So I’m Andrew, a 28 year old college student who a little over a year ago was basically broke. However watching the stock and oil markets for some time I was able jump on once-in-a-lifetime prices, and, with various forms of borrowed capital contributing, I’ve essentially gotten a 10x return to date on my own money, and expecting that might double again over the next year or two before I’ll call it played out and be ready to shift to something else.
So I’m wanting to get into real estate. I set the audacious goal of going from a net worth of $100k by the end of the year ($70k right now) to $1m in 5 years — wanting financial independence soon as reasonably possible. I live in Eugene, Oregon, but would be willing to invest out of state (not sure the west coast is the best beginner market at present) and I’m not opposed to spending a year or two waiting for the right deal — after all this last one was 15 years in the making for me.
Biggest limiting factor is that it’s unlikely I’ll have predictable income between now and my first mortgage. I imagine I could find people to partner with easily enough if need be. Biggest advantage is I know how to take my time and wait for the perfect opportunity as seen above.
So a few thoughts come to mind as far as how best to play this: 1) I might try to find a super good deal that I can house hack in the Eugene area (thinking a 4 room house subletting to students) so I have free rent while finishing up school and a super good return on a FHA loan and build out from there. 2) I could just start, say, picking up $100k duplexes in north Florida, perhaps several next year (don't intend to buy anything this year regardless), 3) I could wait for one perfect big multi-family unit to pick up and sit on for a couple years before 1031ing into something bigger and better.
I’m curious if anyone has any suggestions as to one play over another, or other points I might wish to consider.
I suppose realistically option 1 shouldn’t conflict too hard with 2 or 3 as it wouldn’t necessarily tie up that much capital, but I’m worried about either qualifying for a mortgage, or qualifying for a mortgage on a new house, while having a highly irregular and unpredictable income. I suppose a good partner could help with that however.
I'm active in the Eugene area. If you'd like to connect, send me a message. Thanks!
Not having a strong W2 job will be your biggest downfall. Cash out refi's and investment property mortgages will be a nightmare. House hacking is your best route to get your foot in the door and build equity and prove to financial institutions that you are capable of being a landlord. Building a Stock portfolio and actually taking out profits as income are two completely different things. You will most likely need to show "taxable income" for about two years to have it be considered an actual job. There are always private money lenders that don't care about income, just if the numbers work on the property.
It's great to hear that you are able to get to $70k from basically broke a year ago. I think you are going in the right direction. However, I would suggest you to think about your goal again.
The stock market was in its best run since 2009. People can just close their eyes and pick a stock like PLUG, TSLA or ZM. Historically speaking you may not be able to achieve 10x return in the next 5 to 10 years again. And from what I learned about RE investing, it's not a fast way to get you rich. And it's definitely more hands-on compared to stock market as well. You need 2 out of 3 things to be successful in real estate (money, time or knowledge).
Speaking of rich, have you read "Rich dad, poor dad"? He mentioned a concept that wealth is determined by how long you can survive if you stopped working, not by net worth. Real estate is not as liquid as stock. You cannot just sell it when you need money. It's like selling the hen which lay golden egg. Since you don't have a steady income, having $1M net worth but not enough cashflow may not help you reach your goal if your goal is for you to retire in your 30s.
So I would suggest you to think about what is your goal. If you want to quit working and rely on passive income, then focus on cashflow from RE (not net worth). If you want money fast, then invest in stock market rather than multiplex. Either way, please educate as fast as you could in what you decided to do. Otherwise, you may be taken advantage by others or worse, become another victim in scams (especially if you are looking for partners).
Again, you had a great start and good luck.
P.S. Don't WAIT for the PERFECT multi-family unit. Start small, make some mistakes, learn from it and then the perfect unit may come. MAY.