What is the Best Strategy? - First Investment Strategy

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What is the Best Strategy? - First Investment Strategy

Kirk Zandier
Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes

Hi Everyone!

I appreciate and look forward to everyone's feedback.

I am looking to get into real estate investing in Pittsburgh, PA. I don't want to invest more than 15-20k. With my capital being limited, I have taken interest in the BRRRR strategy. However, using a hard money lender with hopes that the ARV, appraisal and lender will cooperate with my plan makes me nervous - I guess that is just the cost of doing business..

I have also considered trying to flip first to build more capital. Again, I am more than likely going to have to use a hard money lender. Should I be this wary about using a hard money lender or am I overreacting? 

I have picked these strategies as I believe they will help will scalability. The last thing I want to do is buy 1 or 2 properties and be stuck building up another nest egg to purchase my next. 

With that, my question is: If you were a 23 y/o looking to get into investing, but didn't want to corner yourself, by means of limited capital, what approach would you take? 

Thanks!,

Kirk

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Brian G.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y

@Kirk Zandier given your available capital and your lack of experience, if you are flying solo, a live in flip or a house hack is the way to go. These are fairly low risk strategies. However, based on your question my approach would be to wait to invest and instead focus my attention on networking by going to every REIA meeting you can, ask every person you know if they know a RE investor they can introduce you to, etc until you meet someone doing exactly what you hope to do. Find a way to add value to them and ideally a mentoring relationship can naturally unfold. This is the safest way to embark on a a new investing strategy. An experienced person can speed up the learning curve and greatly reduce your risk. This isn't true of RE only, this principle holds true of all business in general.

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  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Kirk Zandier given your available capital and your lack of experience, if you are flying solo, a live in flip or a house hack is the way to go. These are fairly low risk strategies. However, based on your question my approach would be to wait to invest and instead focus my attention on networking by going to every REIA meeting you can, ask every person you know if they know a RE investor they can introduce you to, etc until you meet someone doing exactly what you hope to do. Find a way to add value to them and ideally a mentoring relationship can naturally unfold. This is the safest way to embark on a a new investing strategy. An experienced person can speed up the learning curve and greatly reduce your risk. This isn't true of RE only, this principle holds true of all business in general.

    8Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    No question house hacking is the way to go for you using the fha loan to purchase a 2-4 unit property.  Even if you were to use hard money to do a flip or a rehab and hold of some sort I'd recommend having a decent amount of savings in case things start going side ways.

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    4Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Brian Gerlach I agree that a live in flip would be a nice stepping stone for me right now. I also could potentially rent out doors to others once in decent condition.

    You are absolutely right about finding a mentor and building a network, I need to do a better job of that. It seems tough finding a mentor. What would you look for in a mentee, as far as someone that adds value?

    0Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Twana Rasoul thanks for your response!

    I'm afraid even with an FHA a 2-4 unit building would eat up my capital quickly. Thinking about just doing a single family house hack as the multi-family market is just too tight in my area.

    1Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Kirk Zandier it depends on what the mentor is in need of. Meeting a need = providing value. You can never go wrong with being teachable and hungry.

    1Reply
  • Joe Aiola
    Real Estate Agent · Fleetwood, NY · Member since 2018 · 264 posts · 235 votes
    6y

    @Kirk Zandier That's solid advice from both @Brian G. and @Twana Rasoul. Might not be a bad idea to start out with one of those strategies until you are able to build up a bit more more capital. You're on the right track with BRRRR though, it will definitely help you scale. Continue to learn about the construction side of things and don't be afraid to use hard money - just make sure you talk to enough lenders / get referrals.

    You're in good shape starting out so early. Just keep making progress each day. Best of luck!

    2Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Brian Gerlach Got it. Thanks for your advice!

    0Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Joe Aiola Hey Joe! Appreciate your comment. I'm thinking about maybe doing a quasi BRRRR with a rehab loan ( FHA 203k or Fannie Mae Homestyle renovation). I think this will give me more security, and will be a more slow-paced learning process. Also, totally agree that learning the construction side of things is crucial for success.

    1Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    6y

    @Kirk Zandier Each of those strategies and house-hacking are all great strategies. Don't be concerned about looking for the "best" strategy. You mentioned you are "nervous" and "wary" about using hard money. That's a common feeling everybody can relate to. The feeling won't go away until you start doing deals. 

    1Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Jon Kelly Hi Jon! Yes, just like most things new, I can imagine it is uncomfortable at first but after a few deals, it just becomes another step in the process.

    How did your first deal go?

    0Reply
  • Esther Min
    New to Real Estate · Member since 2018 · 38 posts · 23 votes
    6y

    @Kirk Zandier

    It was awesome for you to share and ask first time questions!

    I'd be interested in hearing how you got interested in REI?

    0Reply
  • Jessica King
    Member since 2019 · 11 posts · 4 votes
    6y

    If I was too young to have much money to invest, I would think about passive ways. I suggest crowdfunding could be a good option. Did you think about that? If not, you can read this article to know more about this strategy: Six key questions about property crowdfunding you may want answered before you invest. 

    0Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Esther Min Like a lot of people, I was introduced to the concept of passive income through the book, Rich Dad, Poor Dad. Ever since reading that I have been on the search for ways to achieve passive income. Real Estate is often talked about in tandem with this concept so as a result I started researching!

    1Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Jessica King I haven’t. I’ll check it out, thanks!

    0Reply
  • Brett McManus
    Minneapolis, MN · Member since 2020 · 94 posts · 161 votes
    6y

    Hey Kirk,

    Appreciate the enthusiasm as you are in a very similar situation that I was just a few months back. I too was ready for my first deal with inspiration to BRRRR from posts on these forums as well as BP Podcasts. The reality was that as I began taking action I realized a few things:

    1) BRRRR has some risks associated to it that can be easily overlooked by new investors (calculating ARV, managing rehabs, etc.)

    2) Hard money is freakin expensive (not the low money down I needed)

    3) Lack of experience makes it very difficult for HML's, Contractors, and Property suppliers (wholesalers) to take you seriously.

    Instead of this I took the advice that many offer to beginners on these forums and hunt down a Duplex to house hack. In doing this I was able to purchase a great starter property within 3 months of this mindset change by doing the following:

    1) Connecting with a local agent/investor who was able to set me up with an MLS search that could fuel properties to be analyze with BP calculators.

    2) Working with local mortgage brokers to understand FHA owner occupant loans which combined with a state funded new-buyer assistance program (and negotiated seller paid closing costs) allowed me to close with only $2,000 out of pocket.

    3) Ultimately close on a base-hit property with virtually no money out of pocket, source my first tenants, do some basic cosmetic work to boost rents, and gain a TON of relatively low risk knowledge that will better set my up for future BRRRR investing.

    Although BRRRR is an amazing strategy, I highly recommend exploring house hacking in order to hit the ground running and get some experience under your belt.

    5Reply
  • Kris Rudge
    Rental Property Investor · Greensburg, PA · Member since 2018 · 38 posts · 13 votes
    6y

    @Kirk Zandier what area or Pittsburgh are you considering? I'd love to hear more, I live in Greensburg. Also I am fairly familiar with construction of a house. Message me if you'd like to talk!

    1Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    6y

    @Kirk Zandier My first true real estate deal was a great learning experience. I found a great deal on a 4-unit property, with 3 -units already rented. Purchased for $112K (appraised for $140K). I put 25% down. I borrowed $5K from 2 family members because I wanted them to be apart of the deal. I learned to always do proper due diligence before you buy and don't be afraid to negotiate the price after you do your final walk through! Before agreeing to a purchase price, I looked at 3 out of the 4 units. I never saw the 4th unit until 1 hour before closing. Of course, the 4th unit was in the worst shape and it cost me an additional $8k in bathroom/kitchen remodel that I didn't expect. I didn't try to negotiate the price because I didn't want the deal to fall through. Regardless of the $8k mishap, its been a solid deal. Highlights of the deal below: 

    4Reply
  • Esther Min
    New to Real Estate · Member since 2018 · 38 posts · 23 votes
    6y

    @Jon Kelly 

    Thanks for sharing your deal! What software did you use in the highlights that you showed? Is it something that you just created? Definitely a user friendly interface!

    2Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Jon Kelly Thanks for sharing, Jon!

    That is awesome you were able to find a 4-unit property for that price! Have you done any single-family homes or only multi-family?

    0Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    6y

    @Esther Min the BiggerPockets calculator! You need to give it a try if you haven't already 

    3Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    6y

    @Kirk Zandier On Monday I'll be closing on my 8th single family, and on 7/27 I'll be closing on my 7th multi-family. I've used the BRRRR strategy on most of them

    2Reply
  • Kris Rudge
    Rental Property Investor · Greensburg, PA · Member since 2018 · 38 posts · 13 votes
    6y

    @Jon Kelly are you staying local to your area Bethlehem, PA? Or are you investing elsewhere? Also congratulations, that's awesome!

    0Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    6y

    @Kris Rudge Most of my investment properties are near the Pocono mountains (~60 min north of Bethlehem). I also have 2 in Western Massachusetts near Amherst College 

    1Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Brett McManus

    That is some solid advice! I have been looking for a decent duplex, but the multi-family market so tight! I seem to come across a decent property and they are only doing cash only, sight unseen.

    I need to get over my victim mindset though. Initially, the strategy you suggest is the one I thought most feasible, I just got frustrated with the search for the right property.

    Nonetheless, I needed to hear your comment. It just simply makes the most sense. It will keep me from getting burned, while still getting my feet wet.

    Have you started looking for your next deal?

    1Reply
  • Kirk Zandier
    OP
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 33 posts · 14 votes
    6y

    @Jon Kelly are you a full-time investor?

    0Reply
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