What kind of Rental Properties did you start with?

13 Replies

Hey all,

I'm looking to start in Real Estate investing via Rental Properties and I wanted to know how some of you may have started. I've been studying pages/forums/books a lot and there's so many different kinds of Rental Properties that are out there and I'm not sure what kind I want to start with.

What kind of rental property did you start with? Would you suggest that kind for a starter? Would you recommend a different kind of rental property?

I'm aware that depending on your location and exposure level to investing, everyone starts differently. I just want a few stories that can keep me brainstorming and studying.

Thanks!

I'd venture most start with cheaper SFHs in bad areas because of the price point and good looking pro forma numbers. Generally these underperform at best and are nightmares at worst, so at this point most either sell for a loss and get out of real estate, or graduate to higher priced SFH in better areas that actually perform as planned.

Thanks @Nick C. I guess I should specify a bit more as well. I was leaning towards SFHs but I was looking at a few as vacation rentals, some as college student housing, and even staying in DC and house hacking with an FHA loan for my first investment. I've read and heard that house hacking might be the best kind of intro, it's just that DC is exploding at an extreme rate and it makes finding a good enough deal more difficult (obviously, not impossible, I need to search more). Thanks again!

@Craig Lind - Congrats on taking the steps to RE investing! I would throw my 2 cents in here and start with SFH. You are able to build your system, become efficient, learn the process in and out, and build confidence.

You can consistently hit a bunch of singles and doubles and build wealth.  

Once you feel you have it "down", if you are comfortable, you can start swinging for the fences with Multi Family Homes.  

House Hacking is a great way to get started as well in an expensive market.  I know a few people here in Northern California who started out house hacking and built equity & cash flow, and parlayed that into a successful business.

It's all on what your comfortable with, but I prefer SFH...

Hope this helps!

I concur that most start off with SFH in bad areas that's where I started. I don't agree with the notion that all or most under perform. That is usually the best cashflow you will get. It does produce headaches but if you can handle it, they can be very profitable. For the one's that last eventually they tire of that and understand the dynamics of moving up. They have built up the networks and resources to do it. Going in on the low income route teaches you so much about the business and prepares you for so much.

My first rental property was an accident (I lived in the house and then took a job transfer, so rented it out). Other than that, I started with turnkeys. And I do recommend them for newbies, here's why-

https://www.biggerpockets.com/blog/turnkeys-for-ne...

If you're in DC, you're likely going to have to invest non-locally in order to see cash flow. Side note.

Originally posted by @Mark Cruse :

I concur that most start off with SFH in bad areas that's where I started. I don't agree with the notion that all or most under perform. That is usually the best cashflow you will get. It does produce headaches but if you can handle it, they can be very profitable. For the one's that last eventually they tire of that and understand the dynamics of moving up. They have built up the networks and resources to do it. Going in on the low income route teaches you so much about the business and prepares you for so much.

 This is very well said and has a lot of truth. The underlying notion that every "cheap" house is a dump in the middle of a war zone is far from the truth. My personal strategy is look for foreclosures in what I would consider low to middle blue collar income neighborhoods. I am closing on a house next week for $24,000. I will have probably $1,000 in new carpets and a replacement of 1 window. This is not the ghetto or anything close just a small blue collar town outside of the Pittsburgh region. The house while old is in nice condition and has quite a bit of new components (roof, boiler, hot water tank) and should make for a great rental so be we do a good job of screening tenants.

By no means am I saying it is A or B class renting and the tenants are top notch citizens but it is not at the other end of the spectrum that some are imposing is all doom and gloom. There is all walks of life and plenty of decent people who rent in the middle class realm. As far as "strategies" everyone has one and you just need to find one that gets you in the game. The longer you sit and wait trying to analyze every scenario the less time you have to actually make progress. 

That is another nice thing about lower purchase price properites though is you can get your feet wet without exposing yourself to quite a bit of risk. In the end its an asset and you can always sell and sure you might take a few thousand dollar hit here or there but I would rather carry that then $100k+ in debt at the beginning of your journey.

@Jared McCullough Totally agree...I'm in Pittsburgh and started here, too. I think there are better long-term options but my sense is it's an easy(ier) place to start than many.

I have properties in Carnegie, Coraopolis, and have done flips in Washington County (just south of Pittsburgh). 

Originally posted by @Ali Boone :

My first rental property was an accident (I lived in the house and then took a job transfer, so rented it out). 

 This was very similar to my story.  Was not a bad area, but we wanted to move closer to my place of business.  Up & down the street there were easily 10+ other homes for sale.  Since I had wanted to get into real-estate, I decided to just jump in & start renting it.

I had a lot of success over the past 4 years with duplexes and triplexes (in Ft Lauderdale, FL) cash flowing within Opportunity Zones.  If you have a good property manager and purchase at a right price point the properties pay for themselves and then some.  For example, I purchased a Triplex in April 2015 for $205K and cash flowed it for 4 years at approximately $700 a month. Had a few minor repairs during the years, but sold it (closed) Today for $307K.

I love multi families in most neighborhoods as look as the numbers work and the right property management is in place.

Welcome and congrats!

For me, I became an accidental landlord when I took over the family commercial property with retail tenants about 10 years ago.  Focused on my career but then caught the real estate bug recently :)

About a year ago, flipped a house by myself and sold for a profit (I am in architecture field).  While I was in the process of flipping that house, partnered up with a friend/colleague and acquired a 16 unit MF.  4 months after that closed, acquired a 15 unit with the same partner and then brought on a 3rd partner and acquired a 14 unit 3 months later.  So all 3 MF acquisitions were done within 2018.  Now in contract for a 14 unit with my partners and looking for more deals!

A few things I will say from my experiences is that 

  • finding great partners is key
  • be patient for the right deal. Money is made when buying the property
  • Skipped the whole SFH and went into small/mid sized MF. Looking to acquire larger ones down the line. Economies of scale do work.
  • Be persistent and hustle!  Worked 40 hours weeks on my W2 job then another 40 hours nights and weekends, learning, walking properties, networking, researching, etc. 
  • Yes I do have a family and kid :) Spouse needs to be on board and understand the long-term picture. Include them in your discussions and day to day events. My wife doe snot participate in the business and understands probably 10% of what I say about REI (she's in the medical field so is much smarter than me) but she is on board.

Hey Craig!

Excited for you to start your investment journey.

Pittsburgh, PA is a great place to start. What I really like about Pittsburgh is that you can pick up $30-$40k properties that need some work and have decent returns, mid priced properties in the 100k's, or large multis. There is a little of everything here. There bad, good, and great areas. And if you keep your pulse on the area, you can see trending areas and get a head of the curve.

I'm personally just starting out and we (my partner and I) bought our first house last week. It's a 3b/1b SFH in a good neighborhood/area. Overall, it's not really even a 'deal', more a market rate house- we are treating this first house as a learning experience and not really focused on making much money on it at all. The process, getting systems in place, and the overall learning experiences are going to be much more valuable for later on. Good luck with your journey!