The Opposite Problem - Have cash to invest but can't decide where

22 Replies

Hi BP community,  

Before I write about my specific situation - I really appreciate any replies, thoughts, or comments in advance. It's a pleasure learning from everyone here. Please feel free to be as critical/constructive as possible, I down to learn. 

I'm currently seeking an investment method that suits my goals, but am really having a hard time making a decision on how to start my investment portfolio. My goal is like most others posting here, to be financially free and generating a high income (min 250k/year) within the next five years or so. I will do this via buy and hold properties, and will work my way up to large multi-family investments. Eventually, I will flip some properties but I'd like to start with buy and holds. 

I currently have around 125k to comfortably invest without draining my savings and will be keeping up with a decent savings rate each year (50k+). Here's the deal - I want to be as efficient as possible without skipping any steps that are crucial to my education in real estate. I've been studying and analyzing deals for about two years and am finally able to get pre-approval; I'm self-employed so it's taken a decent amount of tax prep to have my records looking good. 

I'm having a difficult time determining what my first investment should be. Locally, I've been running numbers and MLS deals aren't fitting my criteria. I've spoken with other investors and it seems that off-market deals are best. I can't help but think about turn-key investments (specifically Rent to Retirement), but also know that I have enough saved to contribute to a syndication deal or have a more hands-on experience. I'm ready to dive in, but I'm nervous that I'll pass up a better opportunity - such a vicious cycle.

At this point, I could buy a property in cash, do a little bit of rehab (nothing too major for my first investment), and refinance it for a lower rate than I would have gotten with a traditional loan right away. Eventually, I'd like to work my way up to the BRRRR method at the @David Greene level. I want to start off strong, and while I know it's impossible to avoid mistakes, I want to do as much as possible to mitigate any poor decisions (anything within my personal control). 

I would LOVE to start big and be a part of a syndication deal, but I want to be a partner, not the person running the show. For members who have participated in syndications, what was your experience and how did you become a part of the syndication? While being an accredited investor is one of my goals, I'm not there yet so it limits some of the investments that I'd like to be a part of.

Knowing what you know now, what would you have done if you started off in my shoes? My mind feels like it's hitting a wall. Logically, I know I should relax a little bit with this, but efficiency is incredibly important to me. 

Updated 5 months ago

Edit - I understand that I need to make my 5 year goal a bit more realistic. While I still need to determine my investment method, I'll work on calculating a more realistic goal. Thank you guys!

Hey Samantha, that's awesome that you've got a chunk of change to invest, way to go! I'd say start small and learn the ropes. Going big can often mean you flop face first if you don't know what you're doing, especially with syndication. Additionally, I always encourage people to aim high for their goals, while still being realistic. I'm not sure making $250K/yr passively within 5 years is truly attainable. If you could get an average return of 10%, you'd need to invest $2.5M to get there. If you can do it, more power to you!

Now you obviously want to be wary of analysis paralysis. I'd say, start with a quad that needs some work, buy it all cash, and fix it up. Then refinance it and get your cash back and then dive in head first. This way, you'll be able to see 360 degrees around the real estate business. You'll have tackled rehab work, financing, as well as value add. These are 3 critical factors that you can use on almost any kind of deal. 

You need to also ensure that you've picked a market to invest in and don't get distracted by all the shiny things that pass you by. There will always be a better deal, and others will always make a better return than you. there is no question about that. But find one that's good enough for you and do it. You'll learn so much and be able to do better the next time. If you wait for the perfect deal, you will miss tons of perfectly good opportunities.

Best of luck!

My first deal was a cash purchase in a B class neighborhood.  49k...  The house needed $20k of rehab to get max rents  for the neighborhood.     So all in with cash for $69k...  

I was told/convinced that the ARV would be $85k... So I thought I could do a cash out refi and get about 60k back out.

WRONG!    The appraisal came back at 70k... So I was able to get $49 k back out of the deal.

The house rents for $895/month and Ive got great prop. mgmt and great tenants.   

-All said and done I am not unhappy with this first deal.  After all my monthly costs it cashflows a solid $300/month.

So the way I see it is I spent 20k of my own money to get a 70k house that someone else is paying for, meanwhile paying me an extra $300/month.    Not terrible for my first try and as the BiggerPockets pros always say, you are not going to get rich on your first deal.  

2nd deal-  A flip house I bought in Indy from a wholesaler.  I totally got taken on the price, the rehab costs way more than the original estimate (not the contractors fault-we discovered a fire had been in the house and covered up at some point and some structural issues needed attention) 

Here are the details-  I share all this because, even though embarrassing, I learned a lot and maybe I can help others be smarter than me!!   

House cost-  $89k

Rehab-  totally gutted and remodeled this 4 bedroom house with high end finishes-  $ 170k

ARV- $260k (if you can do simple math you will notice that I have invested more into this house than its actually worth!! Please note, that the wholesaler (they lurk on this site to try to take advantage of new investors like myself who don't know crap...you know who your are M and T!!!) who claimed to know this market very well, had this house at an ARV of $450k... (HOPIUM) I knew that was high, but I figured $305-325 to be safe and there are comps 2 blocks away that show that. My "realtor" (I won't name his name either, DC, also was saying $384-400k)...turns out he was basically in bed with the wholesaler... I actually laugh at myself over this whole thing. Im a grown and jaded man, yet somehow I always end up trusting people! This house now would probably sell for about $260-270.. Rather than sell and lose money on that also, I decided to find a qualified PM. He got the house rented to fantastic tenants for $1400/month. I'll now take out a HELOC for 150k so Im ready for the next deal.

the good news is that I was/am in a very stable financial place so, even though highly stressful, disappointing, and once again ruined the way i look at most humans, these 2 deals did not ruin me.  

They actually just made me more determined and I see them as an education. I own 2 houses for the grand total of $334,000. I was able to get $49k back out of 1 and I'll get $150k back out of the other. One cashflows for $300/month and the other will cashflow $400/month after loan service and PM fees etc, and I'll still have 200k to put into the next deal. I won't be trusting or stupid anymore and now I know what to look for... And also ARV values are tough to determine in certain areas! I do think that the $265k house will value for well over 300k once the neighborhood finished remodeling efforts. I was the first old house to be rehabbed, but now at least 10 have been or are under construction. Until then, I'll leverage what I can get out of it and collect some rents along the way

Lessons Ive learned after 2 deals

-DO NOT TRUST WHOLESALERS!!!   

-DO NOT TRUST REALTORS!!!

-TRUST YOURSELF ONLY

@Samantha A. congrats on your ability to save working capital to start your investing journey. Let me just say this from experience! Single family investing does not prepare you for multifamily investing! I started with the same intention  that I would start small with single families and then grow into multifamily! 

Well what actually happened is I got really good at single families and when I decided it was time to make the leap I was completely unprepared and have to start from square 1 with learning and educating myself on how to be a multifamily operator! I wish someone could have told me to jump right into to multifamily!

Don't get me wrong, what I have been able to build in my portfolio is awesome and I will likely keep all my rentals long term but this did not prepare me for multifamily! 

I don't think anyone can really tell you what to do with your capital because there are a lot of other factors at play! What's your personality like? Are you risk adversed or more aggressive? Do you want to be an active investor or passive? 

You DON'T have to start small, you can start big, but it is important to have a mentor or coach guiding you through the process! This is MORE important than whether you start big or small you need guidance and direction from someone who has done what you want to do!

@Michael Albaum , thank you so much for this advice! I really like the idea of getting a quad to do a brrrr. I'll definitely have to do some more market research to see where I could purchase one in cash. What amount of passive income would be a realistic five-year goal? I'm a big fan of Napoleon Hill's writing and it has me questioning whether or not I'm selling myself short by not setting high enough goals. After learning the ropes on my initial property, I'm sure I'll gain a lot more insight. 

@Samuel Rogers Wow, thank you for sharing the numbers on your first deals! I'm glad you came out the other end and still have decent cash flow. You're really going to kill it with your next investment. I appreciate the advice, as I too, can be overly hopeful that other's intentions will align with my own. Turns out - many people are only rooting for themselves and you've got to nagivate carefully! I'll have to re-read all of this now and again. Do you have any plans for your next deal? I'd love to hear what you have coming up next. 

@Stephen Akindona I needed to hear this! Thank you!! I'm all about multi-family. Having a mentor/coach is my dream, but I also know that I need to provide some value on my end, too. I'm planning to attend some local meet-ups this month to start networking, which is definitely my weakest point so far. I've held back from networking, as I'm kept fairly busy with my two businesses, and I don't want to let anyone down with expectations of myself. On a positive note, I've been tweaking my pricing on both of my storefronts, and I found a sweet spot that allows me to work less, make more capital, and most importantly - have more time to focus towards REI! Thank you so much for the feedback, I'm learning so much.

@Samantha A.

Syndications (as a partner, not operator) are my primary investment vehicle for real estate right now. 

I definitely advocate this method if you are on a mostly-passive journey. As someone self-employed, you will definitely benefit from passivity, because there is a huge opportunity cost associated with active real estate investment. If you're spending hours on real estate, you're not spending it on your other business.

For some people, this is a good tradeoff because they don't like their job and get a poor return for time spent. For others (like myself, for instance), the primary job is very good and very enjoyable. Real-estate is primarily a way to leverage my money while I am sleeping. It's also worth noting that I would have to work for years in REI to match my current status and compensation.

Happy to talk anytime about my experience. Good luck!

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@Trevor Ewen I second your sentiment. As an accredited investor, you have access to multi family commercial investments, which are essentially small private equity deals. As a limited partner (passive investor), you have the opportunity to invest alongside proven professional investors and participate in the upside.

Something to consider is whether or not you want real estate investing to be a second job, or whether it’s something you want to be able to invest in and forget about. If you want to take a passive approach, I’d highly recommend trying to find a sponsor or syndicator that you trust that you’d like to invest alongside. It’s a great way to both earn strong returns and see the process without taking any execution risk.

@Trevor Ewen ,  I totally agree with your standpoint. Leveraging my savings into larger deals sounds incredibly appealing because I totally love running my businesses. I look forward to work each day, but I also know that I'm losing value by leaving my savings in a low-yield account. 

What percentage of return is average to expect when partnering with a sponsor for syndications? I know this is a kind of vague question, but you do personally find that you have higher returns with syndications than you would with SFH or small MFH deals?

@Samantha A.

Congratulations on taking the steps to self-educate yourself and take the taxes matter in your hands! While you mention that you educated yourself, you also talk about still thinking which path to financial freedom to take: active or passive. 

What you need to decide is: are you able/willing to put in time (as much (or more) as you put into your woodworking business - beautiful work btw!!!) or you'd rather spend  more time in your business. Real estate can be what you make of it - passive or active. This of course entails the timeline to achieve the results you're looking. When someone else is doing majority of the work, you get a smaller piece of the result. However when you divide this outcome over the limited time you spend on evaluating the offering (f.e., syndication) your return becomes infinite. 

Bottom line, you need to decide 1) where can you make the most money - your current business or the business of active RE investing; 2) will your bandwidth allow you to be active; 3) is your "Why" strong enough to take this challenge on. 

Here're a few articles to guide you in the right direction:

https://www.biggerpockets.com/member-blogs/10850/7...

https://www.biggerpockets.com/member-blogs/10850/8...

@Samantha A.

You're definitely looking at a range. The preferred returns I've seen lately range from 6-8%. I always explain that you should consider this to be your low-end, from a planning perspective. Most sponsors will bat well above their preferred return, but it's a good gut check number.

From there, it's going to vary by project, risk, timing, conservatism of underwriting. A typical range would be 11-16% annual projections (tax-advantaged, which is critical). From there, an eventual sale can really up your overall return. It's incredibly hard to properly project a market dynamic in 6-10 years (which is a typical hold period), so your best to do your planning on the annual projections and consider that icing on the cake.

Is it better returns? On average, I would say so. I have one property that sold off for great value and had higher returns than any recent syndications. Because it was a one-off, it's more like buying a lotto ticket than an actual investment strategy. There was nothing too scalable about that, just got very lucky. Also, as a passive investor, I have to measure returns vs. my level of effort and risk. With syndications I am closer to no effort. The risk is only what I've put in the partnership. 

Flippers and small landlords tend to co-mingle a lot of their investment and personal money. For instance, you'd be willing to suffer a rough month of mortgage because your salary is high and can cover the cost. As time goes by, you start to realize that this is neither scalable or desired. There is something very powerful about each project being independent and having to stand on its own merit. It's harder to be fooled, emotionally. Your analysis and hindsight will be better served for it. 

@Samantha A. congrats on your abilities to save. Sounds like you have a real successful business there. 

I'm sure you have received a bunch of different avenues but would like to tackle the one you mentioned regarding syndication. 

If you partner with someone and provide the up front capital (EMD, due diligence, ect) you can get in as a partner on the GP side of a syndication and leverage the operators experience and learn side by side with them. You should consider this as well as the other alternatives others have provided for you.

@Alina Trigub   Thank you so much for your insight and the article links. This thread is really making me realize that I need to make up my mind on how I'm going to invest and start answering my own questions. Hearing your feedback, and others is such a great guide. I'll read the articles now! 

@John Fortes @Austin Hughes   Investing alongside a professional is a really desirable method. Each time I listen to the BP podcast and hear that you need two out of the three things: Capital, Hustle, and Knowledge. I've got the capital and serious hustle, but just not the hands-on knowledge. Sounds like syndication would be a good way to learn. Any suggestions on how you initially linked up with sponsors/syndicators? 

@Samantha A. it depends the quantum of capital you want to invest. If you have a large enough check size that you’re willing to invest (think $250k min) you can look at who some of the most professional real estate investors coinvest with. Blackstone real estate as an example will co-invest with some funds that will take checks around that size.

For smaller check sizes, I would listen to podcasts, and scrub lists of sponsors that have posted on sites like Crowdstreet. You’ll have to diligence the sponsors further from there, but that should give you a starting list that you can narrow down. Hope that helps!

@Samantha A.

Knowing that you'd love to start BIG - If I were starting off in your shoes...

I'd go with a 506(b) syndication in the B & C Class Multifamily space - here are few reasons why.

I like making my money sweat for me at a rate that far outpaces inflation!

I realize it's smarter to have my money working for me, even while I'm asleep, than it is to trade my time for money.

If I am going to trade my time for money, and I DO that too, the main objective, aside from helping others and filling needs, is to bring in more money so that I can put it to work too!

Passively co-owning an apartment building or… buildings allows you to plug into an existing operation and expect a consistent quality return that requires little to no involvement!

Side Note: Now that's the way to properly diversify too!  Take your 125K and go all in on an opportunity you LOVE or split it in half and get into 2 opportunities you like.  Regarding passing on a better opportunity I'll quote Zig Zigglar who once said  "If you wait until all the lights are green before you leave home, you'll never get started on your trip to the top."    

Back to our program... I say “little to no involvement” because well… it’s true nothing is truly 100% passive but this is pretty darn close… once you believe in the asset class as THE choice investment, it’s going to take time to find a team of operators that you trust and get to know. That’s natural - it’s human nature. Once you find your team… you have to look at what they’re serving up so that when they find a deal they’re working on and it gets you juiced - you’re ready to take action and partner with them!

Don’t worry they’re going to do all the work from here on out…

Plugging into an experienced team of operators that have analyzed a market, found a true opportunity, and manage a best in class professional 3rd party property management company - frees you up.

Furthermore, their asset management efforts will assure your asset/business is running optimally and meeting expectations of the business plan.

IMHO, Property Management is the backbone of a multifamily investment.

It's been said that Property Management can make or break the investment.

Always make sure your team of Operators have done their due diligence, selected a stellar Property Management company, and manage the managers!

Once you have identified a team that you know, or get to know - and trust - your involvement will truly be passive.

Leverage a quality, and proven, teams’ experience.

Let your co-owner partners run the business so that you can spend your time elsewhere, doing what you love whether that’s volunteering, making more money, traveling, having experiences, being with loved ones - you name it… all while your money multiplies and your team works for you.

Now on to the Tax benefits:

A great way to shelter income as an owner, partner, or limited partner of a cash flowing multifamily (apartment community syndication) asset is to utilize cost segregation in the 1st year of ownership. 

This allows you to, legally, accelerate the depreciation of the asset over 5, 7, & 15 years vs. straight 27.5 years.

Furthermore, if you claim 100% bonus depreciation, in the 1st year of ownership, the income sheltering effect is dramatically increased by the tax savings. You can 100% bonus depreciate any component with a useful life of < 20 years. (This means you can immediately depreciate it by 100% vs. spreading it out over 27.5 years.

Generally speaking, when you combine bonus depreciation and a cost segregation study, on a multifamily asset, you can immediately expense 25-30% of the entire asset in the 1st year!

This means your K-1 will show a loss even though you are cash flow positive! 

I hope you found this information helpful.

Don't hesitate to reach out-

Dino

Originally posted by @Samantha A. :

@Alina Trigub   Thank you so much for your insight and the article links. This thread is really making me realize that I need to make up my mind on how I'm going to invest and start answering my own questions. Hearing your feedback, and others is such a great guide. I'll read the articles now! 

@John Fortes @Austin Hughes   Investing alongside a professional is a really desirable method. Each time I listen to the BP podcast and hear that you need two out of the three things: Capital, Hustle, and Knowledge. I've got the capital and serious hustle, but just not the hands-on knowledge. Sounds like syndication would be a good way to learn. Any suggestions on how you initially linked up with sponsors/syndicators? 

 

Search the forums, there are plenty of experienced syndicators that could use an equity partner. Build a relationship, attend multifamily focused conferences, go to meetups, and know that they would be the type of person you could enter a partnership with. 

You have to be comfortable with the person before the project, business plan, and returns. Hope all of this helps. 

Originally posted by @Samuel Rogers :

My first deal was a cash purchase in a B class neighborhood.  49k...  The house needed $20k of rehab to get max rents  for the neighborhood.     So all in with cash for $69k...  

I was told/convinced that the ARV would be $85k... So I thought I could do a cash out refi and get about 60k back out.

WRONG!    The appraisal came back at 70k... So I was able to get $49 k back out of the deal.

The house rents for $895/month and Ive got great prop. mgmt and great tenants.   

-All said and done I am not unhappy with this first deal.  After all my monthly costs it cashflows a solid $300/month.

So the way I see it is I spent 20k of my own money to get a 70k house that someone else is paying for, meanwhile paying me an extra $300/month.    Not terrible for my first try and as the BiggerPockets pros always say, you are not going to get rich on your first deal.  

2nd deal-  A flip house I bought in Indy from a wholesaler.  I totally got taken on the price, the rehab costs way more than the original estimate (not the contractors fault-we discovered a fire had been in the house and covered up at some point and some structural issues needed attention) 

Here are the details-  I share all this because, even though embarrassing, I learned a lot and maybe I can help others be smarter than me!!   

House cost-  $89k

Rehab-  totally gutted and remodeled this 4 bedroom house with high end finishes-  $ 170k

ARV- $260k (if you can do simple math you will notice that I have invested more into this house than its actually worth!! Please note, that the wholesaler (they lurk on this site to try to take advantage of new investors like myself who don't know crap...you know who your are M and T!!!) who claimed to know this market very well, had this house at an ARV of $450k... (HOPIUM) I knew that was high, but I figured $305-325 to be safe and there are comps 2 blocks away that show that. My "realtor" (I won't name his name either, DC, also was saying $384-400k)...turns out he was basically in bed with the wholesaler... I actually laugh at myself over this whole thing. Im a grown and jaded man, yet somehow I always end up trusting people! This house now would probably sell for about $260-270.. Rather than sell and lose money on that also, I decided to find a qualified PM. He got the house rented to fantastic tenants for $1400/month. I'll now take out a HELOC for 150k so Im ready for the next deal.

the good news is that I was/am in a very stable financial place so, even though highly stressful, disappointing, and once again ruined the way i look at most humans, these 2 deals did not ruin me.  

They actually just made me more determined and I see them as an education. I own 2 houses for the grand total of $334,000. I was able to get $49k back out of 1 and I'll get $150k back out of the other. One cashflows for $300/month and the other will cashflow $400/month after loan service and PM fees etc, and I'll still have 200k to put into the next deal. I won't be trusting or stupid anymore and now I know what to look for... And also ARV values are tough to determine in certain areas! I do think that the $265k house will value for well over 300k once the neighborhood finished remodeling efforts. I was the first old house to be rehabbed, but now at least 10 have been or are under construction. Until then, I'll leverage what I can get out of it and collect some rents along the way

Lessons Ive learned after 2 deals

-DO NOT TRUST WHOLESALERS!!!   

-DO NOT TRUST REALTORS!!!

-TRUST YOURSELF ONLY

the way BRRR is being touted in the book on BP lacks a very fundamental aspect of BRRR I did as a HML over 2000 BRRR's for clients all over the country prior to the melt down of 08.. its how all turnkey worked at the time..

Big difference though is I would not lend on the asset up front without an ARV appraisal before we even bought the place.. and as the lender I HAD the teams under my control.. since it was my money.. so the out of area investor had a TRUE team not a dream team of wholesaler realtor contractor LOL.. which can be problematical as your discovering.. the only thing that goofed us up is when REFIs were no longer being done on rentals.. not saying it will happen again..

But one really needs to know these things and be fully approved for the refi  including values before you buy the rehabber..

had you done this .. Its a big miss in what is being bandied about in regards to BRRR.. BRRR from out of state is the most high risk you can do.. and many who get hammered with it simply don't have the stones to post about it.. they just lick there wounds and many will never do anything in real estate again..

Originally posted by @John Fortes :
Originally posted by @Samantha A.:

@Alina Trigub   Thank you so much for your insight and the article links. This thread is really making me realize that I need to make up my mind on how I'm going to invest and start answering my own questions. Hearing your feedback, and others is such a great guide. I'll read the articles now! 

@John Fortes @Austin Hughes   Investing alongside a professional is a really desirable method. Each time I listen to the BP podcast and hear that you need two out of the three things: Capital, Hustle, and Knowledge. I've got the capital and serious hustle, but just not the hands-on knowledge. Sounds like syndication would be a good way to learn. Any suggestions on how you initially linked up with sponsors/syndicators? 

 

Search the forums, there are plenty of experienced syndicators that could use an equity partner. Build a relationship, attend multifamily focused conferences, go to meetups, and know that they would be the type of person you could enter a partnership with. 

You have to be comfortable with the person before the project, business plan, and returns. Hope all of this helps. 

have to find ones that accept non accredited if your not accredited..  some of the deals will allow a small number of non accred's into the deals..  Although with syndication experience counts.. lots of beginners in the space.. so one would want to use some caution..

@Jay Hinrichs Hi Jay, it hurt a bit to see you say BRRRR from out of state is the most high risk you can do, however, I'm glad to hear it. I've been reading David's BRRRR book along with the long distance real estate investing book. He makes it seem simple. However, some good friends of mine who are successful investors here in California refuse to try out of state and also say it's too risky, in their opinion. But when I'm reading David's books I think maybe they just haven't done much research for out of state investing. I am in a similar place as Samantha where I have a solid chunk of change to begin with, however, deciding on a strategy has been quite time consuming.

Originally posted by @Joshua Gutierrez :

@Jay Hinrichs Hi Jay, it hurt a bit to see you say BRRRR from out of state is the most high risk you can do, however, I'm glad to hear it. I've been reading David's BRRRR book along with the long distance real estate investing book. He makes it seem simple. However, some good friends of mine who are successful investors here in California refuse to try out of state and also say it's too risky, in their opinion. But when I'm reading David's books I think maybe they just haven't done much research for out of state investing. I am in a similar place as Samantha where I have a solid chunk of change to begin with, however, deciding on a strategy has been quite time consuming.

 all things in theory work great..  ..  rehab is fraught with risk even if its the house next door to were you live.

add on being 3 time zones away.. bottom end contractors.. ( which is what you will need to make BRRR work) and its just risky it just is.

I would not say the markets are that risky or risky at all I am in 11 markets.. However the risk comes in trying to do remote rehab on lower end rentals.. talk to those in those markets who have experience.. I am one I have rehabbed thousands of houses remotely but as A HML and we still get screwed by contractors to this day.. no way around it.. for me if I get bipped its something we will make up on the next one.. take someone starting out and using all the capital they have.. and my position is that is more risk than reward.. better to buy local and do value add and flip.

@Samantha A. your post is timely, because I have been running similar numbers of late and trying to figure out what to invest in, (with consideration of how much time, capital, etc., that I have.)  

I think the syndication thing is interesting, due to it being the ultimate in passive income. However, there's really no way to lever up your money and get an enhanced ROI...but that may be okay. If you can find a deal that gives you 5-10% cash-on-cash, and/or a 12-15% IRR, it's pretty slick. Most of the deals you'd participate in will be exited after 2-5 years, thus increasing the VELOCITY of your money. If you participate each year in a new deal, then after about 10 years, you will be making some pretty good money, due to IRR and reinvestment (velocity.)

However, you may want direct ownership of something and want to lever up your money...e.g. SFR, duplex, multi-family, etc. In that scenario you may learn a lot more and be able to lever your money, and eventually pull it back out (BRRR, price appreciation, etc.)

Thus, it becomes a personal decision...albeit a very fun one once you start running the numbers.  Personally, I will be doing a syndication this year, and potentially a direct ownership deal as well...I would like to experience both and then make a call as to what I want to do going forward.

Good luck!

Originally posted by @Samantha A. :

Hi BP community,  

Before I write about my specific situation - I really appreciate any replies, thoughts, or comments in advance. It's a pleasure learning from everyone here. Please feel free to be as critical/constructive as possible, I down to learn. 

I'm currently seeking an investment method that suits my goals, but am really having a hard time making a decision on how to start my investment portfolio. My goal is like most others posting here, to be financially free and generating a high income (min 250k/year) within the next five years or so. I will do this via buy and hold properties, and will work my way up to large multi-family investments. Eventually, I will flip some properties but I'd like to start with buy and holds. 

I currently have around 125k to comfortably invest without draining my savings and will be keeping up with a decent savings rate each year (50k+). Here's the deal - I want to be as efficient as possible without skipping any steps that are crucial to my education in real estate. I've been studying and analyzing deals for about two years and am finally able to get pre-approval; I'm self-employed so it's taken a decent amount of tax prep to have my records looking good. 

I'm having a difficult time determining what my first investment should be. Locally, I've been running numbers and MLS deals aren't fitting my criteria. I've spoken with other investors and it seems that off-market deals are best. I can't help but think about turn-key investments (specifically Rent to Retirement), but also know that I have enough saved to contribute to a syndication deal or have a more hands-on experience. I'm ready to dive in, but I'm nervous that I'll pass up a better opportunity - such a vicious cycle.

At this point, I could buy a property in cash, do a little bit of rehab (nothing too major for my first investment), and refinance it for a lower rate than I would have gotten with a traditional loan right away. Eventually, I'd like to work my way up to the BRRRR method at the @David Greene level. I want to start off strong, and while I know it's impossible to avoid mistakes, I want to do as much as possible to mitigate any poor decisions (anything within my personal control). 

I would LOVE to start big and be a part of a syndication deal, but I want to be a partner, not the person running the show. For members who have participated in syndications, what was your experience and how did you become a part of the syndication? While being an accredited investor is one of my goals, I'm not there yet so it limits some of the investments that I'd like to be a part of.

Knowing what you know now, what would you have done if you started off in my shoes? My mind feels like it's hitting a wall. Logically, I know I should relax a little bit with this, but efficiency is incredibly important to me. 

I am a month late to the party, but I will say this, get some experience as an investor in your home turf.  Its really really difficult to invest out of state.  Its also really difficult to do rehabs if you don't have experience in construction.

I kinda think your best bet is to start with a rental that is mostly move in ready within 30min or a hour from where you live/work.  Learn what it means to be a landlord, set up your systems.  Who is your accountant, who is your handyman.  Who do you call for plumbing or electrical problems?

Use David greens method of finding a dream team.  Identify a great realtor, then use them to help build out a team.

Don't be overly infatuated with "off market deals".  Yes there are some out there, but you know what, most realtors who have them, have already shopped that property at that price to their volume buyers.  If the deal is still there, its a high likelihood that its not a deal.

Some of the worst at the hype game are the big boiler room wholesalers that advertise they have 20-30 "deals" monthly.

IMO pick a neighborhood, drive it, go to every single open house.  Have a realtor set you up on an inbox search of every listing.  (or do it yourself on a platform like Zillow)  That way you know the market better than the best computer program or realtor.

From baseball terminology focus on hitting a single with your first property. (I think investing locally is the least risky for most first time investors)

Then worry about things like rehabs, or out of state investing, or multi family etc.

Getting started is really important, getting a fantastic deal on your first property is less important.

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