Just starting out! House hacking or small apartment complexes?

Question

Hey everyone, Brennan here, and I'm relatively new to real estate investing. I've been studying it and reading books non-stop for about the past 6-8 months and I can't wait to get started. I'm currently a senior in college and plan on graduating in the Spring with a degree in finance, and am currently still living with my parents and have no major expenses outside of paying for my car insurance and phone bill (Lucky, I know).

Given all the experience and knowledge on this site, I was just curious what would be the best way for me to start out? I planned on steering clear of the single family route, but planned on house hacking as soon as I graduated with a 3-4 family using the BRRRR strategy, and I'd like to repeat that for at least a few years, using FHA loans and refinancing at the end of each year to get a few cash flowing properties under my belt. I currently have enough money saved up to purchase a 3-4 family using an FHA/FHA 203k loan in my desired location, which is Worcester, MA. After I had a few of those properties by the time I'm 25-26, I would use a 1031 exchange to hopefully trade those into an apartment complex where things would really get rolling.

On the other hand, I'd like to get started as soon as possible and have a potential private money lender offering to lend up to 80k to get me started in real estate (I know this individual very well and they have a lot of faith in me, they can see how passionate I am about it). Not to mention I'm also actively looking for deals (smaller apartment buildings, 5-24 units) where perhaps seller financing or a master lease option would be a possibility so I can get started without much of my own capital, but obviously these are difficult to find given my inexperience in finding off market deals. Given all of these options, which one would the seasoned professionals out there recommend? Should I wait to graduate and simply start off by house-hacking a few triplexes/quads and go from there, or should I start actively looking for deals to utilize my private lender and to get my foot in the door and start scaling as early as possible? Any help at all is appreciated and I'm looking forward to hearing the responses from the professionals out there!

Sorry for the long post which seemed to be all over the place, I'm just trying to figure out a solid plan for building my portfolio as quickly as possible. Thank you everyone!

Christina J. · Answer

@Brennan Doherty

Everything I know about apartment investing I learned on the BP Podcast ;) No personal experience but you'll get lots of good feedback here...

Brennan Doherty · Answer

@David Cruice

I don't think I'd be interested in being a Realtor, it would be strictly for MLS access and saving commissions, not to mention it will help me build relationships with lenders, contractors, brokers, etc., however working at a real estate investment company for a few years definitely seems like a great idea to understand how everything works. My goal is to pretty much generate enough capital to kickstart off my investing career and learn as much as I possibly can about the business before launching into investing full time. Thank you for your advice, there's a good chance I'll get both because it couldn't hurt, right? Aside from the money spent obtaining them.

@Christina J.

My pleasure! And it's not really my goal to get a job in finance, so apartments may be the way to go. I just can't imagine myself sitting in an office typing into an excel spreadsheet for 9 hours a day and loving it, which is why I've turned my attention to real estate. My first, second, and even maybe third house is most definitely going to be a house hack, I just can't imagine paying hundreds or even thousands of dollars in rent that I'm never going to get back when I could be paying myself instead.

Also any chance you have any advice that you're willing to share for someone just getting into the apartment game? It all seems pretty daunting before you get started.

Thanks for the comment and I'll be sure to keep you updated!

Christina J. · Answer

Welcome, @Brennan Doherty! Your motivation and drive are inspiring to witness - thanks for sharing your plan for your REI career.

Lots of good advice already shared in the comments here, so I'll just say it all comes down to the life you want to have. I'm a little partial to house-hacking, but that's because it's what works for my life. But you have to decide what works best for you. If you're going to get a job in finance and have to buy a house anyway, house hacking makes a lot of sense. If you want to get your RE license and skip straight to a full time career, apartments may make more sense.

Both are great options and can be very profitable. Keep us posted on your journey - you're one to watch!

David Cruice · Answer

Realtor's license will be good to get you into the MLS, network with peers, find deals, and save money on commissions. It takes a while to actually make money as a Realtor since you need to build up a client list. The CAM license would help you understand about property management, rules, regulations, statutes, etc. as that govern your state. In addition, if you are considering a job in real estate investment and/or management it would look good on your resume.

Brennan Doherty · Answer

@David Cruice,

Thank you for the advice! I'll definitely look into getting my CAM license, I never even thought of that. I had planned on getting my real estate license for sure, I figured it would help me learn the industry a bit as well as save me some money on each deal by not having to pay an agent's commission. Which do you think is more important, or atleast which one would you recommend getting first?

David Cruice · Answer

P.S. Forget to add: Think about getting your CAM license. Another good way to learn about, and get a job in, the real estate investment industry.

Brennan Doherty · Answer

@Matt Engle Thank you for the response. I feel the same way, however my first home is definitely going to be a house-hack just so I can live for free and get ahead that way.

I've been keeping my eye out for apartments, however my main issue is similar to what Jeff said, I'm having trouble locating motivated sellers who would be open to seller financing or a lease option, LoopNet or Redfin aren't exactly the best sources. Any recommendations for key words to look out for in the listings, or maybe any strategies you're willing to share for locating motivated sellers? Thanks again for your help!

David Cruice · Answer

@Brennan Doherty , Bravo, young man! Bravo! You sound like a very switched on individual with your head well and truly screwed on your shoulders. A very sensible and well thought out couple of strategies you have laid out. My advice to you would be to put the hard money lender to one side (he isn't going to go anywhere and will more than likely be even keener to help you once he sees who successful you're going to become) and take the next 18 months to (1) Find yourself a job in finance, and (2) Find yourself a nice 4-plex to purchase/house-hack via an FHA loan. With the job, I would recommend looking for something with a large property management company such as FirstKey, Invitation Homes, American Homes for Rent, etc. since there is no better way to learn the industry from the inside out. With the 4-plex: Once acquired, take the time to stabilize, maximize rents, minimize expenses and learn what is most probably the hardest thing about real estate industry: managing tenants and all their quirky little idiosyncracies! There's quite a bit more advice I could give you, but I'm a bit rushed for time. Feel free to DM me via BP should you have any questions. I'm always happy to help out when I can. All the best.

Jeff Lundeen · Answer

@Matt Engle What would be your strategy in finding these smaller apartment complexes? It seems that finding an apartment that value can be added would make sense. What kind of sellers are you looking for in this situation and where do you find a motivated apartment seller?

Just starting out! House hacking or small apartment complexes?

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