I am 23 and I am looking to getting into the real estate game early. My strategy would most likely be buying properties and managing remote with property management companies since I will probably be going through multiple moves with my job throughout the next 5-10 years. I only have about 5k cash available to start. I would like to implement the BRRRR strategy or find good profitable turnkey properties to make sure I can cash flow positive.
With the limited cash I have, what process/loan types should I follow to getting first cash flowing property?
Hi Rodrigo,Welcome to BP!!!!
I think with that amount, you are better off educating yourself 1st with books, podcasts, meet ups, and webinars. Even joining a mastermind group wouldn't be a bad option. If you have decided to invest out of state, then look into markets like Cleveland and Memphis where you can find cheap properties which cash flow and it would fit your budget. Also, talk to a lot of lenders in those areas who would be willing to work with you on that budget. It will be tough but who said REI was easy. Good luck and let me know if I can help in anyway.
@Aj Parikh thank you AJ! I will continue to get educated and save up! Very excited!
Buy A duplex or something you live in as well or you will not be able to get a loan easily. But I would save up more money to work with.
Since you don't have much cash my recomendation is to buy yourself a primary residence using an FHA loan. You can buy a townhome or condo with a 3.5% down payment. Where I live you can find townhomes and condos for as little as $70k. 3.5% of 70k plus closing costs ends up being about $5k (which is what you have!).
Live in it, pay the mortgage instead of wasting your money in rent, then when you save a good amount of money you can buy another house and rent the townhome or condo.
@Polo Vazquez FHA means I have to live in it for at least a year right? Also, what if I wanted to do a BRRRR? Would a be able to get a hard money loan with no/little money down and build my rehab cost into the loan? (Then refinance it out so I have more to work on and keep repeating that?)
Yup! FHA means you intent to live on it at least a year.
Yes, you can get hard money or private money to buy the house, fix it and then refinance after to get a low cost mortgage. Keep in mind you have to wait 6 months after you buy the property to be able to refinance it with a bank. They call this a seasoning period. There is ways around this 6 month seasoning period but you have to get creative and can be more a hassle.
@Rodrigo Barreiro Pujol Thanks for posting this update and good luck in starting out! I am also a new investor looking into out of real estate deals. I would have to emphasize the point of talking with people who have been their before, both in your current market and ones you are looking to buy in. I just signed up for a Mastermind group and my approach is asking any question that comes to mind with an open attitude and mind. I would recommend the use of the calculators here in BP as I have found (which is what almost every podcast talks about) consistency will bring a better level of understanding what you need to find. If you are moving around a bunch anyway the timing on things may be another thing to consider if you use financing (6 months for seasoning and then an intent to live for another 12). The year timeline does restart on refinancing for most lenders (just started that process on my primary residence with the intention of renting out later for better cash flow) and I do have to wait another 12 months despite already being in the property for 4 years already.
Hola Rodrigo! I might be able to help you out! It sounds like you need to get more under your belt first but if you find a good team or partner you can start soon.
Congrats on getting started!
For OOS investing with little capital, it can get tricky. I would suggest scaling your savings before you make any big moves.
After purchasing, being cash-poor as an investor can make things much more stressful than necessary and can potentially leave you worse off if you aren't careful with your purchases and in vetting your OOS team. Your first step to seeing your potential, if your serious about diving in with what you currently have - would be to add an REI realtor in the market of your choice (consider midwest areas such as Indianapolis: cheaper to get in with high appreciation over time). The trouble with the market right now, at least in my area, is that inventory is low and is going fast and typically above asking - you'll have a lot of competition out there and consulting with a realtor in REI may lead you to lenders that will allow you to have realistic conversations about what is truly possible for your income/situation.
I think its great that you're serious about getting into REI at a young age - just dot your i's and cross your t's so you end up making positive and forward-moving decisions now that pay-off later.
Best of luck to you!
With the limited cash you are most likely going to be only able to house hack. If you can figure out a way to do this first, you will be off to a great start. Either that or find a partner. Good luck! @Rodrigo Barreiro Pujol
Everyone has great ideas above! Wow-23...I wish I would have been learning about real estate at that age :) To get started- everyone is right on track with house hacking in your current market---obviously, a lot of this depends on where you live(prices of homes) and willingness. Sometimes doubles can be more expensive especially if you are looking to live in an A or B area, so if you are willing even to rent out rooms in a SFH this could be something to consider. If you are wanting to implement the BRRR method and are relying on forced appreciation you will need something that will be a fix-upper. If you aren't comfortable with a rehab, you can start off with house hacking on an FHA loan with something more turn key and live for free to save money to keep investing. Things to consider. Once you live there for a year and need to move for work, you can rent it out( I would run the numbers to make sure this would work prior to purchasing the property). Then, repeat this process in each market you move if homes are affordable.