New to Real Estate · Seattle, WA · Member since 2019 · 39 posts · 16 votes
Hi there, college student here projected to graduate in two years with an engineering degree to fund my investments. I am starting out early scoping out the scene trying to decide where I want to start my investing career. How does one decide where to invest? Does one simply invest where they want to live? As of now ideally, I want to move to San Diego post-graduation and use my VA loan to buy a house a year and house hack during the year saving for the next investment.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Kole Moore, it sounds like you know. You want to house hack and live in San Diego. That is your starting point.
As Twana mentioned, your best returns on a house hack will be in a 4 family, typically, since you are only taking 25% of the rent out of the equation. Ideally a 4 family that has 2-3 bed units, where you can not only rent the 3 units, but also another bedroom or two to friends.
Beyond strategy, the most successful real estate investors are the most frugal. So my advice is always to live below your means, save as much as possible, and build your reserves. Cash flow and reserves can get you out of most situations. Lack of capital is a the fastest way out of real estate.
San Diego, CA · Member since 2017 · 49 posts · 33 votes
6y
@Account Closed couldn't have said it better.
@Kole Moore House hacking is another really good option with the VA since they basically removed homeloan limit. Note: lenders still have to be will to loan you the dollar amount. Another BP member held a meetup for some local investers like a month ago. One of the guys there, and his realtor (the meetup host), worked a deal for a 4-plex (I think it was 2bed/2bah each unit) for about 1mil-1.2mil... something like that and with the 3 units rented he was positive cashflow.
New to Real Estate · Seattle, WA · Member since 2019 · 39 posts · 16 votes
6y
@Trevor Haney thanks for the clarification also. Wow that is crazy to think there is basically no limit, sounds like a nice tool. Although why would a property that much have trouble cash flowing? I thought it would only have a greater cash flow. As some said above to big or go home is why I ask.
San Diego, CA · Member since 2017 · 49 posts · 33 votes
6y
@Kole Moore gotta run the numbers to confirm revenue out weighs expenses. I don't remember his numbers but he bought the same place for like 1.5 mil then he probably wouldnt be positive cashflow.
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
6y
I don't think it is important where you start. Your circumstances are more important. First of all, you should make sure your credit score is as good as it can be. Secondly, you will need 2 years worth of employment to qualify for a good mortgage. Thirdly, make sure you have sufficient reserves once you have completed the deal.
I agree with previous posters. You should start with a multi-family property under 5 units. Live in one of the units yourself. That is how I got started. Partnerships should be avoided until you have more experience.
You might also want to work on your DIY skills. That could save you a lot of money in the short run which would provide more cash for the next deal.
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
6y
@Kole Moore I know an investor that I believe can do VA that lives in San Diego and also invests out of state. Let me know if you want me to connect you!
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Kole Moore well “turnkey” is a technical term used of a specific product: a house that is bought (normally distressed), fixed up, tenanted and sold to an investor who holds the property as a rental, ie it’s not lived in by the investor. You can also refer to a property as “turnkey” meaning it’s ready to go, ie there is nothing I have to do to it before renting it out, moving into it, etc.
Rental Property Investor · Escondido, CA · Member since 2018 · 268 posts · 137 votes
6y
@Kole Moore, to add on to my comment about cash flow from @Trevor Haney' s post: A simple definition for Cash flow is what you're left over with after you pay expenses related to the property. The debt service (mortgage), which is an expense you would pay on a 1 million dollar property will be relatively quite high compared to the places in the country where you can still buy a property for 50k. Often the rents you can charge do not keep up with the sales prices in expensive areas. You might be able to buy a property somewhere for 100k that rents for $1000, but it is unlikely that somewhere where you would buy a property for 900k would rent for $9000, meaning that with your much higher mortgage on the 900k property, you might have trouble making it cash flow.
Trevor's example was great, and the reason it worked and could be a great strategy for you, is there were 4 units, so if each one was pulling in good rents, it could offset the mortgage on the 1 mil price.
Rental Property Investor · Davison, MI · Member since 2019 · 76 posts · 24 votes
6y
@Kole Moore Good on you for starting at such a young age! I only wish I had started younger as I could have been using my VA loan to househack as well.
As far as where to invest, as others have said, it really depends on quite a few things. I found I was much more comfortable investing near where I live because it allows me to be more “hands on” with the rentals while I gain experience in real estate. (I just closed on my first house in June this year) As you’ve mentioned, you’re in a very unique position where you can get into a small MF property for 0 down and start making money on day 1! So in short, assuming you have a firm grasp on your own financials (don’t spend all the money you make at your new engineering job), the plan of attack I’d recommend for you is this:
1. Learn how to analyze properties with specific focus on small multi family. Less than 5 units.
2. Find a property near work that requires 0 maintenance (VA can be fun to pass inspections LOL).
3. Buy the property and get the units rented out.
4. Let your disdain from your day job fuel your passion for real estate.
5. Wait two years and buy property #2 and move into it.
If you manage your money properly, and grow smartly, you may only need that degree for 5-10 years. Maybe even less!
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
6y
Sounds like you are heading down the right path by getting started early. House hacking is a great way to get started and I always recommend it. As you begin to scale you may want to look into other markets as well. San Diego might not provide as great of returns as some other markets.
Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
6y
@Kole Moore I like to look at it like this for getting started.
Define your why or vision or big picture goal.
Educate to learn terminology and possibilities - (You are here it sounds like, don't skip number 1)
Find someone doing a strategy you like
Passively invest with them to learn OR actively invest by Mirroring/Copying them as best as possible.
Take Action Daily to improve the strategy
Adjust strategy as needed
Repeat
That's really it. Each step can be done differently and take longer or shorter. The most important however is simply "Take Action". Even if action is just read a book, ask a question, call a lender, attend a meetup, analyze a property, etc. 99% of those on here who haven't done anything to further their investing goals is simply because they haven't taken consistent action. Feel free to connect and DM if you have any questions.
@Greg Dorn Thank you. I did not know that Greg, I was trying to get a hold of a lender to pick their brain about what limits I have with a VA loan but that answers my question. I was set on Duplex until I got advice from others saying go big, but I might stick with a duplex to be safe. That's a great story, do you plan to continue to use your VA loan to buy more investments?
Just do something that you can house hack with, it is easy and less likely to make a lasting mistake. Also there is a comfortable and profitable scale and they have an inverse relationship. The more comfortable you want to be (duplex means you still have privacy) it is harder to find a deal and you may not be as profitable if you were just get a very large house and rent out buy the room. Just listen to lots of podcasts on house hacking.