Real Estate Agent · Atlanta, GA · Member since 2018 · 14 posts · 6 votes
I’m currently reading “How to Invest in Real Estate” and just finished Chapter 4 & 5 which explain the different niches and strategies you can use in investing. There are SO MANY! The one main piece of advice that I’ve gotten from the chapters is to pick a niche and master it then move to another. How did you choose a niche when first starting out?
When I was younger I was lucky to be able to shadow at different times, 3 extremely smart, extremely successful men in their weekly dealings because they too had the same passion for this business that I do. 1 high rise commercial, 1 strip mall commercial, and 1 large multi-family. That let me see the both the bad and the good of different parts of the business. I decided multi-family was best for me.
They were not mentors or coaches, just friends who shared the same passion for this business as I do. I learned a lot about what to do, and what not to do, and how to network effectively.
I also have been fortunate to have input and training from some of the absolute top people in the business which further reinforced my choice of multi-family.
That plus my knowledge of how the economy functions helps a lot.
Nose to the grindstone isn't a chore if you have a passion for it.
Thanks for your response. As I’m reading through this book, listening to podcast and even hearing the stories of other investors, I realized some of these question cannot be answered just by sitting down and trying answering them flat out. For example, a lot of people did not know how to rehab but chose to flip and developed rehab skills along the way. There are people who knew nothing about being a landlord so could not judge if they liked it before hand. I thank you for this list of questions but I tried doing this myself and a lot I just could not answer. That is why I chose to ask the specific question I asked. Do you mind telling me how you chose to pick your first niche? How did you learn to master it?
Thank you for your response! In planning my journey, I had decided that shadowing someone is a huge goal and I’m glad to hear that is what helped in your success. It’s hard to try to figure out things you haven’t seen and just don’t know so I am always trying to keep my eye on people who are doing what I want to do and figure out how to befriend them and bring them value. Thank you again and wish me luck in finding a successful person to shadow!
Well, hang on a sec. you asked what SFR was. It means Single Family Rental
Now...I actually did start with a SFR. It's on my profile under Investments. I started with it because of the lower risk, lower cost of investment compared to anything else. For example, I got my first SFR for ~$25k. If you look at a multi-family (we will say duplex), you'll be looking at double that number (relatively).
So, I looked at the worst case scenario...if I go belly up on my first investment, can I make the payment and still survive? The answer was yes! I chose a decent town, decent neighborhood, and ran my numbers over and over to be sure I would be positive cash flow.
Hope this helps! Do you homework, make sure you can handle potential vacancy, and go for it.
@Keesha Duminie My wife and I found our niche accidentally. We both owned homes before we married. After we married, we moved into one and rented the other...and that's where it all began. We eventually came to the conclusion that our business model was to rent houses we would live in. We allow pets because we are a family with a dog and understand the circumstances, even though we do have restrictions.
Ultimately, we tend to buy a house, live in it and fix it up. Then we refinance, buy another, and rent out the refinanced property. We call ourselves serial home owners and have lived in every house we rent, except for one.
@Keesha Duminie I think it all boils down to what you are interested in, comfortability, and goals. For myself and my wife we know that we want to be as hands off as possible so we can still work at the careers we both love (nursing and vet tech). Then we just match the type of investing that allows us to do that and achieve our goals.
It was picked for me. My wife brought in our first rental deal, and from that point, one thing grew out of the next. We are self-managing, DIY landlords in C/D-class properties. We buy obsolete single-family houses, fix them up, and rent them out. I handle most maintenance and we always have a renovation running.
My grandparents ran much the same sort of operation in New York City many years ago. I started renovating properties when I lived overseas. It all worked together.
I don't intend to stay in this forever. My exit strategy is to sell it all and move back overseas.
I started after I purchased a primary residence and saw the opportunity to flip in the same neighborhood...$100/sqft price vs $200/sqft one mile away. But I don't flip any more or purchase SFRs. Read a ton, try a strategy based on your interests, goals, and opportunities and then pivot as you go. Some answers only come with experience. If you want to go swimming, you have to get wet.
Experience. This sounds scary to someone new, but really, trial and error.
I started with a duplex, because I was 21 and could house hack. B class property close to a base so tenants were military. I liked it...got the bug!
The next year, I bought a 5-plex. Nope....lower class tenants (C) and it was an older property with a ton of maintenance issues. I might have kept it, because it did cashflow well but I was now stationed across the country and it was too much work to manage. Sold it. Broke even, which was a tough lesson.
Next two were condos. Nope. I hate HOAs...you have no control and they can kill your cashflow. But both were rehabbed and in growing areas, so I sold (1031) both at huge profits. I would consider flipping a condo again, but I’d never buy one for long-term holding.
Next, I bought two SFRs with one of the condo exchanges. Nope. The cashflow isn’t as good in my area. Good tenants, but they also attract too many people due to higher square footage.
Also, I bought a tri-plex with the other condo 1031. Very similar to a duplex but better cashflow.
So, just through trial, I've settled on 2-4 units as my niche. I prefer 2 bed/1bath, which attracts my ideal tenant situation. Similar to SFRs in the quality of tenants. Good cashflow. Currently, everyone wants these so I will see appreciation. Maintenance is similar to a SFR also...no need for employees, my husband and I can handle it.
@Keesha Duminie like others on this thread and some who have bought many homes starting off with owner occupied getting favorable financing and small down fixers is a great way to go. I bought a fixer duplex moved in and cleaned it up then bought another moved into it and kept the first and rented it then cleaned up the 2nd moved in and then bought a fixer condo moved in and kept the second plex as a rental. Kept that condo and bought another moved in and so on and so forth.
It seems like you dipped into a few different strategies until you found the one that works. I’m glad you found your personal niche! Thank you for your story!
I don't really have a niche. Living in a high cost area, I will go after the deals that make sense, which is few and far between.
First house was just my primary. I wanted a fixer upper and I wanted to "flip" it. But I ended up living there and utilizing the equity rather than selling it.
Now I focus on buy and hold rentals, while aiming for high appreciation/equity growth.