from Bigger Pockets started The Money Show podcast with the purpose of helping ordinary new investors learn how to get the money safely to get started in real estate investing.
@Aaron Klatt That’s exactly why I asked, I figured it’s not as easy as it looks and there are probably some things I don’t know about the process. Thanks so much for filling me in!
@Brandon Hunsaker
I appreciate the response! I had no idea about the money show, I’ll check that out. I’m sort of limited on the side hustle because I’m a stay at home mom so I have been pretty unsuccessful in finding an income while being home with my kiddos. As far as the financials - my dad and I would probably partner (he has the money and not the time, I have the time but no money.) and I also have a few connections so I would think whatever I need after a loan I could find between my dad and/or other connections. From what I’m gathering between you and Aaron I should just go for it with the rental property.
Hi @Megan Hodges, I completed agree with @Aaron K. and @Brandon Hunsaker. If you're long term goal is to own rental properties, avoid flipping as it is easy to lose money if you're unexperienced. Find properties you can add value to and use the BRRR method if you are looking for cash for future projects. Best of luck towards your future success!!!
I’m 22 and want to start my real estate investing journey, by this time next year I’d like to atleast have 1 property under my belt. I personally won’t have much money to put into it so I’ll be using some kind of lender/loan etc and may have my dad (who also wants to start investing) invest if I need more.
My question is, being that I don’t have a whole lot to put into it- should I find a house, flip it, pay the expenses & the loan back and then use the profit to invest in rentals or should I go straight to rentals?
I would really appreciate any advice! I’m in the Houston area and will be looking for a mentor, agent, etc probably by the new year so I’m also taking recommendations on that. Thanks in advance!
If it helps to motivate, I did what you're looking to do. I used to do flips to help fund my first rental property buys. Flips are great of income -- like a job. Where as rentals are good for building equity and growth. One will make you rich, one makes your kids rich also.
@Cody L. Haha, I appreciate the motivation! Did you start flipping with a lot of your own money? In my head it felt like a genius game plan (as long as I ran the numbers correctly and planned for a set amount of profit). I am down to do some flipping if it will fund my first few rental properties but ultimately I can only retire from rentals and like you said, I can pass that fortune on to my children.
Like others, I vote rental property. I would add two things:
1. Buy a multifamily and live in one unit. Do this while you are young; you won't want to do this after you experience living on your own for extended periods of time.
2. Buy something that needs mostly cosmetic work on your first property. Unless you are very handy, this will reduce your stress.
@Dylan Brand Thanks for the advice! I was also thinking the same thing. We are still in an apartment so I have the opportunity to make my first property a duplex or multi family and rent out the other units, ideally leaving me rent free or with very little rent. Thank you again for the great tips!
In general, if you are financing , you will need to bring less $$ down to a flip and, if it goes well, you will accumulate money faster, so I would vote for flipping first.
@Aaron K. Why do you suppose first time flippers lose money? Too inexperienced? Over purchase? Go too big too fast? Over rehab? I'm not saying you're wrong. I simply don't know if that statement is even true. I am exploring flipping my first house since I'm having trouble finding multi family to purchase for buy and hold. But, I'm also exploring finding a partner/team with experience in the construction/rehab industry first. I've remodeled some of my own home, my own duplex, etc. But that is a long way from flipping a house I know.
@Cody L. Haha, I appreciate the motivation! Did you start flipping with a lot of your own money? In my head it felt like a genius game plan (as long as I ran the numbers correctly and planned for a set amount of profit). I am down to do some flipping if it will fund my first few rental properties but ultimately I can only retire from rentals and like you said, I can pass that fortune on to my children.
Yes, my own money -- but with loans obviously. Even today I have brokers say "Wow, you bought that $x million property yourself?". I say "no". It's not like I wrote a check. I got a loan for 80% of it. Yes I was fortunate to have the 20% I needed but that came from starting small and trading up. And if I found a property that was too big for me to come up with 20% I'd simply go out and fund raise that 20% and show people why it's a solid deal for them.
Hit your local REIAs and try to get involved with somebody who is doing a flip so you can learn some of the business without having to fully dive in - pretty much blind. This business isn't super complicated but there are a lot of moving parts that most people don't understand when they start out on their first deal - which is one reason many first-time flippers are also last-time flippers.
Also, flipping TV shows are pretty much all BS. Nothing in this business happens quick enough to be an exciting TV show full of dramatic twists and turns that lead to a sudden Champagne cheers showered by a buttload of money. You want a realistic renovation show, tune into This Old House.
@Anthony Wick a lot of people have no idea how to estimate a rehab, so they will just buy a property that needs work for what they think of as cheap. Something that is common in my area for listing agents is to list a $300k ARV house that needs $30k worth of work at $270k, and half the time that actually sells because people think they can flip it and make money doing DIY but forget realtor fees on the resale or run into big problems along the way.
I think if you have enough drive and motivation, you will find a way!
With that said, you are already doing the right thing by coming on here and getting great advice. I would also suggest you do a lot more research about both rental properties and flipping properties. Also how to finance them, the process etc
you are very young and most people your age do not know all this also, but unfortunately, not a good excuse... :)
Being a stay at home mom should not stop you from making money. (I know that you can make anywhere between 10% to 20% for bringing deals (listings or buyers) to realtors in your neighborhood and all you have to do is make some calls and get on social media).
Shift your mentality and look for a way to earn the money. If you do what I just mentioned, you will probably earn between 20k and 50k easily by next year (working from home). you Just have to make the right connections and have the right conversations.
Now, flips or rental homes: people on here are right, flips require you to have a know how and is time-sensitive. For rentals, you most likely will need proof of income, hence a job, so that can hinder your progress initially.
Go buy a book on bigger pockets, internalize the knowledge and take action.
If we keep in touch and 6 months from now you haven't done anything, that will give you an indication of how successful you will be.
Matter fact, make a list of the ONE thing that you will do by the end of the day today that will get you closer to your first flip or rental?
@Megan Hodges do as much research on both and do what you feel that you can have great success with. I started flipping in December 17’ we had a net profit of around 50k and now have already sold 3 and on to the 4th. I want to build enough cash flow to eventually have a rental portfolio. But as previous posters mention the ARV is always inflated so be careful number crunching and always plan for the worst. Good luck!
@Megan Hodges
No matter what you do you will need money. I put my first property under contract at 22. I now 3 soon to be 4.
Very possible to do but you need cash.
@Sebastian Marroquin I hadn’t heard of making money giving leads to realtors but if that’s the case I’ll be well on my way to doing that.
It’s hard to list just one thing I’m going to do, I have been listening to the bigger pockets podcast, watching YouTube videos from Brandon, and a few other real estate investors and am also reading “Rich Dad, Poor Dad” & “The Book on Investing In Real Estate with No or Low Money Down”. I’m familiarizing myself with all of the terms (ROI, COC, BRRR, etc) and have been studying how to anylize a deal. As well as looking for an Agent and mentor.
I also feel like I should have clarified in the beginning that I won’t make any moves until I’ve analyzed and re-analyzed the deal and have spent months watching others do it and studying it. I’m definitely not one to just jump into something and hope for the best. I like to have a general idea of how things will go and what to expect.
I greatly appreciate the response and advice!
@Caleb Heimsoth haha yes I’m totally aware of that! What I mean is if I don’t have all the cash I need my dad would be willing to partner with me (him paying the money, me doing the work). Congrats on your properties! And I appreciate the response!
@Blair Poelman
That’s a great idea, I appreciate the advice! I definitely don’t have a glorified idea of how easy and smooth sailing flipping a house will be, that’s why I am really doing my homework on investing in general before I dive in.