Need advice for my real estate game Plan!!

17 Replies

What's up everyone, I was wondering if I could get some advice on my real estate plan. I'm looking to start investing In The Lehigh valley area of PA with primarily buy and hold sfr and small multi families. I own my own residence ( no I can't house hack) and have about 45k to get started and I think I'm ready to take the leap. I'm connected with a friend who is a real estate agent and Also an investor who has been sending me homes that meet my criteria on the MLS. I'm interested but hesitant to try the BRRRR method for my first deal bc I dont have a lot of experience with contractors or financing. I do like the idea of getting a large amount of my money back to reinvest if the deal goes smooth but what's the drawback if I take the safe road and purchase a sfr that cash flows ? How do I make that jump to earn enough passive income to be financially free??? Seems like that's hundreds of deals away when I do the math ?? Thanks everyone. Any advice is appreciated

@Nick Loukas

You could purchase a SFH that cash flows BUT what are you going to do when your 45k is gone? How are you going to scale once it's eaten up by down payments? That's why people BRRRR or just buy value add rentals. It doesn't have to be an immediate refi or huge rehab-you just need a way to make the property value go up! That's how you're going to scale up your holdings with limited capital.

@Nick Loukas the drawback to the safe road is lower returns on your money. As @Lee Ripma your $45k won't last long. It might get you two properties. How long before you can save  enough to buy another Property?

How do I make that jump to earn enough passive income to be financially free???

When you take the safe route you describe, you are basically buying retail. You probably won't get there with that plan. You will get modest cash flow and your net worth only grows with inflation.

By buying fixer upper properties you can add value (equity or net worth) with each property you buy. You can then leverage that equity to grow more.

@Ned Carey thanks great advice. I agree and don’t see fast enough growth with the safe route but for my first deal it’s kinda nerve racking getting involved with a big rehab with no experience

@Nick Loukas

You want something you can add value to, which means increasing the Net Operating Income (NOI). This can be done by raising income by: 1. Raising rents, 2. increasing income by charging for laundry, parking, storage. 3. Buying in an area that's improving and will have increased demand for rentals (ie rent appreciation) And/Or lowering expenses: 1. Sub-metering for water, sub-metering for gas and electric, passing off costs of trash and landscaping to tenants, reducing expenses in any way that you can. Value-add MF has been rebranded as BRRRR-it's the same thing. Once you add value you have equity. Once you have equity you have options-you can sell and trade up into a bigger property or you can refi and hold, freeing up capital to buy another value-add deal. This is how you scale with limited capital. How do I know? It's what I do!

@Nick Loukas  Welcome to the BP family! I am also located in the Lehigh Valley area of Pennsylvania and I focus on value-add Multifamily....Something to think about might be performing a few flips first. That will get you the experience with contractors and financing while also building your capital. It may be beneficial to flip 2 or 3 SFRs, gain the experience and capital and then jump into a 4-6 unit depending on how much money the flips churn. 

In case you need them, here are few things to check out as you work your way around the site:

Find and connect with other BP members that are in your area: https://www.biggerpockets.com/search/users

Set up some keyword alerts to notify you when members are discussing something that interests you. I use this a lot for location based discussions: http://www.biggerpockets.com/alerts

Read Beginner’s Guide: http://www.biggerpockets.com/real-estate-investing

Check out the BP Podcasts. There's tons of great info in these: https://www.biggerpockets.com/podcast

Let me know if I can help you with anything else. Good Luck!

-MB

@Nick Loukas welcome!! The most important question to figure out first is what is your goal?  The second question is how do you want to accomplish that goal?  For example if you want quick cash, that you work on actively, but is taxed heavily, then flipping is for you. If you want to build wealth slowly, with cash flow along the way, but be active then apartment investing, buying SF (even slower) is right for you. If you want hands off, wealth building with cash flow than being a passive investor on multifamily is for you.  There are lots of factors to consider, besides being active vs passive, and cash flow, verses wealth building, and those are tax advantages, the ability to leverage, and most importantly what excites you.  If you have doubts with any investment, it is probably not the best fit for you in the long run.  Hope this helps!

@Matt Bertsch thanks Man!! Great advice as well. I’ve read almost all of the Bp books and listened to about 75% of the podcasts! I feel I’m ready to take the leap on my first Investment property! Where do you find your multi family properties? I don’t see a lot out there in the Lehigh valley area. Thanks in advance !

@Ashley Wilson hi Ashley thanks for replying! Awesome advice! I make enough from my current 9-5 to live comfortably. However I love the idea of being able to retire early spend more time with family and travel! I’d love to make this happen within 10 years and I’m shooting for 5-6k in passive income from buy and hold. I figured if I can save 20k a year I can purchase one house a year minimum. I’ll adjust my plan accordingly and maybe through in some flips but I have to get my first deal to get the ball rolling !

https://www.biggerpockets.com/users/jthomasmartin1 this is his page. He speaks at different events from time to time. He utilizes VAs to automate this entire system and has created his business to be entirely passive.  

@Nick Loukas One piece of advice I give everyone starting out... learn how to calculate your IRR or internal rate of return on investment. New investors always talk about cash flow, but sometimes even a property that cash flows isnt a good investment. You can find videos on Youtube teaching you how to calculate your return based on future streams of cash so make sure you learn that and analyze each deal with what return you require in mind. Best of luck to you.