Best way to maximize my privileged situation... overwhelmed

21 Replies

Long story short, will have about 100k. I have ZERO experience but want to get started ASAP. I have a burning desire to own multi-family properties but don't know where to start. I've listened to a lot of podcasts, i understand most the concepts, i look around the MLS and loop net for fun... and i have a lot of free time, so i dont need to hire property managers at first. I would do this full time if i knew how.

Not sure if i should learn how to flip... is that too risky for a noob? should i simply put 20%-50% down on a Multi fam building... FHA with 10% down on a mil building... ? is that possible to be cash flow positive on? Should i do a light rehab... should i BRRRR? should i house hack and try to live for free... Very overwhelmed and in such a privileged situation and really don't want to blow it. I want to make this a REAL life changing situation...

What would you do if you were me... (28, male, self-employed, introvert) 

@Mason B. i would take 3-5% of that money if not more on education. I can tell you from the school of hard knocks that is always better to learn as much as possible before starting.

Then when you are educated put a team together. Connect with quality contractors, lawyers, CPAs, realtors, and lenders. $100k is a lot but not enough to do everything yourself.

Plus, needing financing for your first few deals will hopefully prevent you picking up bad deals. The lender doesn't want to give you money on a lemon.

Then start making offers on multis. Let me know if this helps.

Andy

Originally posted by @Andy Nathan :

@Mason Barnard i would take 3-5% of that money if not more on education. I can tell you from the school of hard knocks that is always better to learn as much as possible before starting.

Then when you are educated put a team together. Connect with quality contractors, lawyers, CPAs, realtors, and lenders. $100k is a lot but not enough to do everything yourself.

Plus, needing financing for your first few deals will hopefully prevent you picking up bad deals. The lender doesn't want to give you money on a lemon.

Then start making offers on multis. Let me know if this helps.

Andy

 

i should of said i'm trying to learn ASAP, not throw the money in something ASAP. I dont mind spending time or money learning, as long as i am learning a real process / strategy that works... 
What are real sources to learn from? not trying to buy a furu course selling pipe dreams and risky strategies that dont really work. 

trying to get the ball rolling 

@Mason B. I was exactly like you avoiding the guru courses. I would say do some research on multifamily coaches or mentors who can guide you through the process.

That is also why having a team is important to help you with your decision making process.

First, dont post on the internet how much money you have.  Second beware anyone offering "help" now that you have posted you have x amount of cash. 

I would ask mods to edit your post actually 
then i would spend some time reading some basic RE investment books.  
ETA - any kind of reno work for a complete newbie is going to be risky   Best to buy a mf property and learn a bit before diving in. And 20% is standard DP unless you owner occupy 

@Mason B.

Chicago is very tenant friendly, might be tough to learn property mgmt in that market with the tenant friendly laws. perhaps invest out of state (OOS).

Develop a "personal board of directors".  3-4 people that you call when making decisions of spending money of more than 10K.

Also, develop a personal financial statement. How and why you invest in what you are investing in. Real estate, stocks, private companies, etc.

@Mason B.

you could always join a local real estate meetup to learn first before spending money on education. REIA has a few groups in my area, possibly yours, there's one group run by a bigger pockets member by me also. Search on nationalreia.org. I like in person but with covid lots are online, even so there are some incredibly knowledgeable speakers at some, and lots of people who know far more than me, it's humbling and informative, the few I've attended are awesome and cheap if not free.

Nothing beats experience, I jumped right in but my first deal there was basically no way I could lose money. If you know a trustworthy flipper/landlord offer to work for them for free for a month, who doesn't love free work and you'll learn a ton behind the scenes. Just my thoughts

Originally posted by @Spence Kal :

@Mason Barnard

you could always join a local real estate meetup to learn first before spending money on education. REIA has a few groups in my area, possibly yours, there's one group run by a bigger pockets member by me also. Search on nationalreia.org. I like in person but with covid lots are online, even so there are some incredibly knowledgeable speakers at some, and lots of people who know far more than me, it's humbling and informative, the few I've attended are awesome and cheap if not free.

Nothing beats experience, I jumped right in but my first deal there was basically no way I could lose money. If you know a trustworthy flipper/landlord offer to work for them for free for a month, who doesn't love free work and you'll learn a ton behind the scenes. Just my thoughts

I will do that for sure, thanks. I have a meeting planned with family friends who own a few buildings as well, the difference is they had 100% down, and six figure salaries... Trying to find people in similar situations or a trustworthy flipper on a similar scale to gain experience with. 

@Mason B.

You have to really learn the business. Have you ever looked at just investing in the stock market. If I had no idea what I was doing, at 28, it would probably be my #1 choice.

Stock Market:

At age 65 your 100k will be worth 1,200,000 (7%/year)

Real Estate:

Not knowing anything and wanting to invest “ASAP” gets you fleeced of 100k and have a cautionary tale to tell your grandkids.

—————————————-

There are a lot of folks out there who would love to roll the dice with a little OPM...

@Mason B.

First, slow your roll a bit. Deploying money without a thorough understanding is a recipe for money lost. Some call that tuition, some pay tuition repeatedly, some like to let others pay their tuition and simply reap the rewards. I suggest category 3.

So, start reading and absorbing. And be sure to read / absorb much more than just BP. There’s an endless supply of knowledge to be obtained and a book will never spam your inbox with the “invest that with my syndication, we’ve got guaranteed 20% returns!” messages you’re likely already seeing. There is a thread with the BP suggested reading list and several threads asking what to read first.

At minimum, read some on property underwriting, management, business ethics, marketing, and psychology.

Do NOT deploy that money until you have a solid footing. And I’ll end with.. don’t drink the kool aid.

Hey @Mason B.

You are on the right path learning through BiggerPockets. If I were in your shoes I would narrow my focus down to what real estate investment strategy to go in on. I would personally choose a blend of brrr and house hack that way you can get your get your feet wet in building a real estate team, learn about analyzing deals (and having deals be more forgiving), learn the whole transaction process and learn about property management, all while being on site. I am a realtor in the chicago area so if you have any questions I can definitely help out. 

@Mason B. the most important thing I noticed in your post is that you are self employed. That is kind of a big deal unless you have the track record to get a residential loan. If you want to do multifamily, I personally would focus on that primarily. You won't find a deal fast, and it might take you a bit to get in the game, but I don't believe anyone regrets buying multifamily long term. 

I agree with @John Warren being self employed is a big deal and you need to first figure out your financing options. 

I always recommend new investors do a light rehab to a house hack 2-4 unit property for their first deal if you are financeable this is the best way. It's a relatively low risk strategy that works well. I have also had people do a cheap condo live in it a bit and rent it out in neighborhoods such as Avondale, Rogers Park, Albany Park, etc. they cashflow.

Starting from 0 and wanting to get to the finish I think you have a couple options.

You could do trial by fire. Go straight to buying a property and cross your fingers. A lot of people do this and those are who we buy from at a discount when they realize they are in over their heads and the completely hosed the initial transaction and they don't have any idea how to manage a property.

You can spend your time self educating. Nobody can know how long it will take you but you can get a good education here. BiggerPockets is great for what it is, an online forum of people's opinions. You can buy and read book after book and one day pull the trigger.

    Get a local mentor who can help you through the process and maybe partner on a deal. This is how a lot of people start out and it is tried and true. Many people find a local mentor through meetups and networking events in their local area.

    Join a paid coaching/mentor program. When family dynamics made me realize that the long slog of self education is too slow I decided to go down this path and I do not regret it in the least. The best coaches and programs are not cheap but I honestly think they can get a person from 0 to educated and confident the fastest. There are a lot of people on BiggerPockets who think paid coaches are a waste of time but I don't understand why they choose to beat their head against a wall with self education or trials by fire when they could take a shortcut to get to their goal.

    Good luck!

    @Mason B. - First question I always ask is, what is your why for wanting to invest in real estate?

    If you are okay with house hacking, I'd do that.  It is the lowest risk and provides the most experience.  That is assuming you are wanting to be a more hands-on investor which is what I picked up from your post.

    If you are trying to scale quickly, I'd find a seasoned investor and partner with them.  They will be able to teach you everything in exchange for your capital.

    No matter what I wouldn't rush into anything.  Real estate is a get rich slow game.

    Let me know how I can help!

    @Mason B. First thing I would recommend is speaking to a lender to see what you'd qualify for. Having a nice chunk to put down certainly helps, but being self-employed, I'd speak with a lender (if you haven't already) to see if you can qualify for financing and if not, what steps you need to take to get there. Usually you'll need at least two years of consistently good income in the same field, or a consistent track record of good income from something like dividends from stocks. I also agree with Kai that stocks might be a better place to park that cash for now, unless you have a specific skillset related to real estate that you can leverage to give you a competitive advantage, or you're just really passionate about real estate. Also be wary of the many connection requests you'll probably get from this post.

    In the same vein as other people have posted, you need to self-educate yourself on real estate investing and specifically multi-family. Risk comes from not knowing what you're doing. 

    You'll have a realtor, lender, attorney, and contractors etc to lean on for expertise but you need to understand the real estate lingo and understand the process. The most practical way to get started is house hack a 2-4 multi-family property so you don't get over your skis and make a costly mistake. You're going to make mistakes like anyone else so it's better to make them on smaller deals. 

    This is your money at stake, so you have to do your homework. I highly recommend reading the BiggerPockets books & blogs, listen to the podcast, and connect with other investors.

    @Zack Karp may be able to advise on the financing.

    @Mason B. Yea, get off the internet with that news for a bit. DO NOT take a course u are just throwing money away. Read.

    Of the options you mention house hacking with a duplex in a neighborhood you like will have the lowest risk and highest upside. Chance to own your own home, live cheaply build equity and learn the ropes in fairly forgiving circumstances. It's also pretty mainstream so you can find a competent broker etc to help you along the way.

    Read, watch youtube, etc. For only 20-40 hours. Then buy a quality yet cheap house, in a decent neighborhood... In the $150k region, but get a 20% down mortgage. Learn by doing! After 6-12 months, buy another, then another, then another :) But start small and slow - and learn by doing!