New Member Post and a Question

[Max Uyeda]

Hi BiggerPockets community. Thank you for making such a great place for so much information. I became interested in real estate investing a couple weeks ago, so I am brand new to this thing. My goal is long term holding to build retirement income. I'm currently 34. Maybe someone can give me insight into a question I have. 

I am wondering if I should start with SFR or multiunit. I just finished Brandon's book "book on rental property investing." It highlights challenges with investing out of state. I live in Hawaii, where none of the math looks like it will make sense to invest here. My plan is to invest out of state with a very strong management group. I was looking into REI Nation, and have seen good reviews, but they only do SFR and I'm wondering if my capitol would be better spent on multiunit instead of SFR. I have about $400,000 to invest. I could probably get up to $600,000 with family help. Any thoughts on if I should go the multi-SFR refinance route, or if I should use that as a down payment for a larger multiunit property? I'm guessing that refinancing and repeating with SFR is stronger than being tied up in one property but I could use some experienced feedback. Any advice would be great, thank you. 

[Dan H.]

My belief is you are entering a challenging RE market.   Prices are high, rates are high and rents have not kept up. 2 recent studies show it is cheaper to rent than to own in virtually every large market in the US.  Note landlords have increased costs on owner occupied. In particular vacancy and associated tenant flip, increased maintenance/cap ex (it is a very rare tenant that will care for a property like the owner, and in many markets owner occupied pay less property tax.

As indicated it is a challenging RE market.  I believe you need one or more of the following to have a good rental:

- Below value purchase.   This implies off market as mls purchases are retail purchases.

- value add

- alternative financing

- low LTV/leverage

- alternate rent model such as STR, MTR, Rent by room

- patience

All of there either have risk, require work, negatively impact return, or take time (I am not that patient)

Which of these do you think you can successfully pull off on an OOS purchase.   Definitely there are increased risks and challenges OOS.

I like the show Renovation Aloha   Have you seen it?   Flippers on Oahu.  

You do not state how active you desire to be in you REI, but if you are willing to put in some sweat equity, I suggest you take @Joel Bongco up on his generous offer.   I have made the same type of offer in my local market on occasion.   I am surprised how seldom my offer is accepted.  Just seeing the numbers can be enlightening    Before/after photos for the value add also could be educational.

Regardless I recommend all newbies to start in the home market or at least a market they know like their home market. REI is challenging enough without the added risk of starting in an OOS market.

good luck