Where to start/in what order to buy.

Question

I am just starting out in REI (have never purchased a house before), but I have listened to BP a lot, read a lot of the books etc, and want to get started.  I have capital but am unsure where to begin, my goals over the next 1-5 years are to buy as many (5+) multi-families as possible, my primary residence and a lake house for STR (and to work from/enjoy during the week as I WFH), I'd also like to flip 1 house next year to learn the processes etc (and scale that up after).     I am unsure how to allocate capital though, since it's my first home purchase, I can house hack or buy my primary @ 3% down, and save the rest so I have 20% down for the other purchases etc.    How can I maximize my leverage, and are there any good resources for someone that's just starting out in REI, but has some leeway (flexible on the housing situation etc), that also has some capital saved?

Bruce Woodruff · Answer

I would slow down and see what you really want to do. What will you enjoy? What will make the most $$ ?

Learn one thing and do it well. Then branch out. If you spread yourself too thin at the start you could flame out.....unless you have deep pockets and don't care if you lose money....?

Lawrence Potts · Answer

@Anthony Fresta,

Looks like we may have a case of shiny object syndrome 👍 which I am 100% guilty of at all times of the day! I think it’s a good thing: shows you’re willing to learn and you can see the pros.

I like your vision of where you want to be! There’s nothing wrong with that. But here’s a clear distinction: your goals need plans. Reverse engineer. For example:

To own a house on the lake in 5 years, I need to be netting $8k/month.

If I net $125/door, I would need 65 doors by 5 years. That’s 13 doors/year average.

If I spread that over 5 unit deals, that’s 13 deals in 5 years. That’s 2-3 deals a year average.

2-3 deals per year means at a 1% close rate, I need to contact 260 interested leads. That’s 22 leads per month.

You see how that works?

I would highly encourage you to start with a 2-4 unit multifamily and househack it if you can pending inventory and your financial situation. You can use FHA 3.5% down, you cannot use conventional less than 15-20% down. This would be a great intro to you for real estate, being a landlord, etc. And you may not even like it, so that means you may need to pivot your strategy. Maybe you want to go into syndications, house flipping, lending, etc.?

I think goals are great. There’s a need to know when to pivot your strategy though. And don’t confuse dislike with discomfort. Some strategies need time to confirm whether you should pursue or not. I’d say give it a few years and then decide. But truly commit to something for a few years and you’ll have the proper discernment whether it is something to continue or not.

If you can’t buy a multifamily, buy a SFR and rent out the bedrooms. It’s not as ideal as multifamily but you need to play with the cards you’re dealt with and what the market is giving you. If the deal makes sense and gets you to first base, it’s better that than justifying passivity.

I hope that helps! It’s good to dream and look into all things: if you decide on something, commit to it for what it deserves and then decide if you like it or not.

Brock Mogensen · Answer

House hacking is 100% the best way to get started. It will show you the basics of a deal and allow you to get into your first deal with low amount of capital through FHA.

Conner Olsen · Answer

@Anthony Fresta Start out with a house hack. It's the cheapest way to get started and it's a great learning experience.

Anthony Fresta · Answer

I like to get my hands dirty but may look into syndication in the future.  It looks like I may have gotten things backward...haha.  I am going to start assessing whether I should focus on flipping immediately, and put the profits from that into long term rentals.  I like to work, so while Im young(ish) I can grind, and as I get older start moving things to something more passive: LTRs).  THANKS!

Austin Johnson · Answer

I falsely understood your vision as "I'm going to buy a lake house as my personal residence but its ok because ill also STR it on the weekends". I was wrong, I apologize!

I can't give you the answer. that sounds horrible but its the truth. Real estate is so massive that every person will have their preferred method. that being said, here's my preferred method. syndications. invite as a passive investor and watch the cashflow come in. this also allows you to leverage large multifamily deals and not worry about finding the deal, finding the investors, etc. plus you can get tax write offs.I would absolutely buy a house and lake house outside the investment strategy. that goes back to a Rich Dad Poor Dad philosophy. never buy liabilities before you buy an asset to pay for it.

lets pretend you cant invest in a syndication. man, I would look into house flipping now. learn and MASTER that process. create a business of it. grow it. take the cashflow from the business and buy your house, your lake house, etc. or put an extra step and invest in a syndication, lol.  any means necessary to create cash flow without having to work.

Anthony Fresta · Answer

Hey, nice to meet you!

"I personally wouldnt use the 3% and excuse of STR as a reason to purchase a lake house."  I don't really follow that can you explain?Overall, my goal is simply financial independence from a 9-5  (w/ a single family for me and a lakehouse).   My target is 100k/year income (that's more than I need/currently have no debt/very little in the way of expenses etc).     In an ideal world, I deploy my capital in such a way tomorrow, that by Thursday I have met this goal; obviously not realistic to find the deals, etc.   Is it simply a matter of I want ~8000$/mo in cash flow, dividing by ~125$/door cash flow, and looking for deals that meet the criteria until I have ~65 doors as fast as possible and worry about the rest later,  treating my "personal" stuff (my SFH and the lake house) as seperate things?  Then reassess my next step (I would like to flip houses as well, and eventually use that money to keep buying properties)?

Austin Johnson · Answer

hey, fellow missourian!it looks like you're running 5 ways all at once. the best advice I can give is getting crystal clear on what the end goal is. then find one avenue and go all in on that one avenue. buying 5+ units is one avenue. buying a primary residence isnt an investment, buying a lake house STR is another avenue. flipping a house is yet another avenue. land! the only thing i would do with a 3% down is house hack (a duplex,tri plex or four plex) or live in flip. I personally wouldnt use the 3% and excuse of STR as a reason to purchase a lake house.

Where to start/in what order to buy.

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