How should I started real estate investment during pandemic

Question

Hi, great BiggerPockets investors,

I live in Seattle area, and luckily both me and my wife work in high tech companies, we work crazily hard and get good number on our W2s. Now we are looking forward to invest our saving to real estate and hope one day (5-10 years) it can replace our W2 and support a decent life for our family.

Seattle area has been well known for its crazy growth of real estate markets, hard to find good cash flow following the bigger pockets formulas. I would like to get advice on how can I get started in real estate investment, I was looking on Redfins from South Tacoma areas to north Everett. Any recommendations on which area and what type of properties ?

Preference wise, we would like to be more hands-off since our current job is busy, we are okay with compromising short term cash flow with long term appreciation. Also open to partnerships. We are wiling to put down 500k - 700k into real estate in the next 12 months.

Thanks a lot.

Michael Haas · Answer

Do you already own your primary residence @Lintao Cui ? House hacking a single-family with ADU, or a small multifamily would be a great way to start accumulating properties if you don't already own your primary residence (or are open to moving). You have plenty of cash to buy rentals traditionally as well though if you really want to go that route, just know that the cash on cash return won't be nearly as good.

Cashflow is passable out here, but you're right, the main draw is appreciation, rent growth, and loan paydown. When you're playing that game at current 3% interest rates you want to minimize your cash invested and use the bank's money as much as possible - and with a house-hack you can put 5-10% down on a property instead of 20-25% on a typical rental.

Let me know if you'd like to grab a coffee and chat about strategies in more detail anytime - we're here in Seattle as well. Congrats on your financial success thus far!

Jody Sperling · Answer

I'm somewhat surprised more people haven't offered to spend your cash for you! Have you considered out-of-state investing? In a market like Omaha, Nebraska, where I live, 500- to 700k could get you enough property to cashflow exceptionally, and one of the underappreciated truths about this city is that it has been stable through market cycles.

We don't appreciate rapidly, but economic downturns don't tend to harm our real estate much either. Omaha is a great place for steady appreciation, fair property values, and reasonable annual population growth. Message me if you're interested in discussing this market. I'm a motivated investor, open to partnerships.

Taylor L. · Answer

Private lending, Notes, Turnkeys, and Syndications are all popular options for folks in your situation: living in a high cost of living area, good income and savings but limited time to invest in building the real estate business. Those are roughly in order of more active to least active, with syndications requiring zero active participation from investors once the investment is made.

I agree with others that a primary residence with an ADU could also be a very good option, but that may or may not be something you want to take on.

Brandon Vukelich · Answer

We should talk. I watch everything from Everett to Olympia and out towards Bremerton. Avoid Seattle, in my opinion. Too many other areas in King, Pierce, Snohomish and Kitsap to consider if you'd like to stay local.

@Jody Sperling - Good to know about your area and open to partnerships. I'll keep you in mind.

John Colburn · Answer

There are too many unknowns with the economy right now. I would be patient and hold on to your cash. I know it does not feel like the right thing as real estate is super hot and you feel like you are going to missing out.

I have been through market highs a few times, and this is how it feels before the bottom drops.

John Fortes · Answer

@Lintao Cui investing passively is an ideal approach for the everyday working professional and leveraging a sponsor is beneficial to their lifestyle.

There are multifamily syndications to help invest passively and multifamily funds of funds you can participate in to be extremely passive.

There are pros and cons to each. I'd be happy to discuss and there's tons of information out there.

Happy investing!

Linus Cui · Answer

@Andrew Hogan thanks! Extremely useful!

Andrew Hogan · Answer

Lintao, I always advise that people do their research when it comes to sponsors and deals. When you’re considering an investment sponsor, do due diligence. Keep in mind to always:

• Look at the team: Is the sponsor a one-man show? If there’s a team, what do they bring to the table?
• “Stalk” the sponsor online: Do some basic internet searches. If you’re not finding much about the sponsor, that could be a red flag.
• Ask for references: Email references and set up a time to call them. Ask some open-ended questions and find out what they have to say about the sponsor.
• Keep in mind that the Sponsor, their track record, team, experience, and ability to execute are of greater importance to underwrite than the deal itself. A mediocre deal can be turned around by a great sponsor but a mediocre sponsor will make a great deal go to ruins.

All the best!

Linus Cui · Answer

@Michael Haas thanks for your answer. I do have a primary residence. And having another ex-primary resilience rented out, the cash flow is just enough for mortgage and appreciation is below average of the Seattle area :)

Linus Cui · Answer

@Jody Sperling thanks a lot for showing the opportunities in your area to me. I will do some research, will definitely contact you for promising investments :)

How should I started real estate investment during pandemic

How should I started real estate investment during pandemic

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