Hi everyone,

I am new to real estate investing and need some advice from experienced property owners. Iv spent hours learning about real estate investing but I am still very hesitant to pull the trigger. I am 26 years old from Sacramento that makes a 75k salary. I currently have 70k in a high yield savings account and want to use that to buy my first single family rental property in the Sacramento/Elk Grove area. I plan to stay at my full time job to fund my real estate hobby.

Im looking to purchase a 270k-300k 3br/2bath single family home with 20% down that is well kept but outdates. I will put 5k-10k to modernize the property w my pops who is an unlicensed contractor and rent it out for $1800.

My question one to you is...

1. Is my plan feasible?

2. Is it worth buying my first property that does not cash flow but will learn a lot from the experience? Or stay on the sidelines until a come across a cash flowing deal?

Please give me some feedback and let me know what you guys think.

Thanks!

Long

@Long Nguyen So you have doesn't the math and it doesn't cash flow? If not, then I would look at saving more and purchasing a multi-unit building that does cash flow or maybe find a better deal.

@Jim Pellerin Great. Thanks for the advice. The property does not cash flow when including repair cost, vacancy, landscape cost and etc. 

@Long Nguyen

Hi Long,

I think you should look into a house hack. Look into purchasing a duplex or 3 family, and have the tenants pay your note. Then use the equity and buy another :)

Good luck!

@Bud Gaffney I would like to start small with a single family to get my feet wet then move over to a duplex, triplex, and 4plex. Any tips on this approach? 

@Long Nguyen Sounds like we are in the same boat my friend. I have considered a similar investment, maybe even starting with my own home. I’m in the Roseville area and will keep my eye out for a property with these specs.

Originally posted by @Long Nguyen :

@Bud Gaffney I would like to start small with a single family to get my feet wet then move over to a duplex, triplex, and 4plex. Any tips on this approach? 

Look into BRRRR

THe trick here is that the cheaper you buy it, the more money you will make and have available for the "repeat" part if this strategy.

See the problem with buy and hold investors is that they think Lead Generation does not apply to them.

These investors for some stupid reason think that it is OK to buy MLS properties and they think Ohh my number calculations are very different from flipping or wholesaling.

THen they buy houses the "conventional" way and after the 3rd house their debt to income ration is so high they are stuck. They can't buy anymore and if you can't buy you don't get paid.

ALL investors should look into lead generation the right way. EVERYONE!!

Find an off-market property and buy it around 20 -40% ARV.

Fix it up modestly, and THEN refinance.

In between here and there, wholesale a few, and flip one or 2. This is the BEST strategy to get your investing business growing and expanding always at all times.

May the Jerryll be with you man. Always!

Everyone is going to give you a different answer, buy as someone who was in your shoes 30 years ago, and stayed on the sidelines way too long, I suggest you move forward.  

@Dave Peterson Thanks for the encouragement.

Just one question for you Dave. What would you do differently on buying your first property with the tools you’ve learned over the 30 years?

Hi Long, the only thing I would have done differently on my first property would have been not to do some much of the rehab myself.  It took a lot longer and I was burned out by the time it was done.  

I'm in a similar situation, prepping to do my first deal as well. I think there are a couple different things you should consider. 

1) What's your current living situation like? 

Definitely look into house hacking if you're currently renting. I saw your comment about wanting to start off with a SFH and then moving on to duplexes, triplexes, etc. Totally reasonable. You can still house hack a 3BD/2BA house by renting out the extra rooms and you'd be eligible for an FHA loan since it'll be owner-occupied.

2) The actual value of the property vs. how much you purchase it for, and the value of the property after the remodeling you plan on doing. 

@Jerryll Noorden 's advice is solid, just keep in mind that there are still deals to be had on the MLS. Buy a property below market value that other people aren't considering due to cosmetic issues, remodel it in such a way that adds value to the home (don't do a remodel that only increases the value of the property $1 for every $1 you put in), and then cash-out refinance when possible so you can use that for your next deal.

By purchasing it below market value and adding value through a remodel, you should have a decent amount of equity in the deal, even if you decided to go the FHA route and put less than 20% down.

3) I totally understand if people disagree with me on this one, but I feel like a cashflow-neutral deal is fine in this situation. You still have tenants helping you pay the mortgage down. You still receive tax benefits. You'll learn a ton, and you'll be infinitely more prepared the next time a deal comes around.

Good luck

Originally posted by @Alexander Yuen :

I'm in a similar situation, prepping to do my first deal as well. I think there are a couple different things you should consider. 

1) What's your current living situation like? 

Definitely look into house hacking if you're currently renting. I saw your comment about wanting to start off with a SFH and then moving on to duplexes, triplexes, etc. Totally reasonable. You can still house hack a 3BD/2BA house by renting out the extra rooms and you'd be eligible for an FHA loan since it'll be owner-occupied.

2) The actual value of the property vs. how much you purchase it for, and the value of the property after the remodeling you plan on doing. 

@Jerryll Noorden's advice is solid, just keep in mind that there are still deals to be had on the MLS. Buy a property below market value that other people aren't considering due to cosmetic issues, remodel it in such a way that adds value to the home (don't do a remodel that only increases the value of the property $1 for every $1 you put in), and then cash-out refinance when possible so you can use that for your next deal.

By purchasing it below market value and adding value through a remodel, you should have a decent amount of equity in the deal, even if you decided to go the FHA route and put less than 20% down.

3) I totally understand if people disagree with me on this one, but I feel like a cashflow-neutral deal is fine in this situation. You still have tenants helping you pay the mortgage down. You still receive tax benefits. You'll learn a ton, and you'll be infinitely more prepared the next time a deal comes around.

Good luck

 He is strong with the Jerryll. And the Jerryll is strong with him!

I can't recommend more strongly that you should use that great down payment to house hack a duplex or quad. You could purchase something close to $900k. Managing a small multi is really not any more complicated than buying a SFR. My wife and I started with house hacking a duplex and THEN house hacked a SFR. If I had to do it all over again, I'd house hack another duplex. Heck, if I could find a solid duplex now, I'd do it all over again!

You're young and you can move out of a multi in 2 years and sell or completely rent the property. I know you said you want to buy a SFR, but for your situation, that doesn't make a whole lot of cents. (corny pun intended)

Young, single and in an expensive area of CA........ I would lean towards the house hack for sure. Doing a BRRR in Northern CA is a long shot...... you have to have a great network to find those deal and a ton of time and $$ to do all the rehab yourself

Young, single with a steady job, you have the freedom to do some stuff you wont want to do once you are married, kids etc..... like living in a smaller duplex/triplex with close neighbors, no yard or having actual roommates etc. Use that freedom now to allow you to build your buying power and move up the chain.

Sac and EG are not cheap areas...... and getting a decent SFR that will cash flow is real tough to do in a decent area.
If you don't cash flow, you are playing on appreciation alone...... how confident are you that the market will continue to grow and grow and be high when you want to sell?