First Rental Investment Strategy

10 Replies

Hello BP Community,

What was your strategy for the first rental property you purchased? I plan on purchasing my first out-of-state rental investment by the end of the year in Houston, TX. I would firmly say my criteria is geared towards a more safe investment that may not yield as much profits (newer properties in need of moderate cosmetic upgrades), but will hopefully be one that does not come with many expensive surprises. 

However, I am a little concerned that I will not be optimizing my savings. As previously stated, I do plan on undertaking a mild renovation (Paint, flooring, etc.) in which I can force a little appreciation, but am I leaving a lot of money on the table because I do not want to swing-and-miss on my first deal?

What was your initial strategy? What were the results and would you do anything differently?

Thank you!

Hey @JoJo Tucker The first property my wife and I ever purchased was a duplex and our strategy at the time was simple, double our unit count yearly. The duplex needed cosmetic work and was a great learning experience. Since then, we have shifted gears into multifamily and working with folks who want to passively invest their capital.

Im glad I started how we did, it allowed me to learn on the go, with little stress.

I think for your first property or two, that strategy is solid, find houses that at most just need cosmetic work. It's a much easier way of getting started and learning the process of how everything works.

If anything, look for houses that basically need "Lipstick on a pig", houses that would look great with minor updates such as new flooring, paint, appliances, etc. 

Trust me, after you get your first deal done, things will accelerate a lot faster than you can possibly believe, as long as you keep pushing!!

Jump into what you’re comfortable with. People make money at all levels from buying new construction to near-tear downs.

I embarked on my RE journey with a flip just before the crash. I walked away with a little profit and a few years of emotionally recovering. I now doing BRRRRs which I’m pretty darned happy with.

Long story short, choose the type of investment based on what fits you. But whatever type you settle on, get smart on it and find a deal that will make you money!

Hi @Cody M. , I live in Northern California and knew I wanted to invest somewhere in the West. I began researching various demographics such as population growth, employment rates, job growth statistics, renter-to-owner ratios, etc. I really wanted to find a place that was economically diverse and had historically shown market stability.

My search led me to Denver, Phoenix, Austin, and Houston. Houston's average listing price for houses that fit my criteria was a little more in my ballpark. Houston repeatedly showed favorable statistics, with the only major concern being that many areas are susceptible to flooding. 

JoJo

@JoJo Tucker My wife and I bought our first home together in 2011. It was a foreclosed duplex in Austin. We owner occupied and financed using 3.5% down FHA and rolled our closings costs into the loan. I also collected the 3% commission as the buyer's agent so our total out of pocket was $1500. After about a year we converted the other unit to Airbnb and used the extra cash flow to upgrade the property. We still own that duplex today.

@JoJo Tucker i house hacked my first purchase. it was duplex and i did all this before the house hacking term was even coined. i had no clue what i was doing at all. i had no money and made 28,000 per year. to this day, i do not understand how i got an FHA loan. this was in 2012. it all worked out though and i learned a ton. sometimes you just have to go for it.

i live in houston and all my investments are out of state. i love texas and i love houston. however, houston is a city that every real estate investor on the planet knows of. there is alot of competition. so far, the numbers here have not worked out for me. i am still looking though. that does not mean that your numbers are not attainable here. everyone has different investment criteria. best of luck. if i can help in any way, let me know.