Looking for advise in Real Estate investing

11 Replies

I really would love to get into some type of Real Estate investing, rental properties, flips, development, multi family, etc, but I don't really know where to start. I am a licensed General Contractor in San Diego that has worked flips, multi million dollar homes and everything in between. I am very driven and know that I can make something happen but need guidance on how to put the pieces together. Does a person look for partners? Look for cheaper markets than San Diego to get started?  I don't have a ton of money to just throw at deals, so... how much of my money do even want to use?  I got all the construction knowledge, now I need to blossom that into the next level. Any input would be appreciated. Thanks!

Have you done contracting work for any investors in the past? If so, keep building those relationships in particular. Get to know them, their business, their goals, how they do their deals, and so forth. 

The generic advice is to learn as much as you can through free and low-cost resources, like podcasts and books. Then go from there. You have a huge leg up on the average Joe, since you understand construction. Sounds like you're mainly missing the investor mindset & strategies, which is definitely a solvable problem.

Hi Jason, 

Have you utilized an FHA loan already?

FHA 3.5% down would be a good loan program to use so you can save any remaining capital on improvements.

In a general sense, flipping to raise capital to put into larger deals is a good path towards financial freedom. 

Investors in San Diego in the multifamily world used to do this by purchasing a property with under market rents, raising rents to market and rehabbing the units that move out. Because the owner raised the income, they simultaneously increased the value. They would do this until they have enough capital to put towards a larger deal and hold it for longer term, depending on their investment strategy, and return to "flipping" multifamily in order to save for their next big deal. 

With rent control and various other layers of law now in place, it has made this strategy more difficult, although not impossible. 

The simplest starting method for a person with little starting capital, from my perspective here in San Diego, is to utilize a 3.5% down FHA loan (and/or VA, if you have it), seek out properties that are slightly under market rent, give termination of tenancy to the unit with the biggest delta of rent vs. leading rent in the neighborhood, move into that unit while you renovate it, and then rent the unit at leading market rent a year or so when you move out. By this point, your property will have appreciated some, you've increased the income and increased the value. Maybe if you're lucky you were able to negotiate with the other tenants to get those units up to market rent as well, further pushing the value upwards (of which there are a few tricks, although the deal would need to make sense without this factor as it is not guaranteed. There is also an ordinance in place that prevents termination of tenancy for owner occupancy purposes until 60 days after the state of emergency has lifted, which is expected to be cleared within the year and would just need to work around this as well).

Once this is accomplished, you can then decide if its better to let it sit as is and generate its own appreciation and rent increases, or exchange the profit into something larger. We run 10 year projections on deals so you can tell which strategy would be a better play in the long run. 

Feel free to reach out for further inquiry or discussion!

Best,

Christina Labowicz, Apartment Advisor 

ACI Apartments

@Jason Dirks Just as these peoples RE knowledge is valuable to you, so is your construction knowledge valuable to them!  Use that to your advantage, keep those contacts from previous projects and build those relationships.  I am happy to help you explore the SD market further and see what's the best option for you.  I help investors all over CA find the best investment properties!

@Jason Dirks Hello! Like everyone else in this thread has said, your construction background will be invaluable! Advice from this newbie is... the bp podcast and forums is a community and resource that can teach you EVERYTHING in every corner of real estate. I have experienced (and heard lots of other experience) information overload. Some of the most valuable advice I have ever received has been to, " take some time to figure out what investment strategy will fit you best, then niche down hard. Study, educate and build relationships with people doing that particular thing". Otherwise your head will spin with options and cause you to do nothing. (Sure did for me anyway!) Hope this helps! 😁

@Jason Dirks

You mentioned a handful of different investing plays in your description. A few filters to syphon through.. Are you looking to owner occupy? Are you looking for an SFR, 2-4 unit, or larger? The type of financing vehicle will vary depending on your choice.Desired location? etc..

If you are looking to leverage debt and come in w/ little to no money down (VA), I'd recommend owner occupying / house hacking / whatever you want to call it and depending on if you're looking at an SFR or duplex an FHA or conventional loan product will most likely work best.

If you're looking for a complete fixer we need to make sure the home is "liveable" w/o safety hazards and that an FHA/conventional loan product will suffice.

I'd also recommend a thorough discussion w/ a qualified agent on the state of the market and what goes into putting together a strong offer other than just price. It's tough out there!

Best of luck,

I'd recommend that you help others that are looking in cheaper markets with their flips and ask to join them with the limited capital you have. Likewise you can build your contracting business in CA and invest out of state for when you have the money. The market may cool down by then too. :)

Use your skills that you've already gained in life and lean into them harder. You're a builder, so find vacant lots and build. Find flippers and partner with them. Find wholesalers that are willing to forego the wholesale fee to split flip profits on the back end.

If you bring you skills and sweat equity to a deal, others will be more than happy to bring you in and teach you what they know. Eventually you'll build up your own nest egg and you can plow that into long term investments.

@Jason Dirks If you can, start with house hacking a duplex using 3.5% down payment unless you have access to the VA loan. Once you get that under your belt, start looking to partner up with others in the area that have the money but not the time or ability to execute a rehab project. Start with you own deal if you can at first.