Newbie here needing advice!

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Newbie here needing advice!

Connor Ryan
Financial Advisor · Boulder, CO · Member since 2019 · 38 posts · 75 votes

Hello BP community! I am an aspiring real estate investor currently living in Denver, CO and working in finance. In a few months I will be relocating to San Diego with my girlfriend.

We aren’t at the point in our relationship to buy a home together so we will rent for the first year to get a feel for the area. In the meantime I am soaking up as much real estate books, podcasts, and networking as possible to continue to gain knowledge and to see what strategies are the most appealing. I have about 25k saved and excellent credit.

So far the out of state Brrrr strategy sounds appealing for a few reasons. 1. It’s more affordable for me to buy properties in the Midwest. 2. I know the St. Louis area well because I lived there most of my life and feel comfortable with my connections there. Eventually I’d like to househack a duplex in San Diego but for now renting makes sense while I get used to the area. I have long term goals of scaling into a real estate business.

So this leads me to a couple questions. What advice would you give to someone in my situation trying to get started in real estate investing? Is it smart to start a business account at a bank now with the goals of scaling larger in a few years? Is it smart to wait and househack a duplex to get started or is it possible to start investing without owning a home? Should I look at forming partnerships or mentor relationships?

I’d love to hear feedback and I’m open to anything! Thank you!

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Robert Comstock
Member since 2018 · 138 posts · 56 votes
7y

don't do anything....get situated with your new job and city.  25k is an emergency fund living in san diego...just keep saving and reading...re think it in a year.....wet blanket I know but 25k is slim.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y
    Originally posted by @Bill S.:

    @Dan H. I would buy the whole world (perhaps starting in San Diego) if I could figure out how to keep it all together for the next 20 years until appreciation and rent growth bails me out. The caution of buying in appreciation markets is that you have to be able to weather the storm of a market down turn. If rents go down, not up. I'm sure in the San Diego area there was a three year period where effective rents decreased or vacancies increased. You have to be able to feed the alligator until you can afford to wear the alligator boots. I have no concerns about owning properties in good markets for 20 years, the warning is to not make a bad purchase that sets you back or causes financial hardship vs rewards. Markets like San Diego tend to have more hardships for the young, inexperienced and under capitalized investors. 

    At the Great Recession, San Diego had no significant rent decline and no appreciable vacancy increase.  So if you were not over extended prior to the GR, you should not have had any difficulty weathering the GR.  I know of no 3 year term in San Diego history where rents have declined.  My family has been having rentals since the late 1970s.  We have never lowered a rent and never had a unit empty for more than a month after being tenant ready. 

    However, if you were overextend at the GR, relying on a certain rent appreciation, that could have been bad.  The rents increased very little for around 5 years.  I do not recommend anyone purchase a buy n hold anywhere relying on a rent increase over the short term.  
     

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  • Sergio AltomarePro Member
    Rental Property Investor · Greater Philadelphia · Member since 2012 · 135 posts · 60 votes
    6y

    @Connor Ryan We are at the peak of the market cycle and should be planning for a market slowdown or downturn, so your best bet is to relocate and hoard cash to be able to scoop something up at a great price. House hacking would be my vote for your 1st investment. Good luck

    Podcast Guest on Show #545
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  • Connor Ryan
    OP
    Financial Advisor · Boulder, CO · Member since 2019 · 38 posts · 75 votes
    6y

    @Robert Comstock thanks for the insight!

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  • Connor Ryan
    OP
    Financial Advisor · Boulder, CO · Member since 2019 · 38 posts · 75 votes
    6y

    @Sergio A. @Bill S. @Jonathan Oh @Lanny Kimsey @Nigel Guisinger

    Thank you all for the expertise! I plan on continuing to save and analyze the San Diego market for the next year. House hacking a multi family at a discount price, in a decent neighborhood, at a good time in the market seems like the right strategy for me for now. In the meantime I will build those out of state relationships in areas I’m already comfortable with so that when I am ready to invest out of state I have that team in place.

    Thank you all again for the advice and I know who I’ll be thanking when my real estate business gets going!

    1Reply
  • Damien Smith
    Member since 2019 · 25 posts · 2 votes
    6y

    @Connor Ryan I’m a newb like you. Just closed a deal Monday. My man reading and getting advise is good but until you jump in you really won’t know. Find a good mentor. I found an agent who was also an investor in my area. The problem with living in one place and owning in another is it is usually good to rent near where you are. It’s hard to manage from afar especially just starting out. As for finances, running on your own steam is cool, but the amount you have saved for a good property that amount is closer to seller finance territory. As for back up money your in finance I’m sure you Know to diversify your investments just in case.

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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @Connor Ryan my advice is don't do long distance BRRR. Something will go wrong and it likely won't be as efficient as you want.

    Starting a business account now isn’t worth it, in my opinion. Continue to learn, save network etc

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  • Alan Dunlap
    Rental Property Investor · Chicago, IL · Member since 2018 · 89 posts · 77 votes
    6y

    @Connor Ryan

    Since you have familiarity with Denver metro, might it be easier to buy rental property there and then move to San Diego, renting( relatively affordable property) while you figure out what you want to do long term?

    Just a thought

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  • Patrick Lloyd
    Rental Property Investor · Chicago, IL · Member since 2019 · 17 posts · 4 votes
    6y

    @Nigel Guisinger agreed there are lots of opportunities in the Midwest. I have 25k in savings but and using a Heloc to buy my first property for 30k which I can rent for 6-800 monthly!

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  • Lanny K.
    Property Manager · San Diego, CA · Member since 2015 · 36 posts · 23 votes
    6y

    Hi @Connor Ryan,

    Welcome to BP and to San Diego! Seems like you've already started down a good path. As a seasoned out-of-state investor I'd recommend you only invest in areas that you're comfortable with and have solid relationships. For your first few investments you'd be well served to focus on that. Also, for awareness, we seem to be near the top of the market so I'd caution you to only buy something that you're okay holding through the next down cycle.

    Regarding San Diego, there's no way around it, it's expensive here compared to most of the rest of the country and we are taxed very heavily on top of it. That said, I've found owning a S-Corp and having rental property deductions help a great deal with the amount of money I'm able to keep in my pocket. Since you'll be renting your first year I recommend you find a good real estate tax preparation person and look into the specifics of your situation soon. See www.markjkohler.com for great informational videos.

    Feel free to connect with me if you'd like to discuss this further. I certainly wish I had someone to help me when I was starting out.

    Yours in Service,
    Lanny

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