Mike! I wouldn't mind starting a long-term portfolio with it. Having some extra monthly income... Basically I'm just starting out, and would love to do either. Also, some flips would be good, (obviously) to get some more cash flow, then i can get bigger deals,etc.
So to answer your question, either really. I'm very-open to ideas, opinions, etc.
Orion Longman, lets back up a step. I'd hazard a guess that 99% of us here do various sorts of real estate investments and jobs for one reason - to make money. But there are different ways to make money. Rentals require a significant down payment, in many cases. They take some work, but its truly pretty small. And they will generate some returns on your investment. 10% cash on cash is pretty good, 20% would be outstanding. If you buy now, though, and hold for 30 years, you have a free and clear house that's going to generate a pretty nice income. 20, 30, or 50 such houses and you can probably retire and live on that income. Even a handful will give you a bit of income now and a nice addition to your other retirement plans later.
OTOH, something like fix and flipping takes a significant investing in time and money. You have to learn a market, find a property, get it fixed up and get it sold. If done right, it can earn a nice paycheck all at once. But it does take a lot of time, a fair bit of money (15% of the selling price would be my rule of thumb), and quite a bit of skill and knowledge to buy right and manage the rehab.
So, are you looking to invest a lot of your time in exchange for (hopefully, no guarantees) the bigger paychecks for a JOB as a rehabber? Or a smaller amount of time in exchange for small paychecks now, but a head start toward long term weath?
You say "How can I get my first house". What do you mean? To live in? A rental? A fix and flip? Getting a house is a means to an end, not an end in itself. What is the end you're looking for?
@ John Holdman
First off, thank you for your reply.
I'm looking to invest a small amount of time,(or medium amount of time) for small paychecks now, but with the goal of long-term wealth later on.
The "end-goal" I'm looking for is to eventually own around 5-10 houses. So I can retire, and that will supply me with income...
If I could get a few houses sooner, (rather than later) I would rent them out, while the rent covers my mortgage, (say my mortgage is $2000, I'd try for a $2300 rent with them). So it's covering my mortgage, and also supplying me with an "extra" 2-3 hundred a month, per house. (just an idea, definitely open to other ways to do it).
When I say "how can i get my first house", I basically mean, how do I start this process. I have at least 20K, but "new" credit, so banks won't give me a loan. (need to double check with them though)...
The Bay-Area market is kinda crazy. high demand, low supply. Many houses are being sold to All Cash buyers. they'll pay $150K in Cash. Offers over the asking price, etc. So I just don't know how to start.
Basically I would love to get "my first house", either as a rental, or a duplex/tri/quadplex, where I live in one part, rent the other parts out, which covers my mortgage, and i can start building equity from there...
these are just basic ideas I have, I am Very open to others.
Not a "do this only" position. just basic starting ideas. from a beginner.
Would love feedback/ criticism/ thoughts, better-ways, etc.
"All knowledge is power".
Sorry for the long post, I hope I cleared-up some of the questions...
John, thank you.
-Orion-
Jesse, thanks.
Yes, I've read it, but now that you mention it, I am going over it again. always good to refresh up.
worst case is that i work for 2 years, and build up credit so hopefully i can get a fha loan. but by then rates will probably be higher, and possible i still won't qualify for one. for now, im gonna keep reading. what would you do in my situation?
Regards,
-Orion-
Orion Longman, spend some time learning this business. Reading here is a good way to do that. A house that rents for $2300 with a PITI of $2000 won't put $300 in your pocket. A banker would estimate you would have a monthly loss of $275. That would be optimistic, IMHO, if you were using a property manager. If you manager yourself, you might do a bit better. There are MANY expenses beyond taxes and insurance. You may be collecting $300 a month when nothing goes wrong and there's a tenant in place. But once in a while a major bill occurs like a new air conditioner, roof, or a ugly and lengthly eviction.
Also realize the rent you charge is the factor you have the least control of. You have to research the market and figure rents in your target area. Then work backwards to what you can pay and have a profitable deal.
I have a pretty strong suspicion that most places in the bay area are terrible rentals. That's an area where the main play is appreciation. Investors buy rentals knowing they're going to have to kick in money on a monthly basis. The expectation is prices will rise. Twenty years from now the place is worth double what you paid and your rents are now high enough to generate cash flow. But in the short term, you have to make up the shortage. Now, there may be areas where you can find profitable rentals. So, step one to this process (perhaps, really step two, with step one to spend a lot of time reading and learning) is to start learning prices and rents in different areas.
@Jon Holdman has a ton of great insights, so following and answering his questions for yourself will show you the right way.
The bay area isn't one I would like to "start" investing in, i think its a place for more experienced investors since the price points are so high. However, if you're open to investing outside the city, especially in mobile homes or other lower priced areas, you can get a start there as well. Otherwise, you may have to wait the 2 years to acquire more capital and credit seasoning, but you have choices.
The way I got started in the Bay with less than that in cash was buying a 4plex with an FHA at 3.5% and had the seller pay all the closing costs (w/ a little bit higher offer). And I did in the Bay! @Jon Holdman and others are right that MOST bay area properties don't cash flow (and had a lot of other good advice about expenses). However, they can be had here in the Bay, without going inland (like Stockton), or going out of state (not my cup of tea for now.) You just have to be a bit more on the periphery of the Bay..
An alternative for this amount of funds would be to invest in something cheap out of state. Or invest alongside an investor here in the Bay. That's what I have done for my partners. I haven't quite gotten the level of comfort to totally place my success on someone in another state, but maybe someday I'll venture out that way..
I organized a meetup in Oakland on Jan 16th if you want to come out and see what other people are up to.. Good group so far.. Good luck Orion!