Advice for a newbie to real estate investing

Bartlett, TN · Member since 2019 · 20 posts · 10 votes

Hi All,

My name is Bryan and I am new to real estate investing in the Memphis, TN area. I have long wanted to pursue real estate and my wife and I recently decided to take the plunge. I'm looking to start off part time while still working a day job. I would like to focus on single or multi-family properties on a buy and hold strategy. However, down payment is an obstacle. I've been reading up on OPM strategies for those with little or no money available for down payment. Perhaps wholesale or flipping is an option in order to save for future purchases. If any of you saavy vets out there have advice for a newbie like me, I'd greatly appreciate it. Thanks in advance.

Best Regards,

Bryan

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Kiera Underwood

Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes

@Bryan Malone

Live in one side and rent out the other. You could do that for only 5% down! You only have to live there for a year then rent that side out.

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Eric Hicks
Rental Property Investor · Defuniak Springs, FL · Member since 2019 · 4 posts · 4 votes
7y
@Bryan Malone Hey Bryan, I am like you. I am just starting out as well. I just posted a little thing about my current strategy, but I’ll tell you here anyway.
I just bought a condo in a resort near the beach, which is valued at $300K, for $200. I used my local Walton.realforeclose.com. You might be able to find something on you local county’s realforeclose site.
I did a title search on it and took into account that there’s most likely a lien on it with the Owners Association. I thought that if I get the unit, I’ll just make a deal with them to get them paid off. I’ll even sign a contact with them until they are satisfied. Then I can get mine afterwards.
Anyway, I am looking at several foreclosed properties right with almost all of them on auction. I know how much I have to spend, so I stay strict with my bidding and not go over.
Even if I only get two or three properties a year, it will add up over the next five years. And that’s when I’m gonna shut my business down and go full time rent properties. My ultimate goal is multi family apartment buildings. But one step at a time.
2 Reply
Jim Froehlich
Investor · NH · Member since 2016 · 134 posts · 61 votes
7y
@Bryan Malone, welcome and join the rest of us "part-timers" such as myself! Memphis has been a really solid area (some say even recession-proof), but you're in striking distance of a Alabama and other great opportunities...and short-term rentals in Nashville are doing well for some people I know. I would advise you to look up the turn-key rental opportunities in Memphis and make that your first target (I can think of a really good one, but no ADVERTISING on BP forums!). If you want to wholesale, then target selling to one of those turn-key providers, but you will have to put in much sweat equity, because others are putting HUNDREDS OF THOUSANDS of dollars into marketing in the Memphis area for properties worth wholesaling, so that will be tougher than just saving up for a down payment on one of those Memphis turn-keys. I live in New England, but know two guys who recently bought turn keys down in Memphis. Good Luck!
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Arlan Potter
Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
7y
I would start by finding you a distressed cheap house. Pay cash, fix it up and get it rented. Then you could borrow against that one and buy a couple more. Or wait and pay cash for another. Start slow. The first house I bought was in 2002 and I paid $2,900.00. It was half gutted and a wreck. In my spare time I put it back together. A couple years later, I bought another and fixed it up and got it rented. "Off to the races"
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
7y
Bryan, welcome !!!
Curt Davis - KAIZEN Realty538 Reviews
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Jonathan Vest
Rental Property Investor · Memphis, TN · Member since 2018 · 9 posts · 3 votes
7y
Hey Bryan! Good to have you.
1 Reply
Kiera Underwood
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
7y
Is house hacking an option?
1 Reply
Bryan Malone
OP
Bartlett, TN · Member since 2019 · 20 posts · 10 votes
7y
@Kiera Underwood What is house hacking?
1 Reply
Kiera Underwood
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
7y
@Bryan Malone
Live in one side and rent out the other. You could do that for only 5% down! You only have to live there for a year then rent that side out.
2 Reply
Bryan Malone
OP
Bartlett, TN · Member since 2019 · 20 posts · 10 votes
7y
@Kiera Underwood
Okay gotcha, thanks for clarifying...Not likely an option for me at this point with a family of 6 (including myself) in our existing home.
0 Reply
James WachobBusiness Member
Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 897 votes
7y
Welcome, @Bryan Malone what areas of town are you focusing on?
0 Reply
Bryan Malone
OP
Bartlett, TN · Member since 2019 · 20 posts · 10 votes
7y
@James wachob
Bartlett
Cordova
East Memphis
Millington
0 Reply
Dean HarrisBusiness Member
Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
7y
Hi Bryan!
Welcome to BP! Memphis is a great place for Cash flow!!
CrestCore Realty4.713 Reviews
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2 Reply
Joe Sadusky
Rental Property Investor · Levittown, PA · Member since 2016 · 109 posts · 97 votes
7y
@Bryan Malone welcome to BP!
I agree with @Kiera Underwood . If down payment money is an issue, house hacking is definitely an option! In my market in NJ, as an owner occupant (living in one of the units), you can get away with even less then 5% down on an FHA loan. Keep in mind that there are minimum requirements that you may need to physically occupy the unit (6 months to 1 yr) but if you chose a property below market value, you have the option of doing a cash out refi and pulling money out of the property for your next investment.
You can also do a live in flip as an owner occupant (same low down payment concept).
Do you currently own a house ? or renting?
The live in flips and house hacking can get challenging if you and your wife are already comfortable in a nice house (especially if you have kids). But, if you two are willing to sacrifice having your "dream home" until after you acquire some rentals...you could really project yourself ahead!
Good Luck!
1 Reply
Kiera Underwood
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
7y
@Bryan Malone
I understand if if it’s not likely. However not something to totally write off. I just sold luxury duplexes in a great neighborhood with amazing schools that each had 5 bedrooms! Even if you weren’t marking any money, if you tenants are covering even half of what your previous living costs used to be, it’d be worth the inconvenience in my eyes! The move could actually be an upgrade that ends up costing you less.
And you don’t have to sale your current residence if you love it! Rent it if you’re able to get rents to a point where the numbers make sense! And move back in it eventually. However moving every year for 10 years is the way to go if accumulating 20% down payment is tough!
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Alaska Wagoner
Costa Mesa, CA · Member since 2017 · 25 posts · 10 votes
7y
Hi Bryan,
You and I think along the same lines; I've been looking in Memphis as well, and have considered other avenues to build up cash reserves. Here are the things I've considered along the way, hopefully it will help you.
You said that you have wanted to pursue real estate for a long time, but I would ask yourself why. For instance, I am looking for passive income, so that I can write and travel. This means that buy & hold is my best bet. If you were looking for faster cash, flipping or wholesaling might be a better bet for you. Make sure the strategy supports your goals, and that the area you're in, supports your strategy. I live in Orange County, CA, so flipping works here but not buy & hold.
As far as the day job, I would definitely keep it, and also treat your real estate business as a business from the very beginning. Even though I haven't purchased my first property yet (waiting for June when my downpayment money matures in a CD) I have a schedule of research and regularly meet with other investors and keep track of my educational process.
On the downpayment front, do you have a family member who could lend you the money? Have you considered seller financing? This gives retirees more money on their dollar, while getting them out of the management responsibilities they had energy for in their youth.
I have considered flipping and currently work as a realtor to earn money to buy houses, but I would caution you against going into a strategy that is not your end strategy. I say this because flipping, wholesaling, and being a realtor all are careers in and of themselves. There is a lot of time and energy and money lost in career transition. It would probably be best for you bottom line (and for the purposes of securing a loan!) if you stayed in your current career and tried to find a way to make or save more money. If you need help saving money, google Mr. Money Mustache.
Good Luck!
1 Reply
Bryan Malone
OP
Bartlett, TN · Member since 2019 · 20 posts · 10 votes
7y
@Alaska Wagoner Those are some great points you brought up. I've been torn between how to save up enough cash reserves. I'm basically starting from scratch here. I mean I currently own my primary residence and as far as I know have quite a bit of equity in it, so a HELOC is a down payment option I guess. But I've also read from other posts, that you should try not to leverage your primary residence if at all possible because of the risk. But I've also read where people have done this using the BRRRR strategy and it worked for them. Then I had someone tell me that wholesaling may be the most conservative option for me being that I have a wife and 4 kids and can't really afford a lot of risk without sufficient cash saved up.
As far as my why, I too want to build passive income so that I can accelerate paying off debt and saving for retirement. I also want to diversify my portfolio to build a net worth large enough to become financially independent, allowing the option spend more time with my family. I am happy with my day job and plan to keep it. But I also want to get to the point where I'm not dependent on it as a primary income source.
As far as down payment, seller financing could definitely be an option, assuming a came across a really motivated seller. Again, just not sure whether I should start with something conservative and save up or just jump right on a deal and figure out how to come up with the money as I go without much saved up. Seems like the former would the wiser approach. Not in it to get-rich overnight but at the same time I don't want to get stuck in "analysis paralysis" and not take any action towards building my business. I like your approach to having a schedule of research and regularly meeting with other investors and keeping track of your educational process. Would you mind sharing what you've been researching? Do you have a mentor that your working with?
All the best,
Bryan
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Randall Weatherall
Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
7y
If you're looking in Memphis, then keep in mind that you likely won't have your first investment forever. House-hacking is a great choice, but usually with a higher buy-in in areas you'd want to live (Midtown and Medical District have a lot of these types of units). Typically, we see people get a safe, lower-return unit at first, build up some equity for an exchange and finally turn it into a higher-return unit down the road.
Conversely, as a local, it's a little easier for you to tackle a lower-end, higher-CAP unit at first and really keep your eye on it. During this, you build your team while you prep to take on more investments and over time, move them up a class to stabilize over the long-term.
Hope that helps, Bryan.
1 Reply
Bryan Malone
OP
Bartlett, TN · Member since 2019 · 20 posts · 10 votes
7y
@Randall Weatherall Thank you for the advice. I hear varying things on here about the Memphis market...and I've lived here all my life ! lol. But if I understand what you said about not having the first investment forever, it sounds as if fix and flip is the better strategy for this market as a oppose to buy and hold renting, yet I 've also heard that this is supposed to be a good to decent cashflow market. I guess it depending on the deals you come across and some analysis...Thoughts???
Also, how do I go about assembling a team? I mean there have been a few people here and there that I have spoken with but I've also read where traditional lenders and even some real estate agents are less inclined to work with new real estate investors, especially when looking at smaller less expensive properties starting out.
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Randall Weatherall
Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
7y
All strategies have SOME validity and returns, but the main thing is what works best for you in your current state of investing. Keep in mind that sometimes, you'll have to 'right the ship' or change course to do what matches your evolving situation.
On team-building: try to find the best solution first. Take time and set them up; be sure they offer referrals and competitors openly. All under one roof, like we do here, works for some investors but mostly appeals to out-of-state. Others prefer individually picking vendors one at a time and building a more complex but also more specialized team.
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