Got cash, good credit but majorly stuck.
Member since 2020 · 2 posts · 7 votes
I’ve got $100k, I’ve already gotten pre-approved for a loan however I’m stuck on where to buy my first investment. I’ve read much of the BP investing in rental properties book - I know about neighborhood classes, what pitfalls or opportunities to look out for - however having issues pulling the trigger on WHERE EXACTLY to buy. Maybe I missed in the book? I’m getting lost in the sheer volume of location options - do I buy in San Diego, North Carolina, Ohio etc...
In a world that my proximity to investment property is not an issue - what are the first best steps in pinning down location of investment?
Any guidance you have is appreciated.
Find the criteria that's important to you, and then take action.
I started by calling realtors and property managers in the markets I thought of. It causes you to take action without committing any finances
Step 1: Looks like your living or active in both Seattle and NYC. Please validate for the above so we can be more specific in our help. These two markets narrow your options down with $100k cash; but not totally. Totally different market and not my field; but I was discussing Downtown Chicago with a BP member from Chicago, the older Cylindrical buildings. My wife's company was possibly going to relocate her for 5 years there so we looked there. $180k to $220k; 1/1 or 2/1 condos. Or rent for around $2,100. I thought that was high from living in the countryside, but for the city, I thought it was great. Point, is there are options everywhere.
Step 2: I take it as $100k cash on hand. Determine your most likely funding source and the degree to which you want to invest. Based on that decision will determine your equity position and potential funding amount. Example: SBA loan at 10% collateral, $100k would be $1mm project with a $900k loan; Traditional 25% collateral with $80k cash would be $320k project with $240k loan. Do this step to help narrow down your search, other wise you will be looking at deals that don't fit and wasting energy.
Step 3: Recommend you never invest all of your cash on hand since you might have a future deal come up; you can always pay down; your retro costs may be higher than you thought; tenant revenue stream may not be as steady as planned. Especially first time out.
Step 4: Invest local to start with. You don't have a team. You don't have a list of types of people or resources needed. You need to be able to learn close by, so that later it is easier on you and your distant team member to communicate.
Step 5: Define success on your first time out. Your hesitant to pull the trigger, part of that is potential failure. Lets say you lose $25,000 on your first investment. To me that is not a loss. You will have learned a lot during that project. At some point you have to stop reading and get exposed and dirty; to learn to the next level. What does losing $25,000 mean to you? Do you go bankrupt; downsize your house; downsize your car; not go on vacation for 5 years; no college fund for your kids; etc. Once you identify to yourself, your not going to lose the full $100k; then you will be more willing to start your REI path.
Step 6: "Start small and Make your Big Mistakes Early".
Supply the following info:
1. City you are in or very familiar with.
2. How much can you invest or your total loan amount.
3. Define both failure and success; so the above can improve the options they propose.
4. What is your investment interest? AirBNB; hands off investment; House Hacking; etc.
5. Your REI background. Have you bought a house before or had one built?
Good luck.
@Amir Hemmat first of all try and find a mentor doing you’re on your own does not score you any brownie points plus you’ll be prone to making a lot of beginner mistakes, trying to go on your own. Make sure you have clear-cut goals. Most individuals are looking for cash flow investment properties I recommend that they treat their purchases like you would a flip. Many of the people I know who are successful start flipping for quick cash then start buying using flip parameters cash flow rentals. Find below market, use hard money to buy and renovate improve value refinance cash out, repeat.
@Amir Hemmat check out Colorado Springs, CO. https://www.biggerpockets.com/member-blogs/13626/92641-5-reasons-why-colorado-springs-is-the-best-market-to-buy-rentals
I am an investor, agent, and property manager there. Do your research and if interested I am happy to help.
@Amir Hemmat where do you live ? I would start there first unless it really really expensive.
@Amir Hemmat finding markets you are familiar with is huge and comfortable with. That’s why many people start out close to home because they know there market. Could look at other markets that you have family or contacts that may know a good deal about the market but ultimately whatever markets you go in you’ll have to learn quite a bit
THANK YOU to everyone for your replies. This has been monumentally helpful and I appreciate everyone's input.
To answer some of the recurring questions I noticed:
1) I currently live in NYC and my family lives in Seattle,WA and my in-laws live in Sunnyvale,CA. Although buying in one of those markets is not out of the question - all markets that are SUPER expensive to invest in a rental property so this is why I'm looking for a long distance investment.
2) Investment Interest: Looking for good value in a property i.e. flippable houses/condo/MFU. Goal is to build portfolio of rental properties (no airbnb) whereby managed through management company - so not super hands on.
3) My goals are to build long term wealth.
4) I would view success/failure as short and long term - I'll focus on short term. Short term success is defined as running at a surplus in year 1. Short term failure is defined as running at a deficit in year 1.
5) I have minimal REI background however, I'm learning as fast as I can. My family is in commercial real estate - so this incrementally helps in that I have a resource for advise and perhaps contacts.