Disapproving Family - Starting in Rental Property Investing
Hi all,
Since early March I have been learning as much as I can about rental property investing through BP articles, forums, podcasts, and local meetup groups. I have started to establish relationships with local lenders, realtors, property management companies, contractors, and fellow investors through the meetup group.
Just as a brief intro my wife and I are in our late 20's, we bought our first house 4 years ago but the property taxes and HOA fee has increased significantly since we first bought in (including insurance/taxes in escrow it is roughly $1,200 per month). Luckily the market value for our house has gone up to the point that if we were to sell today, even with the realtor fees we would gain about $12,000 from the sale. Due to HOA we can't rent it out, and the timing seems right to sell for us.
We also at this moment have about $10,000 in our bank account we are willing to invest. In the search for something to invest in, I stumbled on BP and was hooked on the idea of REI since. For our situation, it seems like selling our current house and using a low downpayment (3.5% FHA or 5% conventional) on a 2-4 plex is the perfect first investment. Not only are we dramatically reducing our monthly house expenses with a cheaper mortgage, but we can bring in more income on the side. Of course, I am doing everything I can to make sure we are prepared prior to closing our first deal (how to analyze deals, landlord forms, managing properties, legal, CPA, etc.).
As I'm sure most of you do I started telling all of my family and friends about the exciting plan my wife and I have to get started in real estate investing. My parents told me to reach out to my dad's cousin, who rents out a couple SFH houses on the U of Wisconsin (Madison) campus to ask him about his experience. I called him up and 5 seconds into my REI 5 year plan he says "Let me stop you right there" and proceeds to go on a 45 minute tirade of why we should not waste another second on rental property investing. Mostly just complaining about when tenants decide not to pay or want to move out and maintenance/capex items. Telling me over the years they have learned to only to rent to junior-senior students, never adults, never younger partying students. He assured me also his cousin who also has a couple rental properties loathes it just as much as he does. His conclusion essentially was to save up to invest in large, commercial properties/businesses. He also owns a car wash and FedEx routes today.
Besides general story telling there were 3 points for this post I was hoping you could help me with...
1. Other than just proving my success later on, how do you think I can convince my family we are prepared and this is the right move for us?
2. Probably not the most unbiased forum online, but which concerns should I give weight to and which could be chalked up to my dad's uncle's lack of preparedness/management/bad apples/etc? In other words, what are some of the things which pose the greatest danger for those like me about to get into their first house hack/rental investment? I have been trying to learn about all of the pitfalls and instead of saying "I can't" say "How can I" overcome them.
3. Any other beginner investment vehicles worth pursuing that could yield a similar opportunity for return for my wife and I? For our specific residence situation unless we rented a place we would be getting a new mortgage anyways, it seems to make sense to house hack instead of following the traditional path of 'moving up' to a larger house and a larger mortgage. But I'm curious to hear everyone's thoughts...