New to biggerpockets and RE investing. Looking to get started!

New to biggerpockets and RE investing. Looking to get started!

Member since 2018 · 5 posts · 0 votes

Quick background. I have very limited real estate experience and zero RE investing experience. Bought a house that we currently live in, leased commercial space for our business and loved the process of commercial demographics and finding the right location. My wife and I are 29/30. We just dug ourselves out of a 700k student debt hole by working super hard for the past few years. After dumping all that money into paying back our student loans, we now realize we have nothing to show for all of our hard work. Good news is we learned how to make good money with our day jobs and now have a good amount of excess income each month that we need to figure out how to invest. We have a good emergency fund, 401k, post tax investment account, and extra money just sitting there in a 2% money market account... 

We have multiple sources of income including W2 job, small business, and other sources. We are both fairly happy with our jobs and not looking to quit in the near future. I want to start with real estate investing as part of my portfolio, but I do not want to take a ton of time away from my main job at this point because I make very good money with a limited amount of work. I do have a significant amount of free time while at my job to make calls, emails, etc., 1.5 hour lunch breaks, and work less than 40 hours a week. I have a high drive to take on new projects and develop multiple sources of income.

So I guess my concern is buying single family homes or duplexes and managing them is not worth the money/time for me at this point in my life (maybe I'm wrong). How can I still get into real estate investing where it is worth my time? Taking on a huge project right from the beginning like a large number of apartment units or commercial real estate is daunting/intimidating to me with such limited real estate experience. I am really into reading, listening to podcasts, searching for deals, and networking, but not at all into dealing with day to day headaches or managing properties/tenants. I wouldn't necessarily say I am extremely passionate about real estate, but I do enjoy it and have probably put 200+ hours into self education over the past 6 months. Would it be best to look for partners? Just invest in REITs? Start looking into larger projects like apartments or commercial? Also, I live in the Memphis area, which I believe is considered a good area for RE investing and I know the area decently well (have spent almost 20 years of my life here). I think my next step is starting to get out in the community to meet other investors and explore options. I want to try to focus on one area starting out whether it be multi-family, commercial RE, mobile home parks, who knows?

I'm lost on where to start though, please help. Thanks!

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Lender · Austin, TX · Member since 2018 · 241 posts · 136 votes
7y

Hi @Austin Davis 

Inspiring story of the American dream, congrats on your accomplishments. 

Based on your post, it sounds like you are looking to be a little more hands off. It is good that you've identified this early on, really allows you to narrow down the right investments. 

For investors looking to stay more hands off REITs are good options,  Opportunity Zone Funds are great options for investors with capital gains to invest, another option would be buying a turnkey property well below market value and renting it out. Cash flowing a rental can be tricky, but in the long term mailbox money from rental properties is a very strong addition to your investment portfolio. 

See this reply in the discussion

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  • Dan HandfordPro Member
    Investor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
    7y

    @Austin Davis I would highly, highly recommend that you begin investing in multifamily properties. There are so many advantages to multifamily properties with 5+ units. Sending you a PM now.

  • Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    @Austin Davis

    Congrats on making the decision to invest in real estate! Luckily for you, if you and your wife like your jobs and don't want to spend much time investing actively, you can become a passive investor and invest in syndications as a limited partner. This type of investing doesn't take much of your time away from whatever you enjoy doing and will allow you to invest in various real estate asset classes nationwide. 

    Hope this helps!

  • Lender · Austin, TX · Member since 2018 · 241 posts · 136 votes
    7y

    Hi @Austin Davis 

    Inspiring story of the American dream, congrats on your accomplishments. 

    Based on your post, it sounds like you are looking to be a little more hands off. It is good that you've identified this early on, really allows you to narrow down the right investments. 

    For investors looking to stay more hands off REITs are good options,  Opportunity Zone Funds are great options for investors with capital gains to invest, another option would be buying a turnkey property well below market value and renting it out. Cash flowing a rental can be tricky, but in the long term mailbox money from rental properties is a very strong addition to your investment portfolio. 

  • Member since 2018 · 5 posts · 0 votes
    7y
    Looks like I need to educate myself more on syndications. Thanks for the feedback I appreciate it!
  • Member since 2018 · 5 posts · 0 votes
    7y
    @Jarrod Covey I didn’t think my American dream would include $720k in student debt, but it has all worked out. I unfortunately have quite a few friends in similar debt situations that are really struggling. 2 good things from the large student debt: 1. It made me not scared of debt and leverage, which is necessary especially when growing a business 2. It made me learn how to make money to pay it back
  • Investor · Salt Lake City, UT · Member since 2018 · 63 posts · 45 votes
    7y

    @Austin Davis Congrats on paying off those student loans! My wife and I definitely understand the burden those can be!

    I agree with @Jarrod Covey, it's good that you've identified early on that you don't want to invest a lot of time, rather just capital. Here's a couple of ways to be a passive REI investor:

    1. You can be a private lender. When we buy houses with cash, we often use private lender money and pay 6-8% on that loan. If we flip the property fast enough, folks can often lend 2-3 times a year, multiplying their return to 18-24%. Pretty phenomenal returns for completely passive investing.
    2. You can pick up turnkey rentals that have property management included. We've been helping out of state folks pick up turnkey rentals here in Cleveland since the late 90s. For those that don't want to give time, work, or learn REI, turnkey can be a good strategy. For as little as 40-60k you can pick up rentals here in Cleveland that are bringing in $700-$1,100 a month in rental. We have a fourplex right now for 250k in a nice up and coming neighborhood that is bringing in $28,000 in annual rents. You combine these with property management and you have a great passive investment.

    Connecting with other investors is always a great idea. Look for Meetups or REIA groups in your area.

  • Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    7y

    There's definitely a misconception out there that you have to put a ton of time and work into investing. That's what originally held me back from getting into REI initially. I had no desire to swing hammers, manage tenants or fix toilets.

    There are ways to do it much more passively. You can always go the notes or syndications or REIT route, but I'm always in favor of owning real property. I went the turnkey route myself, not because I wanted to stay with my current job at the time but because I had no interest in 'working' on my investments. (that whole working vs. investing- on your investments- thing seems to be a foreign concept people don't understand). When all is fine with my properties, I spend maybe 5-30 minutes a year on them. I have a property manager who handles the day-to-day nonsense. My only job then is to keep an eye on the manager and occasionally deal with him/her.

    Not saying you should go the turnkey route, but you can do similar setups. Have other people doing the work for you. Primarily for rentals- have a property manager rather than you being the landlord.

    Happy to chat anytime if I can be of any help!

  • Investor · Lakewood, OH · Member since 2016 · 158 posts · 49 votes
    7y

    @Austin Davis Sounds like you have a very skilled job with the amount of student loans you have so good for you.

    Hard money lending is a great option for you as many people have said. It allows you to get amazing returns on your money with minimal work. I am working on building my portfolio but am on my second lend while looking for my next property. I am currently getting 15% on a 6 month loan.

    Make sure you vet the person you loan to so you dont get burned.

  • Specialist · Easton, PA · Member since 2018 · 136 posts · 48 votes
    7y

    @Austin Davis I'll share with you what I share with every other newby, especially those with cash and want to put in minimal time.  Look into delinquent note investing.  You can be a passive investor where your cash funds the deal and the profits are split 50-50 (very common split).  You assess the deal, you decide whether to fund, then you sit back and the note owner (actually the note owner's servicer and other vendors) do all the heavy lifting.

  • Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
    7y

    @Austin Davis

    Welcome to BP.

  • Member since 2018 · 5 posts · 0 votes
    7y
    @Peter Ledger I’ve actually been looking at some turnkey companies. One of the largest I believe is right here in Memphis. What would be the best way to go about making connections for hard money lending or to find partners in deals? Local real estate investor meetups? Any other ways I should look to make connections? Thanks for the welcome and all the feedback from everyone!
  • Investor · Salt Lake City, UT · Member since 2018 · 63 posts · 45 votes
    7y
    Originally posted by @Austin Davis:
    @Peter Ledger I’ve actually been looking at some turnkey companies. One of the largest I believe is right here in Memphis. What would be the best way to go about making connections for hard money lending or to find partners in deals? Local real estate investor meetups? Any other ways I should look to make connections? Thanks for the welcome and all the feedback from everyone!

    Local MeetUps and REIA meetings are always great places to start. My biggest question for you though is if you're looking to do turn key or another passive investment, what would you need a hard money lender for? Hard money lenders are typically for cash-strapped flippers who need cash now to pick up a distressed property. The interest rates are high and the loans are typically only for folks who are going to sell the property after the rehab.

  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    7y

    @Austin Davis Congratulations on getting out from so much debt in such a short amount of time. That's truly impressive. My initial take after reading your post is that maybe owning rental properties is not right for you. My concern is that you say you are not extremely passionate about real estate and I think if you're going to be in this business you have to be very passionate about it. Having said that, maybe something more passive might be a better fit. You might want to consider REITS, syndicates or even private lending which can offer a good return without being hands on. Just something to think about. 

  • Member since 2018 · 5 posts · 0 votes
    7y
    What about turnkey companies like Memphis invest?? Does anyone have any experience with them or something similar?
  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Austin Davis:
    What about turnkey companies like Memphis invest?? Does anyone have any experience with them or something similar?

     Highly regarded company in the industry. Some would go so far as to call them the gold standard in the turnkey space. Expect to pay a premium price & receive a premium product in return.

  • Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    7y

    Just to echo Joe, the note space offers a variety of passive opportunities:

    1) Note funds which diversify your money over a number of notes to limit your risk and potential provide a guaranteed return depending on the fund.

    2) JV partner relationships where you invest passively with an active investor on a non-performing note.

    3) Buying performing notes that provide monthly cash flow.

  • Investor · Charlotte, NC · Member since 2017 · 791 posts · 479 votes
    7y

    @Austin Davis congrats on joining the BP community and digging out of debt. I'd be willing to help in any way possible. I would strongly recommend going larger that playing small. 10+ units if you can or partner!

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