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Updated about 11 hours ago on . Most recent reply

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Tulika Bose
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Scared but Determined: Seeking Your Guidance for the First Real Estate Investment!

Tulika Bose
Posted

Hello BP Community! 

I am  excited to introduce myself as a new investor ready to start the real estate journey alongside my adult son. We are based in Central Jersey with big dreams but feeling a bit overwhelmed about where to take our first step.

Our Goal: Build a portfolio of long-term rental properties that generate consistent cash flow

Our Focus: Class B properties that we can rent to college students or traditional long-term tenants

Our Challenge: Limited starting capital and analysis paralysis about where to make our first move

Target Markets We're Considering: New Jersey (local to us) , Philadelphia region( many colleges), Frisco, Texas( growing city)

Seeking some tips on :  which market might be best for rookies with limited funds( 300K) . Analyzing deals in these markets. Any red flags we should watch for as beginners. Any specific neighborhoods or areas within these markets that are investor-friendly?

Our Situation: We've been consuming BP content, podcasts, and books but keep second-guessing ourselves when it comes to pulling the trigger. 

We are committed to doing this right and would  love to connect with mentors or other investors in these markets. Any wisdom, warnings, or encouragement you can share would be appreciated

Thanks for including us in an amazing community. Looking forward to contributing back once we get our feet wet!

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Ryan Spath
  • Real Estate Agent
  • Boise, ID
105
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167
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Ryan Spath
  • Real Estate Agent
  • Boise, ID
Replied

@Tulika Bose

Welcome to the exciting world of real estate investing! This is truly a powerful tool that can transform average people into financially free individuals and millionaires. It's fantastic that you and your son are embarking on this journey together.

Feeling overwhelmed and experiencing analysis paralysis is incredibly common, especially when you're starting with limited capital. You're not alone in that! The fact that you're consuming content and asking for advice shows you're committed to doing it right, which is the most important mindset.

Here are some thoughts based on your goals and challenges:

  1. 1. Market Selection:
    • "Boots on the Ground" is King: I always advise new investors to start in an area they are intimately familiar with, or where they have reliable "boots on the ground" (a trusted team member, friend, or family member who can physically be there). This significantly reduces risk, especially for your first deal. Given your situation, Central Jersey or the Philadelphia region might offer this advantage.
  2. Local Market Nuances: Each market has its own quirks. While Frisco, TX, is growing, understanding the local landlord-tenant laws, typical tenant profiles, and contractor networks from afar can be challenging for a first deal.
  3. Focus on Cash Flow First: For a long-term rental portfolio, consistent cash flow is paramount. Ensure your target Class B properties can truly generate positive cash flow after all expenses (mortgage, taxes, insurance, vacancy, repairs, capital expenditures, management fees).
  4. 2. Analyzing Deals in Your Markets (Step-by-Step):
    • Run the Numbers, Relentlessly: For Class B properties, make sure you are cash flow positive after all expenses.
  5. Get Realistic Expenses: Don't just estimate mortgage. Include property taxes, insurance, a vacancy rate (e.g., 5-10%), a repair/maintenance budget (e.g., 5-10% of gross rent), and a capital expenditure (CapEx) fund (e.g., 5-10% of gross rent for big-ticket items like roofs, HVAC).
  6. Know Your Rehab Budget: For your first one, keep the rehab simple: floors, paint, appliances, maybe a bathroom refresh. You do NOT want to overwhelm yourselves with a major renovation on your first deal.
  7. Check Major Components: As you noted, verify the age and condition of the roof, HVAC, and water heater. These are big-ticket items that can quickly eat into profits.
  8. 3. Red Flags for Beginners:
    • Emotional Buys: Stick to the numbers. If it doesn't cash flow, it's not a deal for your strategy.
  9. Underestimating Expenses: This is the biggest pitfall. Always budget more for repairs and CapEx than you think you'll need.
  10. Ignoring Local Laws: Especially landlord-tenant laws and any specific regulations for Class B properties or student rentals.
  11. "Too Good to Be True" Deals: If it seems too easy, it probably is.
  12. Lack of Team: Even if you're self-managing, have a reliable network of contractors, a good lender, and a knowledgeable agent (like yourselves!).
  13. 4. Overcoming Analysis Paralysis: Just Do It (Smartly)!
    • You've consumed a lot of content – that's great! Now, it's about taking that educated leap. The first property is your best teacher. It will give you invaluable experience for the second, and so on.
  14. Start Small, Learn Big: A light rehab Class B property is perfect for this.
  15. Market Shifts as Opportunity: Here in Boise, Idaho, for example, we're currently seeing a slight shift where buyers are having to be more realistic with prices, and are often offering concessions to get deals done. Use these market shifts to your advantage in your target markets – look for motivated sellers!
  16. 5. FHA financing
    • o You mentioned your adult son is investing alongside of you, if he doe not already have a residence you can leverage this by purchasing a small multifamily unit 2-4 units with as little as 3.5% down!

With the right mindset and a bit of financial discipline, you truly can achieve financial freedom through real estate, potentially in around 10 years. Bigger Pockets has some amazing free resources, this is one of my new favorites is the FI guide: Real Estate Investing Data and How-to Guides

Wishing you both the very best on your journey. Feel free to reach out if you have any specific questions or want to connect further, I’m located in Boise, Idaho so I cannot help you find deals but running numbers and different scenarios is something I love helping new investors do.

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