I'm a new investor looking to purchase my first 3-4 unit deal and need some advice. These types of units in my current market go for more than $200,000 with rents ranging $850-950 for two bed rooms apartments. Since I don't make a lot of money and I don't want to use partners for every deal, I'm looking into 2 different city's that are about 1 - 1 1/2 hours away from me. Compatible houses start at $130,000 with rents ranging $650-$750 for 2 bed room apartments in these two areas. I have 20k to start off with, option for FHA loan, parents who would fund repair costs. My goal is to get into commercial real estate or purchase enough properties for finacial freedom. Here are my questions-
Is looking in new areas within driving distance a good idea for the goals I have?
What steps can I take to research these new markets to know what my best options are?
Should I look into foreclosures as a BRRR strategy since I have partners for repair costs?
@Timothy Curry if you are a brand new investor, look at a small multi-family that you can live in one unit and rent the others. With that in mind, you wouldn't want a property 1 1/2 hours away just because it is cheaper, then have to deal with a super long commute. That to me would be a nightmare. But maybe you are fine with that for a couple years or you telecommute so it isn't an issue.
If the property is in decent condition, you could skip FHA and just buy a small multi with conventional financing and fix it up while you live in it. I would first start off by checking your credit, making sure that is in good shape. Then knowing your credit is good, and you have $20k for a down payment, I would go talk to a loan officer and get pre-approved for a loan. Make sure to talk with them about using rental income for the property you are buying as qualifying income if you need it. After that is done, look for an investor friendly real estate agent to work with.
If you decide to explore new areas, go spend Saturday and Sunday afternoon going to open houses. Go see what is selling, what the neighborhoods are like, go eat at the local hole in the wall/mom and pop sandwich shop. Go see if the local neighborhood watch or police department does local community meetings, and if so, attend them. Look up BP members in those target cities and ask to buy them coffee/lunch/beer and pick their brain on what areas are good and bad in those new cities. Every day look at the local paper for those target cities and see what crime is mentioned, and make notes of where the location is. Use the crime map on Trulia to see what areas to avoid. It doesn't take much effort to get to know an area.
@Timothy Curry Congratulations! Since you are a "new investor", I would stay close to home on your first deal. And start small, learn the process and look for ways to make the process better for you. I would not start with 2-bedroom properties, 3-beds minimum, kids these days always want their own room and 3 is better than 2. Plus 3 brings in more rent. If you can swing it, look at 3 beds as a minimum.
I think you have great goals, but I would work to get some experience under your belt and learn what you do right and wrong and look to improve. I am always looking to improve my processes. I would ask other investors in "new markets" about their experiences. Most investors are open, no one can own all the properties. I think there are going to be more foreclosures soon in many areas due to weather, so that might be a good option for you. Wish you the best!
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