Investing in real estate

10 Replies

Looking to get into real estate but don't know what way to head. I'm 22 years old living in San Diego with a good job. I'm currently building credit and have a good amount of money saved. I keep saving but don't know where to invest my money. 

Are you leaning toward rentals? flips, etc?  I became a landlord in San Diego because the only house I could afford was a triplex. Now, I highly recommend this path because one will learn quickly if they enjoy being a landlord or not. The entry cost can be as low as 3% which is cheaper than any college degree and you get a place to live while others help you pay the mortgage. You'll also get first hand experience about how the tax benefits come into play. Lastly, you most likely will get plenty of experience on the expenses involved in real estate which can guide future decisions. I cannot think of a better purchase to make in your 20's that can set you up for life. As I mentioned, I kind of stumbled upon this, but I am cognizant that I wouldn't be where I am had it not been for that first triplex. After some renovations, I refinanced owner-occupied and used the cash to purchase more rentals. 

The above advice is gold and the advice I get to all my friends. Define your path and your niche you want to focus on, and buy a 2-4 unit to start for your first property.

@Joseph Franco while you are trying to define your real estate goals, look for a duplex in neighborhoods in San Diego you know or like and move into one of the units. Feel free to pm with any specific questions and best of luck with your search

Hi @Joseph Franco , I think the majority of us would highly recommend a house hack as the best way to get started in RE given your situation; lots of good comments by @Emily Di on this.

For kicks I decided to do a deep dive on some local numbers in San Diego to see what this looks like to provide you with some high level assumptions. I only invest out of state because I can't make the numbers work in SD for a non owner occupied property and house hacking with a family of four is not in the cards for me :) So I'm envious that you can employ this strategy!

The BP podcast has had a lot of guests talk about house hacking and living for free. This is highly unlikely in the current SD market unless you are doing the more exotic approach of rent by the bedroom and live in the living room. A more vanilla basic house hack would involve buying a duplex east of I-5: Clairemont, BayPark, South Park have some listings around $600K. Ideally you can obtain a 3% first time buyer loan at an interest rate of 3.5% and only need $18K down (plus closing costs). After mortgage payment ($2613), property taxes ($563), home insurance ($100) and PMI (Mortgage Insurance) ($250), your monthly nut is about $3500. If you can find a renter for one side of your duplex at $2000/month, your living cost is subsidized and you are only paying $1500 for the other side AND most importantly, you own real estate. This was just a quick run through and ignores some very important expense considerations (maintenance, vacancy, capital expenditures like new water heater every 10 years, etc) and you would need to build up reserves from your subsidized living cost in order to cover these expenses.

Hope this helps provide some real life context of how you can get started locally without a lot of risk or alteration to your current lifestyle in America's Finest City- Good Luck!

@Joseph Franco - The best way to get started in real estate investing is house hacking. Especially if you already have a good chunk of money saved. By house hacking, you are able to completely eliminate your housing expense all while building wealth by appreciation of the property, paying down your loan, cash flow, rent savings, and tax benefits. The returns are crazy when you put it all together.

Not only does it help you build wealth, but it is a great transition into becoming a real estate investor/landlord. You likely will be able to do two deals in your first two years. In that time, you'll get first hand experience buying/negotiating a property, showing it to tenants, managing it, managing contractors, etc. All while just living in your own house. By the time you' complete your third, you'll likely have the capital and experience to really start investing. 

@Brian Moore Great breakdown. With the Jr ADU ordinance, too, there's a possibility to make it work in a SFR and avoiding roommates by partitioning off a part of the house and providing it's own entrance. I've seen some great properties for this.

Hi @Craig Curelop - Enjoyed your podcast episode last month!

@Joseph Franco , Craig was just on the BP podcast show #350 and also published a new book on house hacking, but is too modest to give himself a plug :) You should check out both to get more info if you decide house hacking is for you.

Even starting with the basics, like the FREE Ultimate Beginner's Guide that Bigger Pockets offers. You can also listen to it as well on You Tube. @Robert Comstock makes a good point about "defining your goals" as the place to start. I am a couple months in now myself and this is how i am going about it. 

Good Luck

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