How Would You START Your Real Estate Investing Career?

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How Would You START Your Real Estate Investing Career?

Kelly McJunkin
Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes

Hello everyone, I have been following the threads for a while, but just made my own account here. I will be selling my primary residence in San Diego County next month. It is absolutely a sellers market, so I am expecting around $450k+ back from equity. I'm ready to dive-into real estate investing, and am curious what you would do as a first-time investor to generate a passive income initially and get the ball rolling?? I am open to rental properties, flips and wholesale. I would just love advice to point me toward the best starting point as a beginner. Thank you so much!

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y

@Kelly McJunkin and @Kenton LeVay, Be careful with the "flip into 1031" maneuver.  Flips generally dont qualify for 1031 treatment because your intent has to be to hold the property for productive investment use.  If your intent is to resell that doesn't work.

But there is a way to feed your flipping soul and get tax relief.  It just takes a little runway.  Instead of fixing and flipping, fix and rent.  Then refi immediately so you can get the cash for your next "rehab project".  Now you've got two properties - one generating income and one your fixing.  As soon as it's fixed rent it and refi to get your next one.  Now you've got three properties and a year may have passed which is probably enough time to sell and 1031 the first property into down payments on your next two improvement projects.  Within a year and a half you can actually have levered yourself into 5 properties in various stages - some being improved, some being rehabbed, some being sold (but all of this is tax deferred).

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  • Kenton LeVay
    Investor · Austin, TX · Member since 2018 · 119 posts · 114 votes
    5y

    Hey Kelly, what are your investing goals? Flips and wholesale certainly aren't "passive" but they can help grow capital quickly. If you're from San Diego, I'd assume it is probably hard to find a cash flowing rental property unless it requires serious rehab. I'd say for your situation, you'll probably be investing out of state anyway so find an appreciating market where flipping makes sense, use your whatever you're comfortable with to flip houses and then take the capital gains from the flips to buy rental property (ideally through a 1031 exchange). When repeated, this will generate a ton of wealth.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Kelly McJunkin:

    Hello everyone, I have been following the threads for a while, but just made my own account here. I will be selling my primary residence in San Diego County next month. It is absolutely a sellers market, so I am expecting around $450k+ back from equity. I'm ready to dive-into real estate investing, and am curious what you would do as a first-time investor to generate a passive income initially and get the ball rolling?? I am open to rental properties, flips and wholesale. I would just love advice to point me toward the best starting point as a beginner. Thank you so much!

    I live in Poway and invest in San Diego area.  My route is not passive.  Are you going to move?  Rent in San Diego?

    I would classify your examples as far from passive. More passive RE options include NNN, syndication, REIT, commercial properties (retail, industrial and large MF).

    Consider start researching syndications.  Look for one with a great track record of producing and ideally a short term to full payout so that you can pivot as you learn.  I believe you can learn more with the shorter/quicker options.

    Whatever you decide, do your homework.  Educate yourself.  There are a lot or routes in RE.  They have different levels of effort, risk, return, etc.

    Good luck

    1Reply
  • Derek Meyer
    Rental Property Investor · Largo, FL · Member since 2021 · 48 posts · 38 votes
    5y

    @Kelly McJunkin listen to the podcast at other’s stories. Find which is the most suitable for your lifestyle.

    My wife and I pretty much only interested in rent ready multifamily homes for now, but as income expands we make look into rehabbing and the BRRR method.

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  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Kenton LeVay I think I may have worded my post incorrectly. I am willing to work and coordinate projects such as flips. So, not necessarily passive right off the bat- more so, what should I start with that will generate some consistent income while growing a portfolio?

    I have been looking into out of state for rental property investments. Your suggestion of 1031 from flips to purchase a rental is a great plan. 

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  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Derek Meyer Do you invest mainly in Florida for these multi family properties? 

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  • Derek Meyer
    Rental Property Investor · Largo, FL · Member since 2021 · 48 posts · 38 votes
    5y

    @Kelly McJunkin currently yes, but I’m not opposed at looking into other areas. I just haven’t yet researched them enough to have the same comfort level as where I am locally.

    I know that above a certain street are now in a less desirable section as opposed to a macro level of by zip code.

    My father in law is getting me interested in San Antonio though. Lots of new construction.

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  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    @Kelly McJunkin I personally like small residential multifamily locally. Something you can purchase and renovate and potentially add a unit or convert a garage. There are some great neighborhoods with favorable zoning that would allow you to do that, aside from the great new ADU laws.

    Just got a 2 unit property in normal heights off market and buyer is converting the 3 car garage into another 2/1 unit for a total of 3 units.


    Lots of different options, best of luck! :)

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  • Dan Hunter
    Rental Property Investor · Austin, TX · Member since 2020 · 43 posts · 41 votes
    5y

    First thing I would do is educate yourself as much as possible by reading some good books or watching some youtube videos.

    Second thing I would do is is hone in a bit better on what type of investment you'd like to do.  You said you'd be interested in rentals, flips and wholesaling.  I would figure out one and focus on that to start. 

    Third thing I would do is decide which market(s) you think you'd want to invest in and study those markets daily for a few months.  Find out what a bad deal, an average deal and a great deal are in each area. 

    Finally, the advice given to 1031 a flip is incorrect.  You can't 1031 a flip unless you hold it for a long time and rent it out....which I would say makes it not a flip in the first place.

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  • Allen Wu
    Rental Property Investor · Member since 2021 · 335 posts · 193 votes
    5y

    @Kelly McJunkin

    I’m from SoCal and used to live in San Diego. I am a buy and hold investor focused on cash flow + appreciation areas. I like this approach because I’m a W2 employee looking to have an “option” to work in next 20 years.

    Flipping and wholesaling are not for me. Seems a bit more hands on and requires more work.

    0Reply
  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Allen Wu Am I crazy to feel a little nervous about a buy and hold right now? Sensing a market dip soon

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  • Allen Wu
    Rental Property Investor · Member since 2021 · 335 posts · 193 votes
    5y

    @Kelly McJunkin

    Who knows. I invest in real estate like stock market. I dollar cost average. Bought in 2014 when I thought it was heating up. Again in 2020 when things were sketchy. And again a month ago when it was heating up.

    I’m on pause now, until i pay down 2 of my 4 units. Then, I’m back at it, for risk mitigation.

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    @Kelly McJunkin

    I would get your feet wet by putting 20% down on a conventional loan for a SFH. You'll make 40-60% CoC on your 20% down when you factor in monthly cash flow, principal pay down and appreciation.

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  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    5y

    @Kelly McJunkin, to add in, it becomes what are your goals. Flips are very active endeavors.  Good contractors are hard to come by, and those that are good and you can trust without overseeing day in and out typically charge quite a lot making the financials of the flip that much harder. 

    I agree that buy and holds are few and far between right now.  Most markets are appreciating faster than rents are growing, thereby cutting into your cash flow.

    Personally, as someone the does flips, owns SFRs, invests passively and had an AirBnb, my money is in flips and passive investing through syndications. My SFRs do fine, but they are not some cash cow, and I bought them in the financial crisis at prices that you cannot find in any major market across the country. The reason they are not cash cows is my more conservative view on reserves, particularly Capex reserves.

    Flips as mentioned are a lot of work, and personally I would not do them outside of my market.  Others clearly have but I visit my flips several times per week and always have to address issues that the contractors (who I would qualify as some of the best) either don't know how to address or are addressing in a way I do not want.

    Syndications are my current favorite as the returns I am receiving are higher than my rentals (again I account for a lot of reserves), with a lot less work.  Vetting sponsors, reviewing financials and operating results, but no managing the managers or tenants like owning rentals directly.

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Kelly McJunkin and @Kenton LeVay, Be careful with the "flip into 1031" maneuver.  Flips generally dont qualify for 1031 treatment because your intent has to be to hold the property for productive investment use.  If your intent is to resell that doesn't work.

    But there is a way to feed your flipping soul and get tax relief.  It just takes a little runway.  Instead of fixing and flipping, fix and rent.  Then refi immediately so you can get the cash for your next "rehab project".  Now you've got two properties - one generating income and one your fixing.  As soon as it's fixed rent it and refi to get your next one.  Now you've got three properties and a year may have passed which is probably enough time to sell and 1031 the first property into down payments on your next two improvement projects.  Within a year and a half you can actually have levered yourself into 5 properties in various stages - some being improved, some being rehabbed, some being sold (but all of this is tax deferred).

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    2Reply
  • Alexander Szikla
    Real Estate Agent · New York City · Member since 2020 · 819 posts · 641 votes
    5y

    Definitely would have purchased an FHA property first right out of school.

    The increase in the overall property value on such little equity would be tremendous! 

    0Reply
  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Evan Polaski Thank you so much. A ton of good information here! Syndications were sparking my interest, and I've been starting to look into them as well.

    1Reply
  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Dave Foster YESS! This sounds like what I have been trying to piece together. Thank you SO much for laying that out for me. This is the BRRR method, brilliant. Thank you very much!

    1Reply
  • Kelly McJunkin
    OP
    Real Estate Agent · Temecula, CA · Member since 2021 · 28 posts · 16 votes
    5y

    @Alexander Szikla What I wouldn't give to turn back time and make different financial decisions for myself as a young adult. Thank you for your input!

    0Reply
  • Christopher B.
    Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes
    5y

    1. You need a primary revenue generator that pays the bills and throws off investable cash. This can be a W2 you enjoy or you can be full-time REI. Either is fine. Good real estate careers

    - Agent (the good agents make a LOT of money and 95% of the agents are not good) 

    - flipping (tough biz to scale, a lot of headaches, inconsistent income but money can be good if you are good)

    - Some form of service provider to the industry. Fill in the blank 


    2. Once you have established your primary revenue driver choose an asset class that matches your goals. SFR's are wonderful investments but many find them hard to scale. Are risk averse? Would you rather have a smaller, simpler portfolio that is focused on net cash flow or maximize ROI through scale and consistent reinvestment. Asset classes you can pursue are endless, no need to list.

    3. Focus, systemize, and process. As Brandon and David would say, build your first bridge then work on another. Or, don't squirrel too much.  There are so many ways to play this game it can get overwhelming. In this stage done is perfect. 

    4. Perfect the machine here. Now you can start to open yourself up to all these unique opportunities you are seeing all around you. You can grow or let go by handing things off and relaxing a bit. Maybe both. 

    1Reply
  • Craig Bliss
    Flipper/Rehabber · FL · Member since 2019 · 15 posts · 2 votes
    5y

    Wow...lots of good responses here - maybe more than you had hoped for...?

    I've been flipping SFR's for a pretty long time, during good and bad markets. From my experience, it takes either tons of time and money, or almost none at all.

    The recommendation I would have is read through all the great materials BP has as well as other sources, looking for the niche of the REI industry that would best suit your skills, time availability, and available capital. One way to get into flipping with the amount of capital you have (e.g., some portion of your $450K) would be to get in on a joint venture with someone that can give you some "hands-on" experience and coaching while you provide some (or all, depending on your risk appetite) of the working capital.

    You might be able to find someone in your area interested in such an arrangement here on BP. Also check out meetup.com for a local REI group. That has been a good source of deals for me in the past, here in the Southeast.

    Regardless...do your research. With your motivation and drive, there's little doubt you'll be successful!

    0Reply
  • Eric Schultz
    Investor · San Diego, CA · Member since 2016 · 265 posts · 305 votes
    5y

    @Kelly McJunkin

    Here’s another route if not now, for the future...

    If you are not familiar with the term accredited investor, look up the SEC definition and see if you meet the requirements.

    If you do meet the requirements, more doors in real estate investing will be open to you, especially on the more passive investing options.

    The caveat to investing in syndications is that getting involved should be an active endeavor upfront. It comes down to investing with those syndicators / operators that you know, like and trust. To develop these aspects of the relationship, I recommend phone calls / virtual meetings, monitor their deal flow, review their track records, attend their webinars, etc. Get knowledgeable on the markets and underwriting of the deals. Then jump in for the passive investing.

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  • Gabriel Bures
    Peekskill, NY · Member since 2021 · 20 posts · 28 votes
    5y

    @Evan Polaski

    Hello Evan, I'm also new to BP and am trying to narrow down my strategy.

    Would you mind pointing me to a resource for information on syndication? I'd like to learn more.

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    I would suggest investing out of state for cashflow.

    I started with remote turnkey rentals in 2009-2015 which I was working my engineering gig. Then went into syndications once my net worth went over 500k.

    0Reply
  • Owen SchwaegerlePro Member
    Real Estate Broker · San Luis Obispo, CA · Member since 2016 · 181 posts · 69 votes
    5y

    @Kelly McJunkin one thing I’d recommend is house hacking with your next purchase. Buy a 2-4 unit property, have your housing expense covered, and then massively save to buy your next investment. Keep the multiunit and keep moving up.

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    5y

    @Kelly McJunkin. What skill sets do you currently have? Are you a contractor or handyman? Have you managed rehabs before?  Doing a reno/rehab is hard enough but if you have not managed one before and it is out of state that just seems to me to me creating a huge challenge as your first endeavor. 

    Are you able to move to a different location to invest? 

    Will you rent once you sell your home? 

    In general (not always tho!) RE is a long game. Its not a get rich quick scheme. So maybe buying in CA would work if you look out a little further both distance and also time.   

    I dont recommend investing OOS and i DO recommend self managing if at all possible. 

    To be honest 400k is not a lot of $$ to invest so my advice is to be as conservative as possible with the goal of keeping as much of your nest egg as possible, learn as much as you can and grow your asset value over time (long game remember?) 


    Eta be sure no matter what you do- to have cash reserves set aside. How much only you can decide but I like to have one years worth of income set aside. 

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