Hi! My husband and I have always planned to use REI as a means for early(ish) retirement. We're in the saving phase and we're about 1/2 way to having a nest egg of 6 months of expenses. We were almost there but got sidelined with a crazy expensive AC/Furnace replacement in the home we own. The good news is, we were able to pay cash to fix it!
Current plan is to save $ for a down payment on an investment property for the next year while I shore up my knowledge on the business and the local market. I found Chad Carson's ep on the BP Real Estate podcast about using real estate to retire early and I'm about 90% through his book as of right now.
We're looking to buy something in late 2019 or early 2020. My husband is very risk averse and I think we'll probably be more "slow and steady" than high risk quick climbers. (We both graduated from college at the beginning of the crash so we know how tough things can get in a downturn.) We both have good jobs and we're almost living on one income. I'm planning on revising our budget so we can bank my full income in 2019 which would give us about 40k+ cash to play with if all goes well. I have a wonderful Real Estate agent who we bought our current home through and I trust, so I am planning to seek his advice on market strategy. I have also seen good advice in the forums on getting involved with the local REIA, so I'm planning to do that.
Do you guys have any other advice for a new investor in the Houston market? (We live in North Spring near 99.) Neither of us are handy so while fix and flip seems attractive to get a jump on our REI career, I'm not sure it's the best plan for us with no handiness and no current contractor contacts. Right now, my thought is to purchase a small multi-family unit (duplex or triplex) as a long term hold. Not quite sure farther than that. Does this strategy seem sound? Is it "too safe"? Is there a better way I could go about it? These forums have been wonderful and any advice is much appreciated!
Welcome to Bigger Pockets.
@Sarah Preston Welcome!
I cannot speak directly to the Houston market as I am primarily focused in NH and MA, but I figured I'd share some insights and thoughts I have based on what you've said.
First, you do not have to be handy to successfully complete a fix-and-flip, AND, you don't initially have to have any contract contacts. You DO have to understand the process and be well-educated on what's going (your market, costs of the renovations, etc.). It is likely that your real estate agent has contractor contacts that you could leverage, or you could even "drive-for-contractors", as @Brandon Turner says. Drive around to houses being renovated, try to look at the renovations being done, and if you like them, talk to the contractors. However, you need to understand the process well before hiring contractors to limit the likelihood of them ripping you off.
All of the being said, I too prefer the buy-and-hold multifamily rental property strategy. That is the strategy I mainly implement. I look to purchase 3+ unit multifamily rental properties with strong cash flow in up and coming areas. My main focus is on properties that can be BRRRR'ed (Buy Rehab Rent Refinance Repeat). This is the majority of my focus/portfolio, but I do also complete some fix-and-flips as well, mainly to raise capital in order to fund the purchase of rental properties.
All types of investing include risk, real estate included (no matter the strategy). Ultimately it comes down to your long-term goals and how involved you want to be. Rental properties are generally more passive than fix-and-flips.
@Sarah Preston Welcome to BP!
I'm in Austin, Texas and I'm looking to purchase my first rental in the next year or two, so I'm a little familiar with the area. Although I'm so new I don't have any industry specific advice.
However, I think bets thing you could do now is assess what your long-term investment goals are.
Not knowing what your finances look like, I think If you want to be able to retire from your current job in the next ten years, you'll need to get involved in some big projects soon. There's a lot of opportunity to get involved with large multi family units, but if you can find enough investors you could do it with less of your own money.
If you're looking at retiring in 15 or 20 years, you could start with some smaller duplex style units and build up from there, or just hold a few and pay them off. There is a BP podcast where Brad Dantonio talks about his financial independence while owning only 5 units!
From what I can gather, the best way to motivate new investors like you and me is to get clear on the why.
I hope this non-answer helps!
@Sarah Preston Hi Sarah, My in-laws live in your area of Houston. I think it's crucial to figure out what strategy you want to pursue. We're in the late stage of the RE cycle and properties are inflated in many places. There are nice cash flowing opportunities at the higher end of the market in the form of syndications. They're also less risky (legally) for a limited partner investor and have the backing of professional experience, etc. Might be a good place to look also if you find yourself frustrated with the high price/rent ratios in the residential sector. Welcome to BP!
@Robert Leonard Thank you. Great advice. We both have pretty demanding jobs, so a highly involved project might be out of scope for us but I won't rule out fix and flip and BRRR.
@Mike Krieg I hadn't thought about syndication but that is an interesting option. I'll definitely look into it since we aren't on a hard timetable. Thanks so much.
@Sarah Preston there is a fellow up in your area there, in the Woodlands, whom I met here on BP last summer. He does several flips at a time and he has the project management aspects of it down to a science. When I met him for coffee, he literally took me to 3 projects (5 minutes away) going concurrently nearby -- one starting, one about halfway through, and one nearing completion. I was pretty impressed with this, having struggled a bit on my first flip.
If/when I do another flip, I'll get in with this guy, or a guy like him, and just partner and ride along, adding value however I can.
Welcome to biggerpockets!
I would reach out to your agent and mention that you are only looking for properties that require "paint and carpet" fixups. This is likely the least amount of work that you would need to do on a property.
Is the $40,000 all that you will have saved up in 2019? $40,000 will likely get you a $150,000 house at 20% down, closing costs and a small budget for repairs.
I would continue the first 1/2 of 2019 educating yourself on real estate(reading books, podcasts and analyzing properties on the MLS).
Good luck to your investing career. Reach out to me if you think I can be of any help.
Houston, as any market, is always changing. You cannot make a "Plan" with strict guidelines as flexibility in a changing market is vital.
The #1 thing you will struggle with is people- Those who try to sell you a "deal" and those who will "fix it" for you.
Knowing your info 100% and not relying on others to give you what you need to know (facts) is rough....there are 100's of "business's" that lie for a living. Whole-sellers, contractors, realtors....and MOST lie because they dont' know any better and not out of spite/greed. Although, there are A LOT of "mentor groups" and other such non-sense that will not only take your money in exchange for "info" but the info they give isn't based in reality.
Finally, 2020 is too far away. Make this year your year. Don't wait. Look tirelessly for a deal until you find one so perfect and profitable that you cannot help but jump into it. Not "needing" a deal will help you find one that is a profitable one.
Lastly- qualify your deals via a "hard money lender". They will tell you if you have a deal based on if they will loan on it. i.e. if you think you have a deal and the hard money lender wants more than 2 points and closing cost to do it...then its not a deal.
@Mark Sewell Smart. Thank you!
@Basit Siddiqi $40k for investment. My target market is $120-$150k so that's what I based it on. We don't have a hard deadline, so have time to continue education, etc. Thanks for your help!
Hi Sarah and Happy New Year! I just saw your post about being in the Houston area and definitely want to invite you to check out the Realty Investment Community of Houston, the largest, oldest and (IMHO) best REIA in the country!
We're kicking off a program this year that shows folks how to buy Ten Houses in Ten months using just $10k. All your goals are very reasonable and achievable!