Hi Bigger Pockets community,

Jonathan here, I first started listening to the podcast during the beginning of Covid and now I'm 100 episodes in. This is my first post here actually and I have a lot to say. 

So, I just wrapped up my undergraduate education at University of California, Irvine this December. Finished in 3 years, majored in Business Administration: Finance and accounting. I'm originally from San Diego, moved up to Orange County for college, and now back down here since March of 2020. 

I have some good equity built up in my stock investment portfolio which I started at an early age, fair amount in cash saved, and 0% interest debt due to student loan pause. I'm pretty knowledgeable on the different parts of the real estate business ranging from the agent's side, the debt side, the type of loans, the methods of purchasing, BRRRR method, Pro-formas, valuations, and overall general idea of southern California markets. I was originally thinking about single family homes, potentially a 3/2 and adding value through a rehab and renting it out, but I honestly don't know where to start. In an ideal scenario I would like to work with an investor to gain hands on knowledge about the whole process, but I know the importance of action and doing the work hands on.

Basically, my questions are: 

How would a young, hungry, and ambitious investor like myself start? I've looked into markets like Arizona and Texas as possible alternatives; Would it be a good idea to potentially start prospecting over in those areas since the real estate market is developing and the homes there are cheaper than San Diego? What would be the best course of action and best use/velocity of my money? 3.5% FHA loans to get a condo; Rehab the condo to rent? Traditional 20% down in a different market?

Thanks for all your time, sharing your knowledge, and helping a young lad begin his journey!

Jonathan Wu

You're working right with regular W2 income?   That's the first place to start.  Once you have a year or two of steady income, then apply for a mortgage and see how much money you can borrow.  You can do that now, but unless you have income, it might be tough.  Guess it depends on how much cash you have in the stock portfolio though.  Many recent grads want to house hack, so that means buying an owner/occupied property and living in it and renting out the extra bedrooms....or maybe all the bedrooms and you crashing in the living room or study or somewhere maybe a camper in the drive.  The reason for this strategy is lower down payment for owner/occupied properties.  If you pick another market and long distance invest then you'll have to use more down payment likely...like 20%-25%.  Of course there are other low/no down payment strategies you may hear on the podcasts, but they're probably much harder to implement.   Start talking to some lenders today and see what requirements they have for you getting financing....then you'll have some targets for down payment, closing costs, monthly payment, and loan amounts they will give you...plus you can start working on any debt payoff they will require.

Keep after it....sounds like you're off to a great start.

Jonathon Wu, I'm literally in the same spot as you. I have a good chunk invested in stocks that have luckily X'd a few times now since I bought them as penny stocks. I've tried to learn as much as possible through this platform but I dunno if SFR in OC is best and house hack for first property or start out of state to build momentum with first few properties like in Austin or Orlando. My dream would be to fix a duplex in OC and live in smaller unit but those trade usually in the 900's to low mil range. If anyone knows what's best as a newbie investor in the SoCal region it would be much appreciated. I know there's contradictory views on where to get started. I've heard la Quinta is best cash flow in the state but I'm not sure if that's the best move, since renting in OC would cut into profits by not house hacking. I'm a new grad engineer and It seems I would need to be making $100k+ if I want to qualify on my own since I'm single which will obviously take a few years. Anyways good luck Jonathon hope it works out for you.

Best, Shaun

@Jonathan Wu Welcome! There is a lot to take in since you are new, I will save you a lot of time and help you get started in the best possible way:

1st: San Diego is an amazing market (Appreciation is forecasted to be above 8% here in 2021, highest of any major metro in the country)

2nd: Do not start OOS investing for your first property.  You can purchase an owner occupied property with very little money down and get a much bigger bang for your buck.

3rd: Purchase an owner occupied duplex using FHA loan to put down 3.5%, live in one side and rent the other. You will qualify for a higher loan on a duplex than a single family as the lender can use a portion of rents from second unit towards your income to qualify.

4th: As long as you purchase the above mentioned duplex correctly, you can move out after one year and rinse then repeat on the next property.

The above is to save yourself a year of trying to figure out which route to take and get started.  By the end of that year you can decide what you want to do but you certainly will be happy that you chose this path...just make sure you purchase a duplex that makes sense as a long term investment for you.....You're welcome! ;)

@Twana Rasoul , what you suggested is exactly what I want to do but everything trades at $900k+ it seems like in OC for multi family and distressed properties have all cash offers to contend with. Any strategies to actually closing one of these deals for a first time buyer would be awesome. I have a brother in law who is a contractor too and renovates properties for a living but I don’t know how to go about getting that first deal done. Thanks for any input!

Best, Shaun 

@Shaun Byl It is a crazy market but it is totally doable. Got a multi-unit offer accepted for a client with a VA loan and we beat out multiple all cash offers. Just got an offer accepted for a client yesterday, we beat out 47 other offers...I have 2 more separate multi units in escrow that were off market. Just have to work with the right people and don't get discouraged and I'm sure you will be able to make something happen. You got to use different strategies depending on the property, how its priced, the number of offers, etc. don't give up.

Even if a duplex is $900k, if you are able to get decent enough market rents to make the numbers work then doesn't mean it is a bad deal.

@Shaun Byl Multi family especially in Southern California will definitely have a much higher level of entry. Have you thought of house hacking with a SFH or even a condo by renting out the extra bedrooms? It's tempting to have your own place after graduating, especially if you've been living with roommates in college. But renting out your extra bedrooms can lower your mortgage significantly and therefore, fast track your savings rate for a down payment on a duplex a few years down the road. You're also building equity and benefiting from any potential appreciation that may come about.

Hey Jonathan! First off, congrats on completing your degree. I am a BBA graduate as well. Originally from Texas but have lived in the Sacramento area for 5 years now. I would say that you are off to a great start since you are on here already. I work for a mortgage broker up here in Roseville, so I can help from an investor perspective and lending. A great start would be talking to a lender to see what your purchasing power is. Based on your current income, DTI, credit score, etc. you will be able to know what price and/or mortgage you can afford. Just FYI almost any lender will still use 1% of your student loan debt as a default monthly payment amount when calculating your DTI. I am assuming that you actually have interest on them, they are just in deferment because of Covid? Also, you do not have to wait until you've worked 2 years. Just provide your college transcripts, and your current employment information. That will suffice for the employment qualifications sine your fresh out of college.

From an investment perspective, I also recommend what Twana said. House hack a duplex. That is currently what my wife and I are doing. We are in contract to sell our first flip, and will be using that to get into a duplex here to house hack. After we are a bit more familiar with dealing with tenants, we will begin getting more multi-families here, or put our money back in my home state of Texas. But, maybe that's not your best option. Maybe the cost of entry for a condo is all you can get. And that's fine if it's a way to get started. If you're living by yourself, you can even rent out other rooms. Also, FHA on a condo is dependent on whether or not it is HUD approved development just as an FYI, but that's something you can search on their website. In the meantime, feel free to message me if you have any questions. I am always down to chat about lending and investing.

That's great, I would suggest the first thing you do is figure out your big picture and long-term goal.

Really identify your end destination investing in real estate and from there you can decide what types of strategies meaning buy-and-hold, flipping, wholesaling, note purchasing, subject to. - these are your strategies

Last thing is the tactic meaning house multifamily Etc 

figure out your goal then your strategy to reach your goal and lastly it's the tactic

@Jonathan Wu if you have a contract with your W2 salary position, and have good credit, you will qualify for a loan. I helped two clients last year purchase their first househack. Based on your income and credit will determine your loan amount, that will help determine where and what your can purchase. 

@Jonathan Wu I found myself in your shoes a few years ago fresh out of school, I would say that experience is the best teacher.Try to align yourself with people who understand where you want to go and have been there before. There are going to be lots of ups and downs in the beginning as a RE investor. 

I would suggest trying to start locally in investing. In my experience as both a local and OOS investor, I would suggest investing locally to a beginner. That's not to say OOS investing is not possible as a beginner, but it can add an extra level of stress/challenges.

 I like your idea of a 3/2 value add property while house hacking. I think this is the BEST way to start in investing. Getting that first property, building some equity, and lowering your living expenses sets you up very well for your future as an investor. That is exactly how I got my start and have snowballed it into a decent sized portfolio of 12 doors since. Best of luck and never hesitate to reach out! Always happy to help and connect with locals in RE!